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Macroeconomics 111 - Chapter 2

Macroeconomics 111 - Chapter 2 - 1-23 CHAPTER 2 Choice...

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1-23 - CHAPTER 2: Choice, Opportunity Costs, and Specialization Opportunity Cost – the value of the highest valued alternative that must be forgone when a choice is made. It is the evaluation of trade-off . Marginal Benefits and Costs – the benefits and opportunity costs associated with one additional unit of the good Economic Decision Making – Decision-making is done at the margin -Decision-makers evaluate a fixed array of alternatives -Decision-makers compare the marginal costs to marginal benefits to determine the best alternative Growth -The PPC (Production Possibilities Curve) moves outward (growth occurs) as the result of: -Increase in resources -Larger labor force -Change in labor force participation -Change in labor-leisure decisions -Improved technology (innovation) -Expansion of capital stock -An improvement in the rules (laws, institutions, and policies) of the economy -The shape of the PPC illustrates the relative cost of moving productive resources from one
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