Question
Hours Producing Produced (Cars) (Drums) (Cars) (Drums) A 8 0 4 0 B 6 2 3 8 C 4 4 2 14 D 2 6
Hours Producing | Produced | |||
---|---|---|---|---|
(Cars) | (Drums) | (Cars) | (Drums) | |
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 Eleanor's initial production possibilities frontier (PPF).
Initial PPFNew PPF012345678302520151050DRUMSCARS
Suppose Eleanor is currently using combination D, producing one car per day. Her opportunity cost of producing a second car per day is per day.
Now, suppose Eleanor is currently using combination C, producing two cars per day. Her opportunity cost of producing a third car per day is per day.
From the previous analysis, you can determine that as Eleanor increases her production of cars, her opportunity cost of producing one more car .
Suppose Eleanor buys a new tool that enables her to produce twice as many cars per hour as before, but it doesn't affect her ability to produce drums. Use the green points (triangle symbol) to plot her new PPF on the previous graph.
Because she can now make more cars per hour, Eleanor's opportunity cost of producing drums is it was previously.
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