Question

3. Suppose that you are planning a Valentine’s Day party where you will serve cake (C) and brownies (B). You have four hours to prepare for the party. Suppose that in one hour you can produce two cakes or eight brownies.
a. Draw your production possibilities curve for four hours of time. Put brownies on the vertical axis. Why is your PPC linear?
b. What is the opportunity cost of one cake?
c. On a separate graph, show the effect of increasing your amount of time from four hours to five hours. Draw both the original and new PPCs.
d. Going back to four hours of time, suppose that you invent a brownie machine that doubles the amount of brownies you can produce per hour. How does the PPC change? Draw both the original and new PPCs.
e. In part d), now what is the opportunity cost of one cake?

Answer 1