<P> In economics , the law of increasing costs is a principle that states that once all factors of production ( land , labor , capital ) are at maximum output and efficiency , producing more will cost more than average . As production increases , the opportunity cost does as well . The best way to look at this is to review an example of an economy that only produces two things - cars and oranges . If all the resources of the economy are put into producing only oranges , there will not be any factors of production available to produce cars . So the result is an output of X number of oranges but 0 cars . The reverse is also true - if all the factors of production are used for the production of cars , 0 oranges will be produced . In between these two extremes are situations where some oranges and some cars are produced . There are three assumptions that are made in this possibility . The economy is experiencing full employment ( everyone who wants to work has a job ) , the best technology is being used and production efficiency is being maximized . So the question becomes , what is the cost of producing more oranges or cars ? If the economy is at the maximum for all inputs , then the cost of each unit will be more expensive . The economy will have to incur more variable costs , such as overtime , to produce the unit . </P>
<P> In economics , the law of increasing costs is a principle that states that once all factors of production ( land , labor , capital ) are at maximum output and efficiency , producing more will cost more than average . As production increases , the opportunity cost does as well . The best way to look at this is to review an example of an economy that only produces two things - cars and oranges . If all the resources of the economy are put into producing only oranges , there will not be any factors of production available to produce cars . So the result is an output of X number of oranges but 0 cars . The reverse is also true - if all the factors of production are used for the production of cars , 0 oranges will be produced . In between these two extremes are situations where some oranges and some cars are produced . There are three assumptions that are made in this possibility . The economy is experiencing full employment ( everyone who wants to work has a job ) , the best technology is being used and production efficiency is being maximized . So the question becomes , what is the cost of producing more oranges or cars ? If the economy is at the maximum for all inputs , then the cost of each unit will be more expensive . The economy will have to incur more variable costs , such as overtime , to produce the unit . </P>
by definition the law of increasing opportunity costs states that
by definition the law of increasing opportunity costs states that
once all factors of production ( land , labor , capital ) are at maximum output and efficiency , producing more will cost more than average
once all factors of production ( land , labor , capital ) are at maximum output and efficiency , producing more will cost more than average