Question

Consider the following production possibilities for two goods, Autos (A) and bushels of Wheat (W). Autos...

  1. Consider the following production possibilities for two goods, Autos (A) and bushels of Wheat (W).

Autos

Wheat

Opportunity Cost of Autos (MCA = marginal cost)

0

30

1

27

2

21

3

12

4

0
  1. In the axes below, graph the production possibilities curve for Autos and Wheat.
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Homework Answers

Answer #1

Opportunity cost is the forgone cost of production in this case, and the foregone production is of Wheat, and it is the cost of producing Autos.

The opportunity cost of first Auto production is =30-27 =3 Wheat and so on

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A PPF shows the combination of possible production from given inputs, here Autos on X-axis and Wheat on Y-axis, you can make it either way

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