Question

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

 5. Opportunity cost and production possibilities

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

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

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

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

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

Answer 1

Refer the attached picture below for the Production Possibility frontier

Suppose Jaunita is currently using combination D producing one car per day, her opportunity cost of producing second car per day is 2 drums per day.

Now, Suppose Juanita is currently using combination C, producing two cars per day. Her opportunity cost of producing a third car per day is 6 drums per day.

From above analysis , you can determine that Jaunita increase her production of cars her opportunity cost of producing one more car increases.

Because she can now make more cars per hour, Juanita opportunity cost of producing drums is lower than it was previously.

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