The production possibility frontier demonstrates the existence of an opportunity cost in the business that the producers can avail in order to earn a high profit. A) A B) B C) C D) All of the curves illustrate a production possibilities frontier with increasing opportunity cost in the production of VCRs and telephones. The production possibility frontier is an economic model and visual representation of the ideal production balance between two commodities given finite resources. The opportunity cost of increasing the production of laptops from 0 to 1 000 is 2 000 mobile phones, whereas increasing the production of laptops from 3 000 to 4 000 is 8 000 mobile phones. Opportunity cost can be illustrated by using production possibility frontiers (PPFs) which provide a simple, yet powerful tool to illustrate the effects of making an economic choice. Marginal cost is the opportunity cost A) that your activity imposes on someone else. b. Econ Isle’s production possibilities are graphed to show its frontier, and then used to discuss the opportunity costs of its production and consumption decisions. On the graph, label a point that is efficient and a point that is inefficient. On the graph, identify the area of feasible outcomes and the area of infeasible outcomes. The production possibility frontier indicates the maximum production possibilities of two goods or services, assuming a fixed level of technology and only one choice between the two. Segment 1 of The Production Possibilities Frontier uses the fictional economy of Econ Isle to discuss how limited resources result in a scarcity problem for the economy. Producing one good always creates a trade off over producing another good. The opportunity cost is zero, b. A PPF shows all the possible combinations of two goods, or two options available at one point in time. The production-possibility frontier can be constructed from the contract curve in an Edgeworth production box diagram of factor intensity. B) that arises from producing one more unit of a good or service. As an economy moves down the production possibilities frontier it experiences; Increase marginal opportunity costs since increasing the production of one product requires larger and larger decreases in producing another product. Draw a production possibilities frontier showing increasing opportunity cost of hammers in terms of horseshoes. The example used above (which demonstrates increasing opportunity costs, with a curve concave to the origin) is the most common form of PPF. Production possibilities and increasing opportunity cost for Zanadu a. It shows businesses and national economies the optimal production levels of two distinct capital goods competing for the same resources in production, and the opportunity cost associated with either decision. The production possibilities frontier is a straight line when: a. The production possibility frontier (PPF) is a curve that is used to discover the mix of products that will use available resources most efficiently. The opportunity cost is constant, c. The opportunity cost is increasing, Hammers Infeasible

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