The Opportunity Cost of Free Time for Karim

Wage Rate as the Determinant of the MRT

Two Perspectives on the Feasible Frontier Trade-Off

Calculating MRT for a Linear Feasible Frontier (y + z = 200)

An individual's feasible set of choices between two goods, 'leisure hours' and 'consumption units', is represented by a straight, downward-sloping line on a graph. Point A on this line represents a combination of many leisure hours and few consumption units. Point B, also on this line, represents a combination of few leisure hours and many consumption units. How does the number of consumption units the individual must sacrifice to gain one additional hour of leisure compare at Point A versus Point B?

Production Trade-Off Analysis

Interpreting a Constant Trade-Off

An individual can choose between two activities, A and B. The possible combinations of hours spent on these activities are represented by a straight, downward-sloping line. The amount of activity A the individual must give up to gain one hour of activity B becomes progressively larger as they choose more of activity B.

A producer's feasible combinations of producing two goods, widgets and gadgets, are represented by a straight, downward-sloping line. Two possible production points on this line are (100 widgets, 50 gadgets) and (120 widgets, 40 gadgets). What is the opportunity cost of producing one additional widget, in terms of gadgets?

A student has a fixed amount of time to allocate between two activities: studying and exercising. The relationship representing all possible combinations of hours spent on these activities is a straight, downward-sloping line. Suppose the student finds that giving up 1 hour of studying allows them to gain exactly 30 minutes of exercise. If they are already exercising a lot and decide to give up another hour of studying, how much additional exercise time will they gain?

Analyzing Production Scenarios

A decision-maker must choose between combinations of two items, 'Item X' and 'Item Y'. Match each graphical representation of their possible choices (their feasible frontier) with the correct description of the trade-off they face.

The Economic Significance of a Linear Feasible Frontier

A producer's feasible combinations for producing two products, Product A and Product B, are represented by the equation 5A + 2B = 200. To produce one additional unit of Product A, how many units of Product B must the producer forgo, assuming they remain on the frontier?