What does increasing marginal opportunity costs mean in the context of a production possibilities frontier (PPF)?

• A. The PPF is a straight line, indicating constant trade-offs between goods.
• B. The opportunity cost of producing a good remains constant as more of it is produced.
• C. Producing each additional unit of a good requires giving up increasingly larger amounts of another good.
• D. Resources are perfectly adaptable to the production of all goods.

Answer: (C)

Verified step by step guidance

1. Understand that the Production Possibilities Frontier (PPF) represents the maximum combinations of two goods that an economy can produce given its resources and technology.
2. Recognize that increasing marginal opportunity costs mean that as you produce more of one good, you must give up larger and larger amounts of the other good. This is because resources are not equally efficient in producing all goods.
3. Note that a PPF with increasing marginal opportunity costs is typically concave (bowed outwards) from the origin, reflecting that resources are specialized and less adaptable between different goods.
4. Contrast this with a straight-line PPF, which indicates constant marginal opportunity costs, meaning resources are perfectly adaptable and the trade-off between goods remains constant.
5. Therefore, increasing marginal opportunity costs imply that the opportunity cost of producing additional units of a good rises as production of that good increases, due to the reallocation of less suitable resources.