(Solved): 5. Opportunity cost and production possibilities Lucia is a talented artist who sells hand-crafted ...

5. Opportunity cost and production possibilities Lucia is a talented artist who sells hand-crafted goods on her website. Lucia currently crafts and sells both knit caps afd cutting boards. She spends 8 hours a day worklng on crafts. The following table gives different daily output scenarios depending on how much of her time is spent on each good. On the following graph, use the blue points (circle symbol) to plot Lueia's initlal production possibifities frontier (PpF). (?) Initial PPF $??$ New PPF Suppose Lucia is currently using combination D, producing one knit cap per day. Her opportunity cost of producing a second knit cap per day is per day. Now, suppose Lucia is currently using combination C, producing two knit caps per day. Her opportunity cost of producing a third knit cap per day is per day. From the previous analysis, you can determine that as Lucia increases her production of knit caps, her opportunity cost of producing one more knit cap. Suppose Lucia buys a new tool that enables her to produce twice as many knit caps per hour as before, but it doesn't affect her abilty to produce cutting boards. Use the green points (triangle symbol) to plot her new ppf on the previous graph. Because she can now make more knit caps per hour, Lucia's opportunity cost of producing cutting boards is it was previously.