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Question

Economic meaning of increasing marginal opportunity cost implies that to produce more units of good X, the units of the other good have to be sacrificed on an _________.

A
increasing rate
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B
constant rate
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C
decreasing rate
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D
none of the above
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Solution

The correct option is A increasing rate
The slope of production possibility curve is marginal opportunity cost which refers to the additional sacrifice that a firm makes when they shift resources and technology from production of one commodity to the other. Since resources are use specific, therefore every time when one more unit of a commodity is produced more units of the other commodity is sacrificed that results in increasing marginal opportunity cost.

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