Assignment task: HammerTong Industries (HT Inc.) produces both Hammers and Steel Tongs. HT Inc. has already signed numerous contracts for the coming year of production. However, the company has not yet assigned production output across its three manufacturing plants (Plant A, Plant 8, and Plant C).
Each of the manufacturing plants can be used to produce either Hammers or Steel Tongs or some combination of each. Each plant is constrained by a linear PPF and can locate anywhere along their PPF (or interior to the PPF).
Plant A can produce a maximum of 600 Hammers or a maximum of 400 Tongs during the coming year. Plant 8 can produce a maximum of 200 Hammers or a maximum of 400 Tongs during the coming year. Plant C can produce a maximum of 120 Hammers or a maximum of 60 Tongs during the coming year.
a. Draw a PPF for each plant, making sure you label everything fully and DO NOT use any abbreviations in your diagram.
b. Calculate the opportunity cost of producing one Tong at each of the plants. Make sure you show your work and clearly explain the method you are using to determine the opportunity cost.
c. If HT Inc. decides to only produce 60 Tongs and uses all other resources to produce Hammers, which plantl(s) should be used to produce Tongs? Explain your answer.
d. Draw the combined production possibilities frontier (or curve) that HT Inc. faces. Make sure you label everything fully (including points of interest along the combined PPF) and DO NOT use abbreviations in your diagram.
e. If HT inc. decides to produce a total of 440 Tongs, fully indicate the total production of each type of good for each of the manufacturing plants.