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Example of Production Possibilities Fronteer

Suppose a Production Possibilities frontier includes the following combinations:
Cars / Washing Machines
0 1,000
100 600
200 0

a. Graph the PPF, assuming that is has no curved segments
b. What is the cost of producing an additional car when 50 cars are being produced?
c. What is the cost of producing an additional car when 150 cars are begin produced?
d. What is the cost of producing an additional washing machine when 50 cars are being produced? when 150 cars are being produced?
e. What do your answers tell you about opportunity cost?

Solution Summary

Answers the following question

Suppose a Production Possibilities frontier includes the following combinations:
Cars / Washing Machines
0 1,000
100 600
200 0

a. Graph the PPF, assuming that is has no curved segments
b. What is the cost of producing an additional car when 50 cars are being produced?
c. What is the cost of producing an additional car when 150 cars are begin produced?
d. What is the cost of producing an additional washing machine when 50 cars are being produced? when 150 cars are being produced?
e. What do your answers tell you about opportunity cost?

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