Paul can make either “100 bottles of wine and 0 boxes of chocolates” or “0 bottl

Question

Paul can make either “100 bottles of wine and 0 boxes of chocolates” or “0 bottles of wine and 1600 boxes of chocolates” or a combination of wine and chocolates. For parts of this question assume that Paul’s PPF reflects the property of constant opportunity costs.

Suppose PAUL takes a course called CHOCOLATES 103. After the semester is over he realizes that he can now make either “100 bottles of wine and 0 boxes of chocolates” or “0 bottles of wine and 2000 boxes of chocolates” or a combination of wine and chocolates. Find PAUL's new opportunity cost of a bottle of wine in terms of box(es) of chocolates.

Explanation / Answer

opportunity cost is the cost of what is forgone for a certain action chocolates/wine puts it in terms of wine, 2000/100 is 20 1 bottle of wine costs him 20 boxes of chocolates you can figure this easily because relationship is linear so imagine that chocolates are on the y axis and wine on the x 2 points on the graph (which would be the ppf, by the way) are (0,2000) and (100, 0) so slope is -2000/100 and slope of PPF is opportunity cost, its negative because as wine production increases boxes of chocolate able to be produced decreases

Related Questions

Navigate

• Browse (All)
• Browse P
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.