CH2 - Trade-offs Comparative Advantage and the Market System the Market System 1 Learning Objective 2.1 Production possibilities frontier(PPF A

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9/1/2009 1 Trade-offs, Comparative Advantage, and the Market System 1 Learning Objective 2.1 Production possibilities frontier ( PPF ): A curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology be produced with available resources and current technology . Example: Suppose a small country only produces two types of goods: military goods (Tanks) and civilian goods (Automobiles ). Points on a PPF can be shown in a table or a graph. A B C D Tanks 400 350 200 0 Automobiles 0 200 400 500
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9/1/2009 2 Learning Objective 2.1 ¾ Why is the PPF bowed outward? ¾ What happens to the opportunity cost of automobiles as the country produce more autos? ` Production is efficient at points on the curve. This implies that the economy is getting all it can from the scarce Learning Objective 2.1 that the economy is getting all it can from the scarce resource. ` Production at a point inside the curve is
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This note was uploaded on 02/22/2010 for the course FBE ECON1002 taught by Professor Rao during the Spring '10 term at HKU.

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CH2 - Trade-offs Comparative Advantage and the Market System the Market System 1 Learning Objective 2.1 Production possibilities frontier(PPF A

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