Just about every production activity that you can think of has increasing opportunity cost. We allocate the
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Just about every production activity that you can think of has increasing opportunity cost. We allocate the most skillful farmers and the most fertile land to producing food, and we allocate the best doctors and the least fertile land to producing healthcare services. Some resources are equally productive in both activities. If we shift these equally productive resources away from farming to hospitals, we get an increase in healthcare at a low opportunity cost. But if we keep increasing healthcare services, we must eventually build hospitals on the most fertile land and get the best farmers to become hospital porters. The production of food drops drastically and the increase in the production of healthcare services is small.
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