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Question

An economy produces two goods: watches and shoes. The following table summarises its production possibilities. Calculate the marginal opportunity cost of watches at various combinations. Give a diagrammatic presentation of production possibilities.
Watches (Millions)$$0$$$$1$$$$2$$$$3$$$$4$$$$5$$
Shoes (Thousands)$$90,000$$$$80,000$$$$68,000$$$$52,000$$$$34,000$$$$10,000$$


Solution

Watches (Millions)Shoes (Thousands)Marginal Opportunity Cost
$$0$$$$90,000$$-
$$1$$$$80,000$$$$\dfrac {10,000}{1} = 10,000$$
$$2$$$$68,000$$$$\dfrac {12,000}{1} = 12,000$$
$$3$$$$52,000$$$$\dfrac {16,000}{1} = 16,000$$
$$4$$$$34,000$$$$\dfrac {18,000}{1} = 18,000$$
$$5$$$$10,000$$$$\dfrac {24,000}{1} = 24,000$$

883152_959713_ans_f3fd1f44753d428f8d44e766d043137c.jpg

Economics

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