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Unformatted text preview: Pretend only two goods: guns and butter Want to be on the PPF (productive inefficiency) if inside |slope| is the OC of another unit of butter Law of increasing OC-the more of something we produce, the greater the OC of producing even more of it. What is produced? Depends on type of economy-traditional, command, and market exchange How does a market economy work? Usually through prices Determined by consumers voting with their dollars Specialization and Exchange: Allows higher standard of living Absolute advantage vs. comparative advantage-absolute advantage= when a person can produce a good using fewer resources than another person-comparative advantage= when a person can produce a good with a smaller opportunity cost...
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This note was uploaded on 03/30/2008 for the course ECON 101 taught by Professor Brentkreider during the Spring '07 term at Iowa State.
- Spring '07