Cost and Production

Cost and Production - generally increases. e. Consumer...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Cost and Production 1. Productive advantages a. The production possibilities frontier: the combinations of various goods that can be produced given available resources and technology. b. Absolute Advantage: an individual has an absolute advantage in the production of a good if that individual can produce more than others in the same time or can produce the same amount as others in less time. c. Comparative advantage: an individual has a comparative advantage in the production of a good if that individual can produce the good at lower cost than others. i. There are gains from exchange to be realized through specialization. d. Principle of increasing opportunity cost: as the production of one good increases, the opportunity cost of producing another unit (marginal cost) of producing that good
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: generally increases. e. Consumer surplus: the amount above the price paid that a consumer would willingly spend, if necessary, to acquire the units purchased f. Producer surplus: the amount producers receive upon selling the units above the costs of producing the units g. Deadweaight loss: the cost to society of not operating efficiently h. Efficiency: the absence of waste. Efficiency is obtained where the MC of production equals the MV of consumption (i.e. at the market-clearing price and quantity) i. Welfare: commonly, the sum of consumer and producer surplus. Defined this way, welfare is maximized in the perfectly competitive markets. j. they have a higher gdp in California 2. Societys production choice 3. Marginal cost and supply 4....
View Full Document

This note was uploaded on 04/05/2008 for the course ECON 201 taught by Professor Wadell during the Winter '08 term at University of Oregon.

Ask a homework question - tutors are online