E it is impossible to increase the output of one good

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Unformatted text preview: A F D B only Macs produced C feasible and efficient D feasible and efficient E inefficient F infeasible Production Possibilities Frontier C E B Macs 1/7/2009 Class 1 17 An example: wool production Sheeps wool grows in different thicknesses, from about 16 to 40 microns. Fine wool (between 16 and 24 microns) is used for making garments Thicker wool is used for other purposes, such as making carpets Determinants of wool thickness include climate, the animals' diet and (most importantly) the breed of sheep Class 1 18 1/7/2009 Example continued... Australia and New Zealand are the two largest wool producers in the world Aust: Human population around 20 million Sheep population around 120 million NZ i.e. 6 sheep per person Human population around 4 million Sheep population around 44 million i.e. 11 sheep per person 1/7/2009 Class 1 19 Australia Coarse wool (bales) 1 m 2 m 1/7/2009 Class 1 Fine wool (bales) 20 New Zealand Coarse wool (bales) 0.75 m 0.5 m 1/7/2009 Class 1 Fine wool (bales) 21 Opportunity Cost When one chooses to devote resources to one task, one necessarily forgoes the opportunity to use those resources for some other purpose. The opportunity cost is the value of the best opportunity forgone E.g. If one country produced an extra bale of fine wool, it would typically need to give up some coarse wool production. That course wool is th...
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This note was uploaded on 05/16/2010 for the course ECON Section 40 taught by Professor Hogan during the Winter '09 term at University of Michigan.

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