ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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. Opportunity cost and production possibilities

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

Choice

Hours Producing

Produced

(Boats)

(Drums)

(Boats)

(Drums)

A 8 0 4 0
B 6 2 3 11
C 4 4 2 16
D 2 6 1 19
E 0 8 0 20

On the following graph, use the blue points (circle symbol) to plot Musashi's initial production possibilities frontier (PPF).

1Suppose Musashi is currently using combination D, producing one boat per day. His opportunity cost of producing a second boat per day is   per day.

A. 1 DRUM

B.3 DRUM

C.16 DRUM

D.19 DRUM

2Now, suppose Musashi is currently using combination C, producing two boats per day. His opportunity cost of producing a third boat per day is   per day.

A.1 DRUM

B.5 DRUM

C.11 DRUM

D.16 DRUM

3. From the previous analysis, you can determine that as Musashi increases his production of boats, his opportunity cost of producing one more boat   .

A.DECREASES

B.INCRESS

C.REMAINS CONSTANT

Suppose Musashi buys a new tool that enables him to produce twice as many boats per hour as before, but it doesn't affect his ability to produce drums. Use the green points (triangle symbol) to plot his new PPF on the previous graph.

4. Because he can now make more boats per hour, Musashi's opportunity cost of producing drums is _______it was previously.

A. HIGHER THAN

B. LOWER THAN

C.THE SAME AS

On the following graph, use the blue points (circle symbol) to plot Tim's initial production possibilities frontier (PPF).

### Graph Explanation

**Axes:**
- The horizontal axis (x-axis) is labeled "BOATS" and ranges from 0 to 8.
- The vertical axis (y-axis) is labeled "DRUMS" and ranges from 0 to 30.

**Legend:**
- The blue circle symbol indicates the "Initial PPF."
- The green triangle symbol indicates the "New PPF."

This graph is intended to help visualize the different combinations of two goods—boats and drums—that Tim can produce, represented by the production possibilities frontier (PPF). The legend explains which symbols to use for plotting the initial and new PPFs.
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Transcribed Image Text:On the following graph, use the blue points (circle symbol) to plot Tim's initial production possibilities frontier (PPF). ### Graph Explanation **Axes:** - The horizontal axis (x-axis) is labeled "BOATS" and ranges from 0 to 8. - The vertical axis (y-axis) is labeled "DRUMS" and ranges from 0 to 30. **Legend:** - The blue circle symbol indicates the "Initial PPF." - The green triangle symbol indicates the "New PPF." This graph is intended to help visualize the different combinations of two goods—boats and drums—that Tim can produce, represented by the production possibilities frontier (PPF). The legend explains which symbols to use for plotting the initial and new PPFs.
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