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Question
In case of Production Possibility Curve, _______ (Decreasing/Increasing) Marginal Opportunity Cost operates because productivity and efficiency of factors of production _______ (Increase/Decrease) as they are shifted from one use to another.
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Solution
In case of Production Possibility Curve, Increasing Marginal Opportunity Cost operates because productivity and efficiency of factors of production Decrease as they are shifted from one use to another.
Explanation:
As factors are shifted between uses, they are less suited to the new use, so their productivity and efficiency decrease and more of one good must be sacrificed to produce additional units of the other.
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