If we consider the reality that each worker has different skills, then the production possibilities frontier:
A) should display a constant opportunity cost of a good, as more of that good is produced.
B) should display a decreasing opportunity cost of a good, as more of that good is produced.
C) should display an increasing opportunity cost of a good as more of that good is produced.
D) cannot be drawn, as too many variables would need to be taken into consideration.

Question

Quizplus · Accepted Answer

When each worker has different skills, the production possibilities frontier should display an increasing opportunity cost of a good as more of that good is produced. This is because as more of a good is produced, resources that are specialized in producing other goods must be diverted to produce the increasing quantity of the selected good, which leads to diminishing marginal returns and higher opportunity costs. Therefore, the increasing sacrifice of the opportunity cost in producing an additional unit of the good is demonstrated by the outward bow shape of the production possibilities frontier.

If We Consider the Reality That Each Worker Has Different