Question

Suppose Bulgaria produces only smartphones and trucks. The resources that are used in the production of these two goods are specialized—that is, some resources are more suitable for producing smartphones than trucks, whereas others are more suitable for producing trucks than smartphones. The shape of Bulgaria’s production possibilities frontier (PPF) should reflect the fact that as Bulgaria produces more trucks and fewer smartphones, the opportunity cost of producing each additional truck______________.Increases, Decreases or remains constant?

Answer 1

Answer:

The correct answer is decrease.  

Explanation:

The cost of opportunity represent the benefits that you misses out on when choosing one alternative over another.  

In this case, the cost of opportunity is making smartphones and because of  the shape of Bulgaria’s PPF should reflect the fact that as Bulgaria produces more trucks and fewer smartphones,  the opportunity cost will be weaker. Bulgaria can´t produce only smartphones, you have to make more trucks than smartphone. So that will be a reason to prefer making trucks over smartphones ( the cost opportunity looses power)