So, if all the activities we mentioned contribute to the final product or service, that means that virtually every department is involved â not just manufacturing or operations, but also human resources, accounting, marketing, and so on. This is the essence of Total Quality Management (TQM).
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.
The opportunity cost of the third unit will be greater. than that of the second unit. And so forth. Economists use the word marginal instead of the. word additional or change in. So we say that, as more units of anything are chosen, the marginal. opportunity cost of an additional unit increases. Let us illustrate increasing marginal opportunity cost with an example: your choice of the. number of classes to take this term. Assume that your first choice is Principles of. Microeconomics.