Answer Happy

5. Opportunity cost and production possibilities Dina is a skilled toy maker who is able to produce both trucks 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 с D Hours Producing (Trucks) 8 6 4 2 0 (Balls) 0 2 4 6 8 Produced (Trucks) 4 3 2 1 0 (Balls) 0 11 16 19 20 On the following graph, use the blue points (circle symbol) to plot Dina's initial production possibilities frontier (PPF).

On the following graph, use the blue points (circle symbol) to plot Dina's initial production possibilities frontier (PPF). BALLS 30 25 20 15 10 5 0 0 1 2 3 4 TRUCKS 5 6 7 8 Initial PPF New PPF

Suppose Dina is currently using combination D, producing one truck per day. Her opportunity cost of producing a second truck per day is per day. Now, suppose Dina is currently using combination C, producing two trucks per day. Her opportunity cost of producing a third truck per day is per day. From the previous analysis, you can determine that as Dina increases her production of trucks, her opportunity cost of producing one more truck Suppose Dina buys a new tool that enables her to produce twice as many trucks 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 she can now make more trucks per hour, Dina's opportunity cost of producing balls is it was previously.