Lorenzo is a skilled toy maker who is able to produce both trucks and kites. He has
Question:
Lorenzo is a skilled toy maker who is able to produce both trucks and kites. 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 | ||
(Trucks) | (Kites) | (Trucks) | (Kites) | |
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 Lorenzo's initial production possibilities frontier (PPF).
Suppose Lorenzo is currently using combination D, producing one truck per day. His opportunity cost of producing a second truck per day is ___ per day.
Now, suppose Lorenzo is currently using combination C, producing two trucks per day. His opportunity cost of producing a third truck per day is___ per day.
From the previous analysis, you can determine that as Lorenzo increases his production of trucks, his opportunity cost of producing one more truck ____ .
Suppose Lorenzo buys a new tool that allows him to produce twice as many trucks per hour as before, but it doesn't affect his ability to produce kites. Use the green points (triangle symbol) to plot his new PPF on the previous graph.
Because he can now make more trucks per hour, Lorenzo's opportunity cost of producing kites is ____ it was previously.
Essentials of Business Analytics
ISBN: 978-1285187273
1st edition
Authors: Jeffrey Camm, James Cochran, Michael Fry, Jeffrey Ohlmann , David Anderson, Dennis Sweeney, Thomas Williams