Chapter 2 notes on ppf and opportunity cost

Chapter 2 notes on ppf and opportunity cost -...

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Unformatted text preview: Important notes pertaining to chapter 2 that you should remember: 1. Increasing opportunity costs imply increasing marginal cost. PPF is concave, bowed outward, and has a negative slope. The slope of the PPF increases in absolute terms. As opportunity cost increases, the marginal cost will be an upward sloping line having positive slope (graph that I showed in class yesterday). 2. Constant opportunity cost imply constant marginal cost. PPF is linear (a straight line). The slope of the PPF does not change. As opportunity cost remains constant, the marginal cost will be a horizontal line with zero slope. 3. Do not confuse constant slope with zero slope. Constant slope does not change but a constant slope can be positive (eg: increasing marginal cost curve), negative (eg: a curve that is downward sloping such as the downward sloping marginal benefit curve), or zero (eg: any horizontal line). ...
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