The production possibilities curve below shows the hypothetical relationship between the production of guns (national defense) a
nd butter (social goods) in an economy. Combination Guns Butter A 0 4 B 14 3 C 26 2 D 36 1 E 44 0 What is the marginal opportunity cost of producing the second unit of butter? What is the total opportunity cost of producing the second unit of butter? What is the marginal opportunity cost of producing the third unit of butter? What is the total opportunity cost of producing the third unit of butter?
Marginal opportunity cost is the number of units of good 1 that are sacrificed for producing an additional unit of other good.
A) If we increase the production of butter from 1 to 2 then Guns production decreases from 36 to 26. Thus opportunity cost of second unit of butter is 10 guns.
B) Total opportunity cost of 2nd unit of butter = 18 guns
C) marginal opportunity cost of producing the third unit of butter = 12 Guns
D) Total opportunity cost of third unit of butter = 30 Guns
The answer and procedures of the exercise are attached in the following archives.
Explanation
You will find the procedures, formulas or necessary explanations in the archive attached below. If you have any question ask and I will aclare your doubts kindly.
When consolidating parent and a wholly-owned subsidiary we aim to eliminate entries related to the inter company services. Since the subsidiary had recorded a debit to service expense when it was rendered, the adjusting entry would be a credit to the service expense amount by the same figure charged i.e. $600,000 in this case
