5. Opportunity cost and production possibilities

Musashi is a talented artist who sells hand-crafted goods on his website. Musashi currently crafts and sells both crochet hats and embroidered sweaters. He spends 8 hours a day working on crafts. The following table gives different daily output scenarios depending on how much of his time is spent on each good.

Suppose Musashi is currently using combination D, producing one crochet hat per day. His opportunity cost of producing a second crochet hat per day i (1 SWEATER / 2 SWEATER / 13 SWEATERS/ 15 SWEATERS) per day.

Now, suppose Musashi is currently using combination C, producing two crochet hats per day. His opportunity cost of producing a third crochet hat per day is (1 SWEATER / 5 SWEATER/ 8 SWEATER/ 12 SWEATER) per day.

From the previous analysis, you can determine that as Musashi increases his production of crochet hats, his opportunity cost of producing one more crochet hat .(DECREASES/ INCREASES/ REMAINS CONSTANT

Suppose Musashi buys a new tool that enables him to produce twice as many crochet hats per hour as before, but it doesn't affect his ability to produce embroidered sweaters. Use the green points (triangle symbol) to plot his new PPF on the previous graph.

Because he can now make more crochet hats per hour, Musashi's opportunity cost of producing embroidered sweaters is (HIGHER THAN/ LOWER THAN/ THE SAME AS) it was previously.

\begin{tabular}{lccccc} & \multicolumn{2}{c}{ Hours Crafting } & & \multicolumn{2}{c}{ Produced } \\ \cline { 2 - 3 } \cline { 5 - 6 } Choice & (Crochet hats) & (Embroidered sweaters) & & (Crochet hats) & (Embroidered sweaters) \\ \hline A & 8 & 0 & 4 & 0 \\ B & 6 & 2 & 3 & 8 \\ C & 4 & 4 & 2 & 13 \\ D & 2 & 6 & 1 & 15 & 16 \end{tabular} On the following graph, use the blue points (circle symbol) to plot Musashi's initial production possibilities frontier (PPF)