As production increases, what happens to the opportunity cost of production?

When production increases, the opportunity cost of production typically increases due to the concept of diminishing returns. Opportunity cost refers to the value of the next best alternative that must be forgone when making a decision to produce more of one good or service.

As resources (like labor, land, and capital) are allocated to produce a specific good, those resources may not be as well-suited for that particular use as others would be. For instance, if a factory begins to produce more of a product, it might have to shift resources away from producing another product. The first units of production may come from the most efficiently suited resources, but as production continues to expand, less suitable resources are used, leading to a higher opportunity cost. This means that the trade-off of what must be given up to produce more of a product rises.

This concept is illustrated by a production possibilities frontier (PPF), which shows the maximum feasible output combinations of two goods. As you move along the curve to produce more of one good, the amount of the other good sacrificed tends to increase, indicating that the opportunity cost of additional production rises. Thus, the correct answer demonstrates the relationship between increased production and increasing opportunity costs.