Exercise 2: Production Possibilities Frontier

Which of the firms in the choices below should specialize in producing hamburgers?

• Jollibee
• McDonald's
• Wendy's

• Burger King

Which of the firms in the choices below should specialize in producing fried chicken?

• Jollibee

• McDonald's

• Wendy's

• Burger King

Examine the PPF provided. Which firm should specialize in producing Barbie dolls?

• Firm A

• Firm B

• Firm C

Answer explanation

Firm C is able to produce more Barbie at lower opportunity cost (lego)

Using the same PPF provided in number 3, which firm should specialize in producing Lego?

• Firm A

• Firm B

• Firm C

Answer explanation

Firm A is able to produce more Lego at lower opportunity cost (barbie)

What is the difference between constant and inconstant opportunity cost? How does it affect the production possibilities frontier?