The law of increasing relative costs, depicted by the concavity of the production opportunity frontier, is most closely related to the: A

Economics Dec 08, 2020

The law of increasing relative costs, depicted by the concavity of the production opportunity frontier, is most closely related to the:

A. downward slope of the demand curve

B. upward slope of the demand curve

C. downward slope of the supply curve

D. upward slope of the supply curve

Expert Solution

The answer is D).

The law of increasing relative costs means that as more of a good is produced, the opportunity cost (the marginal cost of the good relative to the marginal cost of the other good) of producing the good increases. This is because the marginal cost of a good is higher as more and more of the same good is produced. This also implies a upward sloping supply curve because for a firm to produce more, the firm will be demanding a higher price to cover the higher marginal cost.

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