AEM-ECON2300-%20Lecture3%20-%20Spring%202011

AEM-ECON2300-%20Lecture3%20-%20Spring%202011 - Lecture 3...

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1 of Lecture 3 Prof. David Lee AEM/ECON 2300 BASIC DEFINITIONS (2) Production Possibility Frontier (PPF) : curve showing all possible combinations of outputs of two products that a producer (or economy) can produce with resources fully employed and the best available technology Marginal Rate of Transformation (MRT) : the amount of one product that a producer (or economy) must sacrifice in order to produce one more unit of another commodity (also the slope of the production possibility frontier at the point of production )
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2 of Lecture 3 Prof. David Lee AEM/ECON 2300 Production Possibility Frontier (PPF) X 1 X 2 B A C PPF Marginal Rate of Transformation (MRT) MRT = Slope of PPF at any point
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3 of Lecture 3 Prof. David Lee AEM/ECON 2300 Production Possibility Frontier (PPF) X 1 X 2 B A C PPF Marginal Rate of Transformation (MRT) MRT = Slope of PPF at any point
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4 of Lecture 3 Prof. David Lee AEM/ECON 2300 BASIC DEFINITIONS (2) Production Possibility Frontier (PPF) : curve showing all possible combinations of outputs of two products that a producer (or economy) can produce with resources fully employed and the best available technology Marginal Rate of Transformation (MRT) : the amount of one product that a producer (or economy) must sacrifice in order to produce one more unit of another commodity (also the slope of the production possibility frontier at the point of production ) Marginal Cost of Production (MC): cost of producing an incremental unit of a good or service (equivalent to MRT between 2 goods – e.g., what you give up of one good to get more of another)
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5 of Lecture 3 Prof. David Lee AEM/ECON 2300 Production Possibility Frontier (PPF) X 1 X 2 B A C PPF Marginal Rate of Transformation (MRT) MRT = Slope of PPF at any point
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This note was uploaded on 03/27/2011 for the course AEM 2300 taught by Professor Lee,d.r. during the Spring '06 term at Cornell.

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AEM-ECON2300-%20Lecture3%20-%20Spring%202011 - Lecture 3...

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