Gerry is a chef in a popular restaurant. He has limited time to help prepare for a party. Study the table below, which shows Gerry's production possibilities. Calculate the opportunity cost of going from producing 2 sandwiches to 3 sandwiches. Show your work. b) Draw a correctly labeled PPC using the data from the table above.

c) Does this PPC indicate increasing, decreasing, or constant opportunity cost? Explain.

d) Think of two goods that might have a constant opportunity cost of production. Draw and label a PPC for them. You do not need to make a table or define specific data quantities on the axes. Label which good is represented on each axis.

e) On your graph from part d, label an efficient and inefficient point of production (two separate points).

a) 6 Deserts

b) See Question (b) Answer in the attached graph.

c) Increasing opportunity cost.

b) See Question (d) and (e) Answer in the attached graph.

e) See Question (d) and (e) Answer in the attached graph.

Explanation:

a) Calculate the opportunity cost of going from producing 2 sandwiches to 3 sandwiches. Show your work.

Moving from 2 sandwiches to 3 sandwiches requires moving from 6 Derserts to 0 Derserts

Moving from 2 sandwiches to 3 sandwiches = 3 - 2 = 1 more

Moving from 6 Derserts to 0 Derserts = 6 - 0 = 6 less

Therefore, the opportunity cost of going from producing 2 sandwiches to 3 sandwiches is therefore 6 Derserts that must be sacrificed.

c) Does this PPC indicate increasing, decreasing, or constant opportunity cost? Explain.

The PPC indicates increasing opportunity cost.

The reason is that the PPC is concave to the origin. That is, the PPC is bowed outwards.

This implies that more and more units of Derserts have to be sacrificed in order to produce one additional unit of Sandwiches. It also indicates that more and more units of Derserts have to be sacrificed in order to produce one additional unit of Sandwiches.

From the table for example, going from 0 sandwiches to 1 requires 1 Deserts to be sacrificed, while going from 1 sandwiches to 2 requires 3 Deserts to be sacrificed. This increases more as going from 2 sandwiches to 3 requires 6 Deserts to be sacrificed.

d) Think of two goods that might have a constant opportunity cost of production. Draw and label a PPC for them. You do not need to make a table or define specific data quantities on the axes. Label which good is represented on each axis.

The two goods chosen are oranges and apples.

The two goods have a constant opportunity cost of production because the production of one more unit of orange or apple requires always requires just one units of apple or orange to be sacrificed. That is why the PPC is a straight line.

e) On your graph from part d, label an efficient and inefficient point of production (two separate points).

An efficient point on the PPC is a point at which all the resources have been fully utilized. This is point A under Question (d) and (e) Answer in the attached graph. At this efficient point, no more units of either orange or apple can be produced.

An inefficient point on the PPC is a point at which the resources have not been fully utilized. This is point B under Question (d) and (e) Answer in the attached graph. This point is inefficient more units of either orange or apple or both can still be produced.

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