Question

Suppose a small economy produces only two goods: books and shirts. The opportunity cost of 1 book is constant at 3 shirts. For example, in order for this economy to produce 1 more book, 3 fewer shirts must be produced.

In the following table, fill in the number of shirts in each combination (given the number of books being produced).

Answer 1

Books Shirts

4 0

3 3

2 6

1 9

0 12

Explanation: At combination E, the economy is producing 0 books and 12 shirts. Since the opportunity cost of 1 book is 3 shirts, moving from point E to point D (gaining 1 book) requires this economy to produce 3 fewer shirts. Thus, the number of shirts in combination D must be 12 shirts−3 shirts=9 shirts. The rest of the combinations can be calculated in a similar fashion, with the answers summarized in the following table.

A 4 3−3=0

B 3 6−3=3

C 2 9−3=6

D 1 12−3=9

E 0 12