Question

Auto Bull's-Eye offers a 10-minute oil change and 30-minute brake check. There are two technicians who perform each of these services. Next week, the shop is offering a discounted oil change. How might this affect the production possibilities curve for next week?

Answer 1

The shop would decrease the brake-check price to eliminate scarcity; increase worker pay to make up for the opportunity cost of not doing brake checks; shift production to oil changes and away from brake checks.

Answer 2

The main element to consider in the stated situation is the number of technicians.

Since there are only two to carry out each function, their workload is limited. In the beginning, the production possibility curve will move up (increase) but will decrease as soon as the technicians find their limit.