that follovw [16-17) Refer to the information provided in Figure 2.2 below to an
ID: 1132198 • Letter: T
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that follovw [16-17) Refer to the information provided in Figure 2.2 below to answer the questions 120 90 80 Plasma televisions Figure 2.2 16. Refer to Figure 2.2. The economy is currently at Point A. The opportunity cost of moving from Point A to Point B is the A) 90 LCD televisions that must be forgone to produce 20 additional plasma televisions. B) 30 LCD televisions that must be forgone to produce 60 additional plasma televisions C 120 LCD televisions that must be forgone to produce 40 additional plasma televisions. D) 30 LCD televisions that must be forgone to produce 20 additional plasma televisions 17. Refer to Figure 2.2. The economy is currently at Point B. The opportunity cost of moving from Point B to Point A is the A) 40 plasma TVs that must be forgone to produce 120 additional LCD TVs B) 20 plasma TVs that must be forgone to produce 30 additional LCD TVs C) 30 LCD TVs that must be forgone to produce 40 additional plasma TVs. D) 120 LCD TVs that must be forgone to produce 20 additional plasma TVs.Explanation / Answer
Let's first write down all the production possibilities at different points on the PPF curve.
Point A (40,120)
Point B (60,90)
Point C (80,y1) where y1 is simply the units of LCD television corresponding to 80 units of production for Plasma Televisions.
16. The economy is currently at point A. Now, the Opportunity cost of moving from Point A to Point B would be:
Production at Point A = (40,120) or 40 units of Plasma TV and 120 Units of LCD TVs.
Production at Point B = (60,90) or 60 units of Plasma TV and 90 units of LCD TVs.
Thus, to produce 20 extra units of plasma TV, we must forego 30 units of LCD TVs which is the opportunity cost of producing 20 extra units of the plasma TV.
Thus, Option D is the correct answer.
17. Opportunity Cost of moving from point B to Point A
Production at point B = (60,90) or 60 units of Plasma TV and 90 units of LCD TV.
Production at point A = (40,120) or 40 units of Plasma TV and 120 units of LCD TV
Now, Moving from Point B to Point A would mean that we are producing 30 additional units of LCD TV which will come at a cost of 20 lesser units of Plasma TV.
Thus, Opportunity Cost is: 20 Plasma TV must of foregone to produce an additional 30 units of LCD TVs.
Thus, Option B is the correct answer.
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