Question

If the United States decided to convert its automobile factories to tank production as it did in World War II, but found that some auto making facilities contributed very little to tank production while other facilities were more productive, then: a. The production-possibilities curve between tanks and automobiles would appear as a straight line. b. The production-possibilities curve between tanks and automobiles would shift outward. c. Decreasing opportunity costs would characterize greater automobile production. d. There would be increasing opportunity costs in the production of additional tanks.

Answer 1

Answer:

D) There would be increasing opportunity costs in the production of additional tanks.

Explanation:

Opportunity costs are defined as the cost (or lost benefit) resulting from choosing one activity or investment over another alternative.

In this case, since not all the car factories are suitable for producing tanks, the economic cost of producing tanks will start to increase because more resources will be needed to produce tanks in the factories that were not ready to produce them.

For example, factory A can produce 100 tanks using 50 units of resources, while factory B can produce only 50 tanks using 50 units of resources. Both factories can produce 200 cars using 50 units of resources.

When you are producing one tank at factory A, the opportunity cost measured in cars is 2, but if the demand for tanks is greater than factory A's capacity, then producing one tank in factory B will have an opportunity cost of 4 cars.