Question

business example: messy buns is a business that sells hot dogs and hamburgers. 1. what is the opportunity cost for messy buns if production moves from point a to point b? 2. what point would represent production if two of messy buns’ employees called in sick or if there was a break down in physical capital? 3. list three ways messy buns could increase production to point d?

Explanation:

Sub - Question 1

Step 1: Identify production at Point A

From the graph, at Point A, the number of hot dogs is 800 and the number of burgers is 600.

Step 2: Identify production at Point B

At Point B, the number of hot dogs is 700 and the number of burgers is 700.

Step 3: Calculate the change in hot dogs and burgers

The change in hot dogs: \(800 - 700=100\) (decrease in hot dogs production).
The change in burgers: \(700 - 600 = 100\) (increase in burgers production).
The opportunity cost of moving from Point A to Point B is the number of hot dogs given up to produce more burgers. So, the opportunity cost is 100 hot dogs (or we can also say it is the production of 100 hot dogs that is forgone to produce an additional 100 burgers).

When employees call in sick or there is a breakdown in physical capital, the firm's production capacity decreases. Points inside the Production Possibility Frontier (PPF) represent inefficient or under - capacity production. Point C is inside the PPF, while Points A, B are on the PPF and Point D is outside the PPF. So, with a decrease in production capacity due to sick employees or capital breakdown, the production point will move to a point inside the PPF, which is Point C.

To increase production to Point D (which is outside the current PPF), Messy Buns can use the following methods:

1. Increase in Labor: Hire more employees. By hiring more workers, the firm can increase the number of units of hot dogs and hamburgers produced as there will be more labor available for production.
2. Improve Physical Capital: Invest in better equipment, such as more efficient grills or food preparation machines. Better physical capital can increase the productivity of the existing labor force, allowing them to produce more output.
3. Technological Innovation: Implement new production techniques, such as a more efficient way of cooking or assembling the hot dogs and hamburgers. Technological innovation can increase the overall production capacity of the firm by making the production process more efficient.

Answer:

The opportunity cost for Messy Buns when production moves from Point A to Point B is 100 hot dogs (or the production of 100 hot dogs forgone to produce 100 more burgers).

Sub - Question 2