The farm incurs an opportunity cost of ______

Microeconomics:TipsfromHWProblemsChapter2PPF”boundarybwthosecombinationsofgoodsandservicesthatcanbeproducedandthosethatcannotbeproducedStraightPPF(productionpossibilitiesfrontier)line=constantopportunitycostOpportunitycostof1poundofteais__pairsofhikingboots50lbstea:250hikingboots250/50=5pairsOpportunitycostof1pairofhikingbootsis__poundsoftea50lbstea:250hikingboots50/250=0.2lbsMovingalongPPF=quantityofproductionwouldbechangingQuestionspecifiesquantityproduced?NOTmovingalongProduceonPPF=facestradeoff,notabletoproducemoreofgonegoowithoutproducinglessofotherProduceinsidePPF=abletoproducemoreofonegoodwithoutproducinglessofotherIncreasingopportunitycost=curveddownwards,mustintersectxandyaxisOpportunitycost:thequantityforgoneofProductAbcyouchosetoproducexquantityofProductBProduces0bagscandy,20bagschips.Toproduce1bagcandy,opportunitycost=4bagschipsbc20-16=4.

Worked ProblemLeisure Island has 50 hours of labour a day that it can use to produceentertainment and good food. The table shows the maximum quantity ofeach good that it can produce with different quantities of labour.Labour (hours)Entertainment (shows per week)Good food (meals per wee00or0102or5204or9306or12408or145010or15Questions1.Can Leisure Island produce 4 shows and 14 meals a week?2.If Leisure Island produces 4 shows and 9 meals a week, is productionefficient?3.If Leisure Island produces 8 shows and 5 meals a week, do the peopleof Leisure Island face a tradeoff?4.Suppose that Leisure Island produces 4 shows and 12 meals a week.Calculate the opportunity cost of producing 2 additional shows a week.Solutions1.To produce 4 shows it would use 20 hours and to produce 14 meals itwould use 40 hours, so to produce 4 shows and 14 meals a week,Leisure Island would use 60 hours of labour. Leisure Island has only 50

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