Question

4. Opportunity cost and production possibilities 

Amy is a skilled toy maker who is able to produce both trains and puzzles. She has 8 hours a day to produce toys. The following table shows the daily output resulting from various possible combinations of her time.

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

Suppose Amy is currently using combination D, producing one train per day. Her opportunity cost of producing a second train per day is _______ per day. 

Now, suppose Amy is currently using combination C, producing two trains per day. Her opportunity cost of producing a third train per day is _______ per day. 

From the previous analysis, you can determine that as Amy increases her production of trains, her opportunity cost of producing one more train _______ 

Suppose Amy buys a new tool that enables her to produce twice as many trains per hour as before, but it doesn't affect her ability to produce puzzles. Use the green points (triangle symbol) to plot her new PPF on the previous graph. 

Because she can now make more trains per hour, Amy's opportunity cost of producing puzzles is _______ it was previously.

Answer 1