Figure 3-5
Hosne's Production Possibilities Frontier
Merve's Production Possibilities Frontier
-Refer to Figure 3-5.If Hosne must work 0.5 hour to make each purse,then her production possibilities frontier is based on how many hours of work?
A)2 hours
B)5 hours
C)20 hours
D)50 hours

Question

Figure 3-5
Hosne's Production Possibilities Frontier
Merve's Production Possibilities Frontier  
-Refer to Figure 3-5.If Hosne must work 0.5 hour to make each purse,then her production possibilities frontier is based on how many hours of work?
A)2 hours 
B)5 hours 
C)20 hours 
D)50 hours

Quizplus · Accepted Answer

Based on Hosne's production possibilities frontier, she can either produce 10 purses and 0 wallets or 5 purses and 5 wallets. This means that the opportunity cost of producing one wallet is 2 purses (she has to give up 2 purses to produce one wallet). If Hosne must work 0.5 hour to make each purse, then she would need a total of 20 hours of work to produce 10 purses. Therefore, the slope of her production possibilities frontier is -2 (with wallets on the y-axis and purses on the x-axis).

Merve's production possibilities frontier is steeper, which means that her opportunity cost of producing one wallet is higher than Hosne's (she has to give up more purses to produce one wallet). If Merve values wallets more than purses (i.e. her preferences are different from Hosne's), then she should produce more wallets and fewer purses than Hosne. However, based on the information given in the figure, we cannot determine which option is the best choice for Merve.

Figure 3-5 Hosne's Production Possibilities Frontier