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Which of the following statements is true? A) The law of increasing opportunity costs assumes that all people have the same ability to produce goods
Which of the following statements is true?
A) The law of increasing opportunity costs assumes that all people have the same ability to produce goods.
B) In a world of efficiently used scarce resources, more of one good necessarily means less of some other goods.
C) Efficiency implies that it is possible to get more of one good without getting less of another.
D) Even if a country has unemployed resources, it can still be operating on its production possibilities frontier.
Expert Solution
The correct answer is B) In a world of efficiently used scarce resources, more of one good necessarily means less of some other goods.
This is because the economic theory is based on the law of marginal rate of substitution. The limited resources are available to the individuals but he demand is always greater than the available resources. With the given level of products, the individuals need to adjust their demand level. For instance, suppose a person is earning $500 per month. If the person is consuming only apples and clothes, then the person can have more clothes with a reduction in consumption of apples. This is because the income of the person is limited.
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