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Table 2-2

Footville's Production Possibilities
Shoes Socks
800 0
600 400
400 700
200 900
0 1,000

Refer to Table 2-2. Which of the following statements is correct?
a. The opportunity cost of an additional 200 shoes increases as more shoes are produced.
b. The opportunity cost of an additional 200 shoes is constant at 300 socks.
c. Footville's production possibilities frontier is a straight, downward-sloping line.
d. The opportunity cost of an additional 200 shoes is constant at 200 socks.

1 answer

To analyze the opportunity costs given in Table 2-2, we need to examine how many socks are forgone for each increase in shoe production.

  1. From 800 shoes to 600 shoes (producing 200 fewer shoes), the production of socks increases from 0 to 400. So, the opportunity cost for 200 shoes is 400 socks (forgoing 400 socks to gain 200 shoes).
  2. From 600 shoes to 400 shoes, sock production increases from 400 to 700 (additional 300 socks). Here, the opportunity cost for another 200 shoes is 300 socks.
  3. From 400 shoes to 200 shoes, sock production increases from 700 to 900 (additional 200 socks). Here, the opportunity cost is 200 socks for another 200 shoes.
  4. From 200 shoes to 0 shoes, sock production goes from 900 to 1,000 (additional 100 socks). So, for 200 shoes, the opportunity cost is 100 socks.

From this information, we can conclude:

  • The opportunity cost of producing more shoes increases as more shoes are produced (it decreases in sock production).
  • The opportunity costs are not constant and vary based on how many shoes are being produced.
  • The production possibilities frontier is not a straight line; it is likely concave.

Thus, the correct statement would be:

a. The opportunity cost of an additional 200 shoes increases as more shoes are produced.