Ch2 Practice

Ch2 Practice - Ch 2 Practice 1 The principle of increasing...

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Ch. 2 Practice 1. The principle of increasing marginal opportunity cost states that opportunity costs increases the more you concentrate on the activity. In order to get more of something, one must give up ever-increasing quantities of something else. The principle of increasing marginal opportunity cost causes the production possibilities curve to bow out from the origin. Constant opportunity costs would cause the production possibilities to be a straight downward sloping line. If a nation has more resources to work with, this would cause the production possibilities curve to shift out from the origin. When individuals trade, using comparative advantages, their combined production possibility curves shift out . 2. What can cause a nation's production possibilities curve to shift out? Why do nations try to shift their production possibilities curves out? Anything that increases a nation's productivity will shift the nation's production possibilities curve out. Generally, an increase in the amount of resources the nation has to
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This note was uploaded on 03/19/2008 for the course ECON 2302 taught by Professor Andron during the Spring '06 term at Austin CC.

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Ch2 Practice - Ch 2 Practice 1 The principle of increasing...

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