Figure 3-5
These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour.
-Refer to Figure 3-5. What is the opportunity cost of one pair of tap shoes for Fred?
A) 1/5 pair of ballet slippers
B) 1/3 pair of ballet slippers
C) 3/5 pair of ballet slippers
D) 5/3 pairs of ballet slippers

Question

Figure 3-5
These graphs illustrate the production possibilities available for dancing shoes to Fred and Ginger with 40 hours of labour. 
-Refer to Figure 3-5. What is the opportunity cost of one pair of tap shoes for Fred?
A) 1/5 pair of ballet slippers 
B) 1/3 pair of ballet slippers 
C) 3/5 pair of ballet slippers 
D) 5/3 pairs of ballet slippers

Quizplus · Accepted Answer

The opportunity cost of a pair of tap shoes for Fred is the slope of the production possibilities curve (PPC) for ballet slippers. The slope of the PPC is the amount of ballet slippers Fred must give up to produce one more pair of tap shoes. From the graph, the slope of the PPC for Fred is 3/5, meaning he must give up 3/5 of a pair of ballet slippers to produce one pair of tap shoes.

Answer: B or C
 The best choice(s) depend on Ginger's production possibilities. If Ginger's PPC for tap shoes is steeper (meaning she gives up more ballet slippers to produce tap shoes), then it would be more efficient for Fred to produce all of the tap shoes and Ginger to produce all of the ballet slippers, giving them a total of 16 pairs of shoes. In this case the answer would be B. If Ginger's PPC for tap shoes is less steep (meaning she gives up fewer ballet slippers to produce tap shoes), then it would be more efficient for Fred to produce only 4 pairs of tap shoes and for Ginger to produce the remaining 6 pairs of tap shoes, giving them a total of 18 pairs of shoes. In this case the answer would be C.

Figure 3-5 These Graphs Illustrate the Production Possibilities Available for Dancing Shoes