# Macroeconomics

Let’s calculate opportunity cost using the following PPC:

● MovementfromPointAtoB :Thismovementrepresentsanincreaseintheproductionofcars. However, this comes at a cost. Fewer laptops will be produced as more resources are now allocated to the production of cars. At point A, 200 laptops and 50 cars are produced. At point B, 180 laptops and 150 carsare produced. Thismeansthatfortheproductionofcarstoincreaseby100units(150minus50), 20 units of laptops were sacrifced (200 minus 180). ● Movement from Point C to A: Now let’s consider another scenario where the production of laptops increases instead (yes, movements on a PPC can be back and forth!) MovingfrompointCtoAindicatesthattheeconomyisnowallocatingitsresourcestoproduce more laptops, which requires a decrease in the production of cars. At point C, 305 cars and 100 laptops are produced. At point A, 50 cars and 200 laptopsare produced.Thismeansthattoachieveanincreaseintheproductionoflaptopsby100units,255 cars were sacrifced. Therefore, the opportunity cost of moving from point A to B is 20 laptops.

Therefore, the opportunity cost of moving from point C to A is 255 cars.

Checkpoint Quiz 3:

Suppose that the economy moves from point B to C on the same PPC. What is the opportunity cost?

(Checkpoint answers are located at the end of the chapter under the review question answers.)

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