Question : Why marginal opportunity cost operates?
Option 1: Productivity decrease
Option 2: Efficiency of factors ot production decreases
Option 3: Both 1 and 2
Option 4: None of the above
Correct Answer: Both 1 and 2
Solution : Because factors of production lose productivity and efficiency as they are switched from one use to another, increasing marginal opportunity cost (MOC) arises. If an economy only produced two products—weapons and butters—a worker would be employed in the manufacturing of guns because it is the job for which he is best equipped. If the economy decides to switch from producing more butter to producing fewer firearms, the output of butter will be increased. He is not as effective at producing butter as he was at producing guns, though. His butter productivity will be low as a result, and his marginal opportunity cost (MOC) will rise. Hence, the correct option is 3.
