Question

S. Oppartunity cest and preduction possibiisies Crystal is a skilled toy maker who is able to produce both trucks 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. Hours Preducing Preduted Cheice Trucksy ces (rucks) CMes) On the following graph, use the blue points (circle symbol) to plot Crystal's initial production possibilities frontier (PPF). Suppose Crystal is currently using combination D, producing one truck per day. Her opportunity cost of producing a second truck per day isper day. Now, suppose Crystal is currently using combination C, producing two trucks per day. Her opportunity cost of producing a third truck per day is From the previous analysis, you can determine that as Crystal increases her production of trucks, her opportunity cost of producing one more truck Suppose Crystal buys a new tool that enables her to produce twice as many trucks 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. per day. Because she can now make more trucks per hour, Crystal's opportunity cost of producing kites is it was previously.

Answer 1

At combination D, the opportunity cost of producing a second truck is 2 kites. When production of trucks is increased from 1 to 2, Crystal has to give up (15-13)=2 kites.

At combination C, the opportunity cost of producing a second truck is 5 kites. When production of trucks is increased from 2 to 3, Crystal has to give up (13-8)=5 kites.

Increases, as Crystal has to give up more number of kites for each additional truck produced.

The opportunity cost increases as Crystal has to give up more number of trucks for the kites produced.

Under the old PPF, she gave up 1 truck when production of kites was increased from 15 to 16, now under the new PPF she has to give up 2 trucks.