Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

A famous construction company has the necessary resource capable of construction buildings and roads. A careful engineering estimate reveals that, in a year, the company

A famous construction company has the necessary resource capable of construction buildings and roads. A careful engineering estimate reveals that, in a year, the company has the possibility of producing the following combinations of buildings and roads basing on the amount of resources held.

Output Combinations
A B
4 Bedroom houses 12 0
Roads (in km) 0 60

Further analysis reveals that, while the cost of constructing one house is Tsh.62 million, the cost of constructing a road is Tsh. 30 million per km. on the other hand, while the selling value of one house is Tsh. 105 millioni, payments for constructing a road is Tsh. 48 millioni per kilometer.

  1. Determine the opportunity cost of constructing a 4 bedroom house in terms of road kilometers.
  2. Determine the opportunity cost of constructing one road kilometer in terms of 4 bedroom houses.
  3. If you are to provide an economic advice to the company, which combination would you advice the company to opt?. Give reasons for your answer.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Introduction To Business Law

Authors: Jeffrey F. Beatty, Susan S. Samuelson, Patricia Abril

6th Edition

1337404349, 978-1337404341

More Books

Students also viewed these Economics questions