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Consider two alternatives for Stromboli in 2018. In case (a), its inhabitants eat 60 million pizzas and build 6,000 pizza ovens. In case (b), the population eats 15 million pizzas hut builds 18,000 ovens. Which case will lead to a more generous production possibilities frontier for Stromboli in 2018?

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Microeconomics: Principles & Policy

14th Edition
William J. Baumol + 2 others
Publisher: Cengage Learning
ISBN: 9781337794992

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Chapter
Section
BuyFindarrow_forward

Microeconomics: Principles & Policy

14th Edition
William J. Baumol + 2 others
Publisher: Cengage Learning
ISBN: 9781337794992
Chapter 3, Problem 3TY
Textbook Problem
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Consider two alternatives for Stromboli in 2018. In case (a), its inhabitants eat 60 million pizzas and build 6,000 pizza ovens. In case (b), the population eats 15 million pizzas hut builds 18,000 ovens. Which case will lead to a more generous production possibilities frontier for Stromboli in 2018?

To determine

The case that leads to more generous production possibilities frontier for the country.

Explanation of Solution

Opportunity cost:

The opportunity cost is the cost of the next best alternative that is foregone to pursue one course of action. For example, harvesting with manual labor is replaced by harvesting with machinery. Hence, the opportunity cost of using machinery is the cost of manual labor forgone.

The following graph shows the PPF of the country:

PizzasOvensPizza / OvenOven / Pizza
Case A600006100000...

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