Authors libby rittenberg 889

The production possibilities curve for Roadway shows the
combinations of trucks and boats that it can produce, given the factors
of production and technology available to it. To maximize the value of
total production, Roadway must be operating somewhere along this
curve. Production at point D implies that Roadway is failing to use its
resources fully and efficiently; production at point E is unobtainable.
We have learned that the absolute value of the slope of a production
possibilities curve at any point gives the quantity of the good on the
vertical axis that must be given up to produce an additional unit of the
good on the horizontal axis. It thus gives the opportunity cost of producing
another unit of the good on the horizontal axis.
Figure 17.2 Measuring Opportunity Cost in Roadway

The slope of the production possibilities curve at any point is equal to
the slope of a line tangent to the curve at that point. The absolute value
of the slope equals the opportunity cost of increased boat production.
Moving down and to the right along its production possibilities curve,
the opportunity cost of boat production increases; this is an
application of the law of increasing opportunity cost.
Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org

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