chapter 2 and 3

# chapter 2 and 3 - What is the highest possibility for...

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What is the highest possibility for efficiency (also called the frontier)? Looking at the "closed society" (potato vs. chocolate) problem, you can see that if you want to sacrifice potatoes for getting chocolate, it is necessary to look at the ratio to see which workers can be released from potatoes to chocolate in order to make the most efficient combination. John has the lowest marginal opportunity cost ( Figure I ). Figure I. John Charles Mark Paul Bill Potatoes 1 8 3 7 6 Chocolate 4 6 3 2 4 M.O.C. ratio 0.25 1.33 1 3.5 1.5 Rank 1 3 2 5 4 M.O.C. stands for Marginal Opportunity Cost. The person/good with the least M.O.C. is the first person that can be used to make chocolates rather than potatoes. If Mark's production of chocolate went from 3 to 10, not only does the total amount of chocolat e that's able to be produced increase, but the rank/order of the workers will change. This model can be used to show international business, as a country could easily replace the names of the workers. Solving this prob

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## This note was uploaded on 09/21/2011 for the course ECON 010 taught by Professor Stein during the Fall '07 term at UPenn.

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chapter 2 and 3 - What is the highest possibility for...

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