3 Monday, August 28, 2006

3 Monday, August 28, 2006 - Monday Microeconomics LAW OF...

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Monday, August 28, 2006 Microeconomics LAW OF INCREASING COST is the opportunity cost of each additional unit of output increases as more of that good is produced. In order for the PPF to exhibit the law of increasing cost, it must be bowed outward (some resources are better for producing than others) To start producing DVD you use the land that doesn’t grow wheat good so for the first 100 DVD players produced your opportunity cost is lower because less bushels of wheat can be grown on the taken land. Because of the speciation of resources the PPF is bowed outward and the opportunity cost of producing a good increases as the total output of that good increase. For example, as more and more DVD players are produced, more and more of the workers that reallocated from the wheat industry to the DVD industry have better farming skills; therefore a larger and larger sacrifice of wheat is necessary for each additional DVD player produced. ECONOMIC GROWTH is the outward expansion of the PPF (point F)
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This note was uploaded on 03/20/2008 for the course EC 201 taught by Professor Xasdf during the Fall '08 term at N.C. State.

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3 Monday, August 28, 2006 - Monday Microeconomics LAW OF...

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