Lecture_Microeconomics_Chapter2

Lecture_Microeconomics_Chapter2 - The Economic Problem:...

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The Economic Problem: Scarcity and Choice
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The Economic Problem: Scarcity and Choice
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THE ECONOMIC PROBLEM: SCARCITY AND CHOICE FIGURE 2.1 The Three Basic Questions Three basic questions must be answered in order to understand an economic system: What gets produced? How is it produced? Who gets what is produced?
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SCARCITY, CHOICE, AND OPPORTUNITY COST FIGURE 2.3 Production Possibility Frontier
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SCARCITY, CHOICE, AND OPPORTUNITY COST Unemployment During economic downturns or recessions, industrial plants run at less than their total capacity. When there is unemployment of labor and capital, we are not producing all that we can.
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SCARCITY, CHOICE, AND OPPORTUNITY COST Inefficiency Waste and mismanagement are the results of a firm’s operating below its potential. Sometimes, inefficiency results from mismanagement of the economy instead of mismanagement of individual private firms. The Efficient Mix of Output To be efficient, an economy must produce what people want.
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SCARCITY, CHOICE, AND OPPORTUNITY COST Negative Slope and Opportunity Cost FIGURE 2.4 Inefficiency from Misallocation of Land in Farming marginal rate of transformation (MRT) The slope of the production possibility frontier (ppf).
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This note was uploaded on 03/30/2008 for the course ECON 2005 taught by Professor Zirkle during the Spring '07 term at Virginia Tech.

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Lecture_Microeconomics_Chapter2 - The Economic Problem:...

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