Suppose, for simplicity, that during any given week, the machinery and number of workers at Tesla Motors’s Fremont plant cannot be increased. So the number of original models or Model 3s the company can produce during the week depends on how many hours are devoted to assembling each of the different models. Assume that Model 3s are more difficult to assemble, so if Tesla devotes an hour to assembling its original Model S or Model X, it will produce 15 vehicles, but if Tesla devotes an hour to producing Model 3s, it will produce only 10 vehicles. Assume that the plant can run for 8 hours per day.

a. Use the information given to fill in the missing cells in the following table.

b. Use the data in the table to draw a production possibilities frontier graph illustrating Tesla’s trade-off between assembling original models and assembling Model 3s. Label the vertical axis “Quantity of original models produced per day.” Label the horizontal axis “Quantity of Model 3s produced per day.” Make sure to label the values where Tesla’s production possibilities frontier intersects the vertical and horizontal axes.
c. Label the points representing choice D and choice E. If Tesla is at choice D, what is its opportunity cost of making 10 more Model 3s?

Transcribed Image Text:

Choice A BCDE TIM GH I Hours Spent Making Original Models Model 3s 8 7 65432 1 0 0 1 2 869G AWN 3 4 5 7 Quantity Produced per Day Original Models Model 3s