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Consider a society consisting of only Helen, who allocates her time between sewing dresses and baking bread. Each hour she devotes to sewing dresses yields 4 dresses, and each hour devotes to baking bread yields 8 loaves of bread. If Helen works a total of 8 hours per day, graph her production possibilities curve.

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Answer:

Since Helen works a total of 8 hours per day, she can produce a maximum:

  • 4 dresses x 8 hours = 32 dresses
  • 8 loaves of bread x 8 hours = 64 loaves of bread

Helen's opportunity cost of producing one loaf of bread = 4 / 8 = 0.5 dresses

Helen's opportunity cost of producing one dress = 8 / 4 = 2 loaves of bread

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