lnc2 - 2) Notes #2: Production Possibilities Frontier Model...

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Notes #2: Production Possibilities Frontier Model and Comparative Advantage (Ch. 3) A. Production Possibilities Model 6 simplifying assumptions of the model: A. Two goods are produced simple yet allows for opportunity costs B. Constant opportunity costs assumes perfectly substitutable inputs; 1 we'll relax this later C. Fixed resources D. Fixed technology 2 These two together: i) determine potential output ii) determine the position of the curve iii) changes in either shift the curve E. Maximum efficiency F. Full employment These two together: i) determine actual output ii) determine the point on the diagram iii) changes in either move the point 1 an input that can be switched from production process to another without changing its productivity, i.e., it’s equally well suited to either process. 2 applied knowledge. TV sets Monitors 100 200 300 400 500 1000 800 600 400 200 ple 1. Constant Opportunity Costs. ction-Possibilities Schedule TV sets Monitors Marginal opp . cost (TV) 0 1000 - - - 100 800 200 600 300 400 400 200 500 0 Examp Produc Point A B C D E F
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This note was uploaded on 11/23/2011 for the course ECON 231 taught by Professor Staff during the Fall '09 term at Calhoun Community College.

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lnc2 - 2) Notes #2: Production Possibilities Frontier Model...

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