1. Table 1.2 Pants or Shorts Production Possibilities
APPLYING YOUR LEARNING 1.3
ANSWERS
Table 1.2 Pants or Shorts Production Possibilities

2. Q1. What is the opportunity cost of making 500 pairs of pants?
400
300
200
100
Shorts
250
450
600
720
800
When the firm makes 500 pairs of pants they have used up all their resources producing the pants so the quantity of shorts produced is zero.

3. Q2. What is the opportunity cost of making 250 pairs of shorts?
Pants
500
400
300
200
100
Shorts
250
450
600
720
800
To make 250 pairs of shorts the production of shorts goes from 0 to 250. This leads to a reduction in resources available for pants and the quantity of pants declines from 500 to 400. So the loss of production or opportunity cost is 100 pairs of pants.

4. Q3 What happens to the opportunity cost, if you increase the production of shorts from 250 to 450?
Pants
500
400
300
200
100
Shorts
250
450
600
720
800
If the production of shorts rises from 250 to 450, the production of shorts declines an additional 100 pants as production falls to 300 pants.

5. Q4. What is the opportunity cost of 200 pairs of pants?
500
400
300
200
100
Shorts
250
450
600
720
800
If no pants are produced 800 pairs of shorts can be produced. If 200 pairs of pants are produced then the production of shorts falls to 600. Thus the opportunity cost is 200 pairs of shorts.

6. Q5. What factors would influence your decision about which combination of shorts and pants to produce?
The factors would include
How easy it would be to transfer resources between production methods
The current and future demand for the two products
The level of profit made by the two products

7. Plot your production schedule on a graph showing a production possibilities frontier.
Pants
400
300
200
100
Shorts