Chapter 2 - Chapter 2 The PPF does NOT solve the economic...

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Chapter 2 The PPF does NOT solve the economic problem because scarcity will always exist because people’sneeds will never be satisfied. Opportunity cost of x is the amount in y If we produce ON the PPF curve it is production efficiency because it maximizes x and y If we produce INSIDE the PPF (z) I is Production inefficiency because you could produce more PPF is bowed down or linear NEVER bowed in Opportunity cost is the cost of an action that is the highest-valued alternative forgone -Ratio of the decrease in the quantity produced of one good divided by the increase of the quantity produced for the other -Opportunity cost of x = INVERSE opportunity cost of additional y PPF slope is the marginal opportunity cost of producing one good in terms of the amount of other that must be forgone Marginal Cost – the opp. cost it takes to have one more unit Marginal benefit – benefit received from one more unit ( the most they’re willing to pay, goes down as qd increases)
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