David lee aemecon 2300 3 of lecture 3 basic

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Unformatted text preview: N 2300 3 of Lecture 3 BASIC DEFINITIONS (2) Production Possibility Frontier (PPF): curve showing all possible combinations of outputs of two products that a producer (or economy) can produce with resources fully employed and the best available technology Marginal Rate of Transformation (MRT): the amount of one product that a producer (or economy) must sacrifice in order to produce one more unit of another commodity (also the slope of the production possibility frontier at the point of production) Marginal Cost of Production (MC): cost of producing an incremental unit of a good or service (equivalent to MRT between 2 goods – e.g., what you give up of one good to get more of another) Prof. David Lee AEM/ECON 2300 4 of Lecture 3 Production Possibility Frontier (PPF) X2 Marginal Rate of Transformation (MRT) A B C PPF MRT = Slope of PPF at any point, indicates MC of prod’n X1 Prof. David Lee AEM/ECON 2300...
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