Opportunity cost and production possibilities
Raphael is a skilled toy maker who is able to produce both trains 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.
On the following graph, use the blue points (circle symbol) to plot Raphael's initial production possibilities frontier (PPF).
Suppose Raphael is currently using combination D, producing one train per day. His opportunity cost of producing a second train per day is(1 / 2 / 14 / 16) kites per day.
Now, suppose Raphael is currently using combination C, producing two trains per day. His opportunity cost of producing a third train per day is(1 /6 /8 /14) kites per day.
From the previous analysis, you can determine that as Raphael increases his production of trains, his opportunity cost of producing one more train(decreases/increases/remains constant) .
Suppose Raphael buys a new tool that allows him to produce twice as many trains 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 trains per hour, Raphael's opportunity cost of producing kites is(higher than/lower than/the same as) it was previously.