Practice with Production Possibilities Frontiers and Opportunity Cost

1. Suppose that the nation of Nestle produces chocolates and cookies. Below are the possible

combinations of chocolate and cookies that Nestle can produce.

Combination Chocolates Cookies

A

0

10

B

2

9

C

4

7

D

6

4

E

8

0

1. Plot the Production Possibilities Frontier for Nestle.

2. What is the opportunity cost of the first 2 chocolates produced?

3. Between which two points is the opportunity cost per chocolate the

highest?

4. Label point F at the combination of 4 chocolates and 12 boxes of cookies.

5. Label point G at the combination of 4 chocolates and 6 boxes of cookies.

6. label point H where we have underutilization of resources

7. Draw a new curve reflecting what the PPF might look like if new cooking technology is

invented to speed up production in both industries.

8. What is the situation described in number 7 called?