Authors libby rittenberg 68
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The absolute value of the slope of any production possibilities curve equals
the opportunity cost of an additional unit of the good on the horizontal
axis. It is the amount of the good on the vertical axis that must be given up
in order to free up the resources required to produce one more unit of the
good on the horizontal axis. We will make use of this important fact as we
continue our investigation of the production possibilities curve.
Figure 2.4 "Production Possibilities at Three Plants" shows production
possibilities curves for each of the firm’s three plants. Each of the plants, if
devoted entirely to snowboards, could produce 100 snowboards. Plants 2
and 3, if devoted exclusively to ski production, can produce 100 and 50
pairs of skis per month, respectively. The exhibit gives the slopes of the
production possibilities curves for each plant. The opportunity cost of an
additional snowboard at each plant equals the absolute values of these
slopes (that is, the number of pairs of skis that must be given up per
snowboard).
Figure 2.4 Production Possibilities at Three Plants
Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org
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