EC111Class1Answers

EC111Class1Answers - UNIVERSITY OF ESSEX DEPARTMENT OF...

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Autumn Term 2011/12 DEPARTMENT OF ECONOMICS Tim Hatton EC111 Introduction to Economics: Class Exercises 1 Outline Answers 1. a. Concave means this shape (think of looking up at the curve from the origin), rather than bending towards the origin (draw an example of a convex or straight line PPF to contrast). It means that the higher the output of one good, the greater the opportunity cost of obtaining another unit of the good in terms of the other good. [Compare the slopes at different points on the PPF, remembering that the slope measures the opportunity cost of butter] That could be because some factors of production tend to be specialised. The more we shift factors into one industry the lower is their productivity in that industry relative to the other industry. b. Inside the PPF means that (1) some productive resources are not being used, say because of unemployment, or (2) because productive resources are being allocated inefficiently. (those that are most productive in industry A are allocated to industry B and vice versa).
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This note was uploaded on 03/15/2012 for the course EC 111 taught by Professor Timhatton during the Spring '12 term at Uni. Essex.

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EC111Class1Answers - UNIVERSITY OF ESSEX DEPARTMENT OF...

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