101_04 - Basic Concepts Continued (Chapter 3) 1- Production...

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1 Basic Concepts Continued (Chapter 3) 1- Production Possibilities Definition Examples Opportunity Cost Optimum Production 2- Trade and Gains from Trade Absolute Advantage Comparative Advantage Specialization Globalization Issues
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2 Production Possibilities: A schedule that shows various combinations of goods that an economy can produce given its resources and production technology Options Cars Computers O.C of Cars A B C D E 0 1 2 3 4 18 16 13 8 0 ------------ 2 (computers) 3 5 8 Production Possibilities Table Law of Increasing Opportunity Cost: As we increase production of a good, the opportunity cost of producing it will eventually increase. This is due to specialization of resources (inputs)
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3 Points outside PPC: Impossible to attain now, but feasible with growth and technological progress Points inside PPC: Inefficiency or unemployed (or disguisedly unemployed) Resources 0 8 1 2 3 4 13 16 18 Computers Cars Production Possibilities Curve B C D E A
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4 Optimum (Best) Production and the Question of What to Produce
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This note was uploaded on 04/02/2008 for the course ECON 101 taught by Professor Dezhbakhsh during the Fall '07 term at Emory.

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101_04 - Basic Concepts Continued (Chapter 3) 1- Production...

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