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Unformatted text preview: Chapter 2 A. Production Possibility F rontier: is described as the process and consequences of making output choices when using scarce inputs. It emphasizes the role of scarcity in human decision making and also explains the reason why trade is such a universal human behavior a. T rade-Off: An Increase in one good with a decrease in the other i. Opportunity Costs: Opportunity Cost is a characteristic of the production process and of the consequences of allocating the available inputs away from one good to increase the production of the other. ii. Constant Opportunity Cost: consists of taking a selection from one group each time that specific group is increased and then sacrificing at a constant rate a selection of inputs from another iii. Increasing Opportunity Cost: b. Declining Input Productivity: is when each input gets a ranking based on their productivity in producing one good, thus being reflective on the declining input productivity....
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This note was uploaded on 04/27/2008 for the course ECON 205 taught by Professor Hampton during the Spring '08 term at St. Cloud.
- Spring '08