Chapter2Summary

Chapter2Summary - 1 Chapter 2 Summary Tucker,...

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Chapter 2 Summary Tucker , Macroeconomics for Today , 5 th Edition 1. The production possibilities schedule indicates the amounts of any combination of products (two or more) than can be produced by any given society if all resources are used (full employment), each resource is employed in the most productive way (maximum efficiency) and production is undertaken using the most appropriate technology available. 2. The production possibilities schedule (drawn between any two products X and Y) is downward sloping because on the production possibilities schedule more Y can be produced only be using resources taken out of X production (and vice versa). 3. An opportunity cost is a foregone alternative. Within the context of the production possibilities schedule, the amount of X that must be given up to produce an additional unit of Y measures the "opportunity cost" of Y production (or vice versa). Opportunity costs are increasing if increasing amounts of Y must be given up for equal incremental units of X produced (or vice versa). Increasing opportunity costs are illustrated geometrically by a "bowed out" production possibilities schedule that is concave to the origin of the graph. Constant opportunity costs are illustrated geometrically by a linear production possibilities schedule. 4.
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This note was uploaded on 04/02/2008 for the course ECN 211 taught by Professor Kingston during the Spring '08 term at ASU.

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Chapter2Summary - 1 Chapter 2 Summary Tucker,...

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