Nov18QzNotes - Econ 200 AD/AI quiz section notes Sui...

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200 AD/AI quiz section notes Sui Luo/Fall 09 Econ200 AD/AI Nov.18 Notes for quiz section on Nov.18 1. Productivity, marginal cost and production possibilities frontier. Productivity —the amount a producer can produce with certain resources. If one can produce more in a given amount of resources, he is more productive. Alternatively, if one can produce a given amount of goods with less amount of resources, he is more productive. Marginal cost —the cost of producing an extra good. In the past, we use dollar price to measure marginal cost. In this chapter, we more often measure it in terms of the amount of another good that we can produce using the same resources. In other words, the marginal cost of producing one good is the amount of another good that we give up producing. PPF — short for production possibility frontier. PPF represents the combination of maximum production under certain resource constraint. PPF is of negative slop. Due to resource constraints, productions of two goods are substitutes. That means, if you want to produce more of one good, you need to decrease the production of the other good. Pay attention, points lying above the PPF are not available, because the economy doesn’t have enough resource to produce them. Points on or under the PPF are available production bundles. However, points under the PPF are not efficient,
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Nov18QzNotes - Econ 200 AD/AI quiz section notes Sui...

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