3. Opportunity cost and production possibilities

Ginny is a skilled toy maker who is able to produce both trains and balls. She has 8 hours a day to produce toys. The following table shows the daily output resulting from various possible combinations of her time.

Choice	Hours Producing	Produced
(Trains)	(Balls)	(Trains)	(Balls)
A	8	0	4	0
B	6	2	3	8
C	4	4	2	14
D	2	6	1	16
E	0	8	0	17

On the following graph, use the blue points (circle symbol) to plot Ginny's initial production possibilities frontier (PPF).

Initial PPFNew PPF012345678302520151050BALLSTRAINS

Suppose Ginny is currently using combination D, producing one train per day. Her opportunity cost of producing a second train per day is2 balls per day.

Now, suppose Ginny is currently using combination C, producing two trains per day. Her opportunity cost of producing a third train per day is6 balls per day.

From the previous analysis, you can determine that as Ginny increases her production of trains, her opportunity cost of producing one more trainincreases .

Suppose Ginny buys a new tool that enables her to produce twice as many trains per hour as before, but it doesn't affect her ability to produce balls. Use the green points (triangle symbol) to plot her new PPF on the previous graph.

Because she can now make more trains per hour, Ginny's opportunity cost of producing balls ishigher than it was previously.