Why MOC ( marginal opportunity cost ) is increasing?
Moc increases as we shift from production of of one good to another because resources are not equally efficient in the production of the two goods.this increases the marginal opportunity cost.
Why MOC ( marginal opportunity cost ) is increasing?
Introduction:
Marginal opportunity cost (MOC) is the cost of producing one extra unit of a good or service in terms of the next best alternative forgone. It is the difference in cost between producing one additional unit of a good and producing one less unit of another good.
Reasons for Increasing MOC:
There are several reasons why MOC may increase, including:
1. Resource Scarcity: As resources become scarcer, the MOC of producing additional units of a good will increase. This is because resources must be diverted from other uses, which will have a higher opportunity cost.
2. Diminishing Marginal Returns: As more units of a good are produced, the marginal cost of production tends to increase due to diminishing marginal returns. This means that each additional unit of a good will require more resources than the previous unit, which increases the MOC.
3. Technological Constraints: Technological constraints can also increase the MOC of producing additional units of a good. For example, if a company has reached the limits of its current production technology, it may need to invest in new technology to increase production, which will increase the MOC.
4. Market Demand: Market demand can also increase the MOC of producing additional units of a good. If demand for a good increases, producers may need to invest in additional resources or technology to meet that demand, which will increase the MOC.
Conclusion:
MOC is an important concept in economics, as it helps to determine the cost of producing additional units of a good. Understanding the factors that can increase MOC is essential for businesses and policymakers who want to make informed decisions about resource allocation and production.