An economy operates along a linear-segmented Production Possibility Curve with full employ… — JAMB UTME

An economy operates along a linear-segmented Production Possibility Curve with full employment of resources, producing only Solar Panels ( $S$ ) and Wind Turbines ( $T$ ). Its production schedule is given in the table below:

Combination	Solar Panels ( $S$ )	Wind Turbines ( $T$ )
P	100	0
Q	85	10
R	65	20
S	40	30
U	0	40

If the society decides to reallocate its scarce resources to increase the output of Wind Turbines from $10$ units to $30$ units, what is the average opportunity cost per unit of Wind Turbine gained, expressed in terms of Solar Panels foregone?

Cevap: 2.25 Solar Panels

Cevap

2.25

Moving from Combination Q to Combination S increases Wind Turbine production from

10

30

units (a gain of

20

units). Simultaneously, Solar Panel production falls from

85

40

units (a loss of

45

units). The opportunity cost per unit of Wind Turbine gained is the total number of Solar Panels foregone divided by the total Wind Turbines gained:

45 \div 20 = 2.25

Adım Adım Çözüm

Determine initial output of Solar Panels at

10

units of Wind Turbines

10

Wind Turbines (Combination Q), Solar Panel production is

85

units.

Establishing the baseline production combination before reallocation.

Determine new output of Solar Panels at

30

units of Wind Turbines

30

Wind Turbines (Combination S), Solar Panel production is

40

units.

Establishing the ending production combination after reallocation.

Calculate total sacrificed Solar Panels and total gained Wind Turbines

Solar Panels foregone =

85 - 40 = 45

units. Wind Turbines gained =

30 - 10 = 20

units.

Opportunity cost measures the sacrifice of alternative output necessary to obtain additional units of the target output.

Calculate marginal/average opportunity cost per unit gained

Average Opportunity Cost =

\frac{45 \text{ Solar Panels}}{20 \text{ Wind Turbines}} = 2.25

Solar Panels per Wind Turbine.

Dividing total units foregone by total units gained provides the unit opportunity cost.

Anahtar Kavram

Marginal Opportunity Cost along a Production Possibility Curve

Soru

Cevap

Adım Adım Çözüm

Anahtar Kavram

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