Susan is a skilled toy maker who is able to produce both trains 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. Choice Hours Producing Produced (Trains) (Drums) (Trains) (Drums) A 8 0 4 0 B 6 2 3 8 C 4 4 2 14 D 2 6 1 16 E 0 8 0 17 On the following graph, use the blue points (circle symbol) to plot Susan's initial production possibilities frontier (PPF). Then use the green points (triangle symbol) to plot Susan's new (PPF) Suppose Susan 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 Susan 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 Susan increases her production of trains, her opportunity cost of producing one more train . Suppose Susan buys a new tool that enables her to produce twice as many trains 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 trains per hour, Susan's opportunity cost of producing drums is it was previously.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Susan is a skilled toy maker who is able to produce both trains 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.

Choice	Hours Producing	Produced
(Trains)	(Drums)	(Trains)	(Drums)
A	8	0	4	0
B	6	2	3	8
C	4	4	2	14
D	2	6	1	16
E	0	8	0	17

On the following graph, use the blue points (circle symbol) to plot Susan's initial production possibilities frontier (PPF). Then use the green points (triangle symbol) to plot Susan's new (PPF)

Suppose Susan 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 Susan 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 Susan increases her production of trains, her opportunity cost of producing one more train .

Suppose Susan buys a new tool that enables her to produce twice as many trains 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 trains per hour, Susan's opportunity cost of producing drums is it was previously.

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