ECON 2306 9 Trade

5 productionontheisland

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Unformatted text preview: than huts is 10 huts. – Opportunity Cost­ the highest valued, next best alternative that must be sacrificed to obtain something or to satisfy a want. 5 Production on the Island What if they want more radios? Who should also make radios and not huts? Who ever is next best at making radios relative to making huts – – Lets say that’s Maryanne The Professor and Maryanne can produce 6 radios and everyone else can produce 41 huts in one month – The opportunity cost of Maryanne making radios is 9 huts. 6 Production on the Island At this point we have three production possibilities for the crew: – They all make huts – All but Professor makes huts – All but Professor and Maryanne make huts Let’s look at this information in a table 7 Production on the Island Number Huts Producing Produced Huts 7 60 Number Radios Producing Produced Radios 0 0 6 50 1 3 5 41 2 6 8 Production on the Island This is known as a Production Possibilities Table – PPT­ a table that shows all of the combinations of goods and services that can be produced given the resources of society and the existing state of technology. – This table lets us know how much our island...
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This note was uploaded on 03/23/2014 for the course ECON 2306 taught by Professor Bailiff during the Spring '08 term at UT Arlington.

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