1- As the Director of Operations at GLOBAL CHIPS, Inc, your job is to oversee the production of computer chips in one of the company's plants in Southeast Asia, and decide what is the most efficient production possibility given the resources available for production. GLOBAL CHIPS makes two different types of computer chips, A and B, and the production possibilities (in thousands per quarter) are expressed in the table below.
Production decision Chip A Chip B
1 1000 0
2 750 250
3 500 500
4 250 750
5 0 1000
Global Chips Production Possibilities Frontier
a) In economics, what is the definition of Production Possibilities Frontier (PPF)?
b) Define opportunity costs. What is the marginal opportunity cost for GLOBAL CHIPS as the company decides to increase the production of chip B?
c) In the last quarter, the Manufacturing Report showed that GLOBAL CHIPS made a combination of 600 chips A and 200 chips B. What is the problem with this production level?
d) In the last board meeting, members of the board expressed concern with competition and asked you if GLOBAL CHIPS could increase the production of chip A to 1300 per quarter. What should you tell them?