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ECO 211 HA2 - b The shape of the production possibilities...

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Microeconomics 211 Chapter 2: Trade-Off’s, Comparative Advantage, and the Market System HA 2 (RQ #1.2, 1.3; PAA #1.8 & 2.5) 1.2) a) A production possibilities frontier is a curve that shows the maximum attainable combinations of two products that may be produced with available resources and current technology. b) We can show economic efficiency with points on the production possibilities frontier. c) We can show economic inefficiency with points inside the production possibilities frontier. d) The production possibilities frontier will shift outward if resources are used to produce capital goods. 1.3) a) Increasing the production of a good requires larger and larger decreases in the production of another good.
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Unformatted text preview: b) The shape of the production possibilities frontier shifts outward. 1.8) a) Point E is unattainable because it is outside the production possibilities frontier. b) Points B, C & D are efficient because this is where maximum output is produced with available resources. c) Point A is inefficient because production is not using all available resources. d) Point B, because it is where the most resources are used to produce capital goods. 2.5) a) Neither country has a comparative advantage producing oil because their opportunity costs of producing oil are equal. b) These countries cannot gain from trade because neither has a comparative advantage producing either good....
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