Question

 11. Opportunity cost and production possibilities

 Becky is a skilled toy maker who is able to produce both cars and kites. 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 Becky's initial production possibilities frontier (PPF).

 Suppose Becky 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 Becky 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 Becky increases her production of cars, her opportunity cost of producing one more car _______ 

 Suppose Becky 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 kites.

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

 Because she can now make more cars per hour, Becky's opportunity cost of producing kites is _______  it was previously.

Answer 1

Suppose Becky is currently using combination D,producing one car per day.her opportunity cost of producing a second car per day is 19-17=2 kites per day.

Now,suppose using combination C,her opportunity cost of producing a third car per day is 17-12 = 5 kites per day.

From the previous analysis,you can determine that as Becky increases her production of cars,her opportunity cost of producing one more car increases.

Because she can now make more cars per hour,Becky's opportunity cost of producing kites is higher than it was previously.