Question

 Clancy is a skilled toy maker who is able to produce both trucks and kites. He has 8 hours a day to produce toys. The following table shows the detailed output resulting from various possible combinations of his time.

 On the following graph, use the blue points (circle symbol) to plot Clancy's Initia' production possibilities frontier (PPF). 

 Suppose Clancy is currently uğing combination D, producing one truck per day. His opportunity cost of producing a second truck per day is _______  per day.

 Now, suppose Clancy is currently using combination C, producing two trucks per day. His opportunity cost of producing a third truck per day is _______  per day.

 From the previous analysis, you can determine that as Clancy increases his production of trucks, his opportunity cost of producing one more truck _______ 

 Suppose Clancy buys a new tool that enables him to produce twice as many trucks per hour as before, but it doesn't affect his ability to produce kites.

 Use the green points (triangle symbol) to plot his new PPF on the previous graph.

 Because he can now make more trucks per hour, Clancy's opportunity cost of producing kites is _______  it was previously.

Answer 1

	Initial PPF		New PPF
Choice	TRUCKS	KITES	TRUCKS	KITES
A	4	0	8	0
B	3	8	6	8
C	2	14	4	14
D	1	16	2	16
E	0	17	0	17

Suppose Clancy is currently using combination D, producing one truck per day. His opportunity cost of producing a second truck per day is 2 kites per day.

At combination D, Clancy is producing 1 truck and 16 kites. In order to produce one more truck and move to combination C, Clancy has to decrease the production of kites from 16 to 14.

Hence, the opportunity cost of producing one more truck is sacrifice of 2 kites.

Now, suppose Clancy is currently using combination C, producing two trucks per day. His opportunity cost of producing a third truck per day is 6 kites per day

At combination C, Clancy is producing 2 trucks and 14 kites. In order to produce one more truck and move to combination B, Clancy has to decrease the production of kites from 14 to 8.

Hence, the opportunity cost of producing one more truck is sacrifice of 6 kites.

From the previous analysis, you can determine that as Clancy increase his production of trucks, his opportunity cost of producing one more truck increase.

Because he can now make more trucks per hour, Clancy's opportunity cost of producing kites is greater than it was previously.

Because now Clancy can make more truck per kite. Hence, opportunity cost of producing kites will be greater than previous.