An increase in the production of one good can have zero opportunity cost only if an economy initially operated at a point inside the production possibilities curve.

Question

Quizplus · Accepted Answer

This statement is true. If an economy is operating inside the production possibilities curve, it means that resources are not being fully utilized and there is unused capacity. In such a scenario, increasing the production of one good would not require sacrificing the production of another good, and hence, the opportunity cost would be zero. However, if an economy is operating on the production possibilities curve, an increase in the production of one good would require a sacrifice in the production of another good, and hence, the opportunity cost would be positive.

An Increase in the Production of One Good Can Have