Question

At one point along a PPF, 350 tanks and 200 automobiles are produced. At another point along the same PPF, 200 tanks and 400 automobiles are produced. The opportunity cost of a tank between these two points is

a. 3/4 of an automobile per tank.
b. 4/3 of an automobile per tank.
c. 1/2 of an automobile per tank.
d. 2 automobiles per tank.

Answer 1

Option B. The opportunity cost of a tank when moving between two points on the same production possibility frontier, with a decrease from 350 to 200 tanks and an increase from 200 to 400 automobiles, is 4/3 of an automobile per tank.

Step-by-step explanation:

The opportunity cost of producing one good in terms of another can be calculated using the production points on a country's production possibility frontier (PPF). To find the opportunity cost of a tank between the two given points on the PPF, we can compare the change in automobile production to the change in tank production.

From the first point to the second, tank production decreases by 350 - 200 = 150 tanks, while automobile production increases from 200 to 400, an increase of 200 automobiles. Therefore, the opportunity cost of one tank in terms of automobiles is the ratio of the increase in automobiles to the decrease in tanks.

1. Calculate the difference in automobile production: 400 - 200 = 200 automobiles.
2. Calculate the difference in tank production: 350 - 200 = 150 tanks.
3. Divide the difference in automobiles by the difference in tanks: 200 automobiles / 150 tanks = 4/3 of an automobile per tank.

Therefore, the opportunity cost of a tank between these two points along the same PPF is 4/3 of an automobile per tank, which corresponds to option (b).