Hilary is a skilled toy maker who is able to produce both trains and balls. She has 8 hours a day to produce toys. The following table shows the daily output resulting from various possible combinations of her time.
Hilary is a skilled toy maker who is able to produce both trains and balls. She has 8 hours a day to produce toys. The following table shows the daily output resulting from various possible combinations of her time.
Microeconomics: Principles & Policy
14th Edition
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:William J. Baumol, Alan S. Blinder, John L. Solow
Chapter7: Production, Inputs, And Cost: Building Blocks For Supply Analysis
Section: Chapter Questions
Problem 8TY
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Transcribed Image Text:Hilary is a skilled toy maker who is able to produce both trains and balls. She has 8 hours a day to produce toys. The following table shows the daily
output resulting from various possible combinations of her time.
Choice
A
B
C
D
BALLS
E
30
25
20
15
10
50
0
Hours Producing
(Trains) (Balls)
8
0
6
2
0
4
1
2
0
4
2
6
8
On the following graph, use the blue points (circle symbol) to plot Hilary's initial production possibilities frontier (PPF).
(?)
3
Produced
(Trains)
4
TRAINS
4
3
2
1
0
5
(Balls)
0
6
11
16
19
20
7
8
Initial PPF
A
New PPF
Suppose Hilary is currently using combination D, producing one train per day. Her opportunity cost of producing a second train per day is
per day.
Transcribed Image Text:1
2 3
4
TRAINS
5
6 7 8
Suppose Hilary 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 Hilary 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 Hilary increases her production of trains, her opportunity cost of producing one more train
Suppose Hilary buys a new tool that allows her to produce twice as many trains per hour as before, but it doesn't affect her ability to produce balls.
Use the green points (triangle symbol) to plot her new PPF on the previous graph.
Because Hilary can now make more trains per hour, Hilary's opportunity cost of producing balls is
it was previously.
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