Question

Incorrect Question 1 0/1 pts The graph below represents the Production Possibility Frontier (PPF) for an economy that produces two goods: bicycles and lawnmowers. Bicycles 0 1 2 3 4 5 6 7 Lawnmowers What is the opportunity cost of producing another lawnmower in terms of bicycles if the economy is currently producing efficiently at two and a half bicycles? (The new point would be on the X-axis at the X-intercept point.) 5

Answers 3.5 and 4 were also incorrect for number 1.

Answer 1

2.5 is the correct answer. Currently when two and a half bicycles are produced 4 lawnmowers are produced. To produce one more lawn mower, the production of bicycles has to be reduced to zero because when there are five lawnmowers there are zero bicycles in the PPF. Therefore the opportunity cost which is the reduction in the amount of bicycles produced is 2.5

Third option is correct. Because the production possibilities Frontier is a curve, the opportunity cost is increasing and resources that are used in the production of bicycles would now be required to switch to the production of lawn mowers. This shift is required because resources are fixed and there is a trade off between what they can produce