Eric is a skilled toy maker who is able to produce both boats 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.

ChoiceHours Producing

Produced

(Boats)(Kites)(Boats)(Kites)A8040B62311C44216D26119E08020

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

Initial PPF

New PPF

0

1

2

3

4

5

6

7

8

30

25

20

15

10

5

0

KITES

BOATS

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

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

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

Suppose Eric 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 kites. Use the green points (triangle symbol) to plot his new PPF on the previous graph.

Because he can now make more boats per hour, Eric's opportunity cost of producing kites is it was previously.