Question

use the data below to answer question 11-12.

use the following production-possibilities schedule to answer the following questions.

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$$\begin{tabular}{|c|c|} \\hline cakes (in thousands) & bicycles (in hundreds) \\\\ \\hline 0 & 15 \\\\ \\hline 1 & 13 \\\\ \\hline 2 & 9 \\\\ \\hline 3 & 0 \\\\ \\hline \\end{tabular}$$

1. what is the opportunity cost of producing the first thousand cakes?

• 200 bicycles
• 500 bicycles
• 900 bicycles
• 1300 bicycles

1. what of the following combinations of producing cakes and bicycles is impossible?

• 1000 cakes & 1000 bicycles
• 2000 cakes & 1300 bicycles
• 2000 cakes & 500 bicycles
• 2000 cakes & 800 bicycles

Explanation:

Analyze the production schedule

The table shows the production possibilities for cakes (in thousands) and bicycles (in hundreds):

• Combination A: 0 cakes (0) and 15 hundred bicycles (1500)
• Combination B: 1 thousand cakes (1000) and 13 hundred bicycles (1300)
• Combination C: 2 thousand cakes (2000) and 9 hundred bicycles (900)
• Combination D: 3 thousand cakes (3000) and 0 bicycles (0)

Calculate opportunity cost for Question 11

Using the Opportunity Cost knowledge point:

• To produce the first thousand cakes (moving from 0 to 1 thousand cakes), bicycle production decreases from 15 hundred to 13 hundred.
• The decrease is:

$$ 15 - 13 = 2\text{ hundred bicycles} = 200\text{ bicycles} $$

• Thus, the opportunity cost is 200 bicycles.

Evaluate combinations for Question 12

Using the Opportunity Cost and production possibilities concepts:

• At 1000 cakes, the maximum possible bicycles is 1300. Thus, 1000 cakes & 1000 bicycles is possible (underutilization).
• At 2000 cakes, the maximum possible bicycles is 900.
• Comparing the options for 2000 cakes:
• 2000 cakes & 1300 bicycles: Requires more than the maximum possible (900), so it is impossible.
• 2000 cakes & 500 bicycles: Less than 900, so it is possible.
• 2000 cakes & 800 bicycles: Less than 900, so it is possible.
• Therefore, 2000 cakes & 1300 bicycles is impossible.

Answer:

Question 11

• (A) 200 bicycles (Correct answer)
• (B) 500 bicycles
• (C) 900 bicycles
• (D) 1300 bicycles

Question 12

• (A) 1000 cakes & 1000 bicycles
• (B) 2000 cakes & 1300 bicycles (Correct answer)
• (C) 2000 cakes & 500 bicycles
• (D) 2000 cakes & 800 bicycles