2. PPF 2

2. PPF 2 - Principles of Microeconomics Shomu Banerjee 2....

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Principles of Microeconomics Shomu Banerjee Emory University Fall 2011 2. Production possibilities
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Opportunity costs Definition : The opportunity cost of making a choice is Ex.: An Emory professor who makes $100,000 a year decides to quit teaching and open a restaurant instead. What is his opportunity cost?
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Opportunity costs cont’d Opportunity cost = Explicit costs + Implicit costs Ex.: You fly Airtran from Atlanta to NYC for $89. It takes you 5 hours in all. Your wage is $10/hr. What is your opportunity cost?
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Production Possibilities Frontier A1 • A country produces guns or butter A2 • Technology 1 worker produces 1 unit of butter 2 workers produce 1 gun A3 • Endowment There are 10 workers in all
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PPF model cont’d Guns Butter 0 5 10 5 10 PPF Unattainable Attainable Attainable w/ full employment
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PPF model cont’d Guns Butter 0 5 10 5 10 PPF Opportunity cost of 1 unit of butter = Opportunity cost of 1 gun =
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PPF model cont’d Guns Butter 0 5 10 5 10 Old PPF Opportunity cost of 1 unit of butter = Opportunity cost of 1 gun = Innovation: 1 worker produces 1 gun New PPF
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This note was uploaded on 10/17/2011 for the course ECON 101 taught by Professor Dezhbakhsh during the Fall '07 term at Emory.

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2. PPF 2 - Principles of Microeconomics Shomu Banerjee 2....

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