📚 Learning Guide
Opportunity Cost and PPC
medium

Increasing the production of one good always results in a constant opportunity cost, regardless of how much of that good is produced compared to others.

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Learning Path
Learning Path

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Choose the Best Answer

A

True

B

False

Understanding the Answer

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Answer

Opportunity cost is what you give up when you choose to produce one good over another. When we say that increasing the production of one good results in a constant opportunity cost, it means that for every additional unit of that good produced, the amount of the other good you have to give up stays the same. This idea is often illustrated using a Production Possibility Curve (PPC), which shows the trade-offs between two goods. For example, if a factory can produce either 10 cars or 30 bikes, and it decides to make one more car, it might have to give up making 3 bikes every time, regardless of how many cars or bikes it has already produced. However, in real life, opportunity costs can change as resources are not always equally good for producing both goods, leading to increasing opportunity costs as production shifts.

Detailed Explanation

This statement is false. Other options are incorrect because Many think that opportunity cost stays the same.

Key Concepts

Opportunity Cost
Production Possibilities Curve (PPC)
Resource Allocation
Topic

Opportunity Cost and PPC

Difficulty

medium level question

Cognitive Level

understand

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