Figure 3-5

-Refer to Figure 3-5.Hosne's opportunity cost of one purse is

Question

Figure 3-5
 
-Refer to Figure 3-5.Hosne's opportunity cost of one purse is

Quizplus · Accepted Answer

Hosne's opportunity cost of one purse is the slope of her PPF, which is 4/5 wallet. Merve's opportunity cost of one purse is the slope of her PPF, which is 3/2 wallets. The best choice for both of them is where the PPFs intersect, which is point E. At point E, Hosne can produce 8 wallets and 5 purses, while Merve can produce 6 wallets and 5 purses. Therefore, they can each specialize in producing purses and trade with each other to reach a consumption point on both of their indifference curves that is not achievable on their own.

Figure 3-5 -Refer to Figure 3-5.Hosne's Opportunity Cost of One Purse Is