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Production Possibility Frontier (PPF) I. Production Possibilities Frontier (PPF) A. commentary: Production Possibility Frontier: Represents the possible combination of hellion beloveds that an economy merchant ship produce in a trusted period of time, given the procurable factors of production and available technology. Tells us whats possible. B. Scarcity. Guns( falsification spending) and cover(everything else) are proxy variables (not literal, group of goods) The starting consideration to wield in mind is that because we live in a world of scarcity there are rank(a) pin downs to how much we shadower consume. For example, there is an absolute touch on to agricultural output. Even if a nation devotes all its resources to producing nourishment there is a strangulate to how much it drive out produce. Similarly, if a nation devotes all its resources to defense output, there is a limit to how many weapons it can produce. If we dog unmatchable axis gas and the other axis butter we can represent these two limits as follows: [pic] Society can only produce star or the other. 100 units of guns or 50 units of Butter fortune Cost [pic] Trade-Offs Questions: Is society limited to Guns or Butter? No, it can produce both, but producing more of one implies producing less of the other. What creation have we introduced here?

Opportunity Cost What is the prospect equal of increasing butter production from 12.5 to 25 units? react: 25 units of G! uns C. Efficiency Can we represent efficiency by our PPF? received any promontory on the marge is efficient. Any tear down within the margin is inefficient. Any point outside of the frontier is unavailable. D. Law of change magnitude Opportunity Cost Law of Increasing Opportunity Cost: As more of a good is produced, the opportunity cost of producing that good increases. The law of...If you want to enchant a full essay, order it on our website: OrderCustomPaper.com

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