4. Opportunity cost and production possibilities Alex is a skilled toy maker who is able to produce both trains and drum

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4. Opportunity cost and production possibilities Alex is a skilled toy maker who is able to produce both trains 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. Hours Producing Choice (Trains) (Drums) (Trains) (Drums) 0 ABCDE А 6 ON A 4 2 ON 46 2 8 OHN WA Produced 9998 10

On the following graph, use the blue points (circle symbol) to plot Alex's initial production possibilities frontier (PPF). DRUMS 30 5 0 1 3 14 TRAINS 5 7 Initial PPF New PPF

Suppose Alex is currently using combination D, producing one train per day. His opportunity cost of producing a second train per day per day. is Now, suppose Alex is currently using combination C, producing two trains per day. His opportunity cost of producing a third train per day per day. is From the previous analysis, you can determine that as Alex increases his production of trains, his opportunity cost of producing one more train Suppose Alex buys a new tool that enables him to produce twice as many trains 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. Because he can now make more trains per hour, Alex's opportunity cost of producing drums is it was previously.