5. Opportunity cost and production possibilities Caroline is a talented artist who sells hand-crafted goods on her website. Caroline currently crafts and sells both knit caps and embroidered sweaters. She spends 8 hours a day working on crafts. The following table gives different daily output scenarios depending on how much of her time is spent on each good. Hours Crafting Produced choice ( Knit caps) (Embroidered sweaters) (Knit caps) ( Embroidered sweaters) A 8 0 4 0 B 6 2 3 10 c 4 4 2 16 D 2 6 1 18 E o s 0 19 On the following graph, use the blue points (circle symbol) to plot Caroline's initial production possibilities frontier (PPF). 30 O 25 Initial PPF A 20 New PPF EMBROIDERED SWEATERS 15 10 5 0 2 3 5 6 7 8 KNIT CAPS Suppose Caroline is currently using combination D, producing one knit cap per day. Her opportunity cost of producing a second knit cap per day is per day. Now, suppose Caroline is currently using combination C, producing two knit caps per day. Her opportunity cost of producing a third knit cap per day is per day. From the previous analysis, you can determine that as Caroline increases her production of knit caps, her opportunity cost of producing one more knit cap Suppose Caroline buys a new tool that enables her to produce twice as many knit caps per hour as before, but it doesn't affect her ability to produce embroidered sweaters. Use the green points (triangle symbol) to plot her new PPF on the previous graph. Because she can now make more knit caps per hour, Caroline's opportunity cost of producing embroidered sweaters is it was previously