d) The price of toilet paper rises, but the quantity of toilet paper could rise
ID: 1142780 • Letter: D
Question
d) The price of toilet paper rises, but the quantity of toilet paper could rise or fall. 10) The production possibility frontier for Wonderland is shown in the following figure. Assume that Wonderland only produces bicycles and computers. Use the figure to answer the following two questions. Assume the PPF is linear between any two adjacent points (e.g, the PPF is linear between points A and B. or between points B and C). What is happening to the opportunity cost of producing more bicycles as we move from point D to point B?Explanation / Answer
Answer 10
The correct answer is (a) the opportunity cost of Bicycle increases.
Opportunity cost of bicycle refers to the amount of computer we have to sacrifice in order to produce more of Bicycles.
Opportunity cost of Producing Bicycles If we move from Point D to Point C is (5 - 4)/(7 - 4) = 1/3 computer.
Opportunity cost of Producing Bicycles If we move from Point C to Point B is (4 - 2)/(9 - 7) = 1 computer.
Opportunity cost of Producing Bicycles If we move from Point C to Point B is greater than Opportunity cost of Producing Bicycles If we move from Point D to Point C.
Hence Opportunity cost of Bicycles as we move from Point D to Point B increases.
Hence The correct answer is (a) the opportunity cost of Bicycle increases.
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