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Big Oaks can produce either paper products or lumber with each tree that they harvest. Because Big Oaks can adjust the amount of paper
Big Oaks can produce either paper products or lumber with each tree that they harvest. Because Big Oaks can adjust the amount of paper products and lumber they produce from the harvested trees, paper products and lumber are produced in variable proportions. The above table summarizes Big Oaks production possibilities from each harvested tree. Refer to the table above. Suppose the profit for each unit of paper product is $2 and the profit for each unit of lumber is $5 and Big Oaks is producing the profit-maximizing quantity of lumber and paper products. If the profit from each unit of lumber increases from $5 to $6 and the profit for each unit of paper products does not change, to maximize profit, Big Oaks should produce a proportion of lumber and produce units of paper products and lumber. Ogreater; more O greater; less O smaller; less O smaller; more Movement along Big Oaks Production Possibilities Frontier A to B B to C C to D D to E E to F Gain in Lumber (per unit) 1 1 1 1 1 Forgone Paper Products (per unit) 0.50 1.25 2.50 4.50 7.0
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