Inter-temporal Production Possibilities and Trade Instead of trading one good for another at a point in time‚ we exchange goods today in return for some goods in the future. This kind of trade is known as inter-temporal trade. Even in the absence of international capital movements‚ any economy faces a trade-off between consumption now and consumption in the future. Economies usually do not consume all of their current output; some of their output takes the form of investment in machines‚ buildings
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FOE_C02.qxd 1/15/07 14:45 Page 16 »2 The production possibility frontier (curve): the PPF or PPC The starting point in our economic analysis is to consider what an economy can produce. As consumers we may want many things‚ but there is a limit to what our economy can actually produce. This can be analysed using the production possibility frontier (PPF). In this unit we examine the factors that determine how much an economy can produce and the implications of different output decisions
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inputs‚outputs. Answer: Production possibility frontier (PPF): PPF shows the maximum quantity of goods that can be efficiently produced by an economy‚given its technological knowledge and the quantity of available inputs. For example: If the choice is reduced to two goods‚guns and butter.Points outside the PPF are unattainable.Points inside it are inefficient since resources are not being fully employed‚ resources are not being used properly or outdated production techniques are being utilized
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decided to increase military production? Explain your answer using the concepts of economic efficiency and opportunity costs. The Production Possibilities Frontier is best described as a line demonstrating the maximum level of production of one good for every production level of some other good. It is a graphical device used to illustrate the concepts of scarcity & how it necessitates choice‚ as well as opportunity cost. The PPF demonstrates the presence‚ or possibility of‚ scarcity and the inability
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be considered opportunity costs. Now lets look at Opportunity Cost from the point of production. Opportunity costs may be assessed in the decision-making process of production. If the workers on a farm can produce either one million pounds of wheat or two million pounds of barley‚ then the opportunity cost of producing one pound of wheat is the two pounds of barley forgone (assuming the production possibilities frontier is linear). Firms would make rational decisions by weighing the sacrifices involved
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income tax rates on people with higher incomes f. Instituting laws against driving while intoxicated 4. Imagine a society that produces military goods and consumer goods‚ which we’ll call “guns” and “butter.” a. Draw a production possibilities frontier for guns and butter. Using the concept of opportunity cost‚ explain why it most likely has a bowed-out shape. b. Show a point that is impossible for the economy to achieve. Show a point that is feasible but inefficient.
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provides utility should also be considered opportunity costs. Opportunity costs may be assessed in the decision-making process of production. If the workers on a farm can produce either one million pounds of wheat or two million pounds of barley‚ then the opportunity cost of producing one pound of wheat is the two pounds of barley forgone (assuming the production possibilities frontier is linear). Firms would make rational decisions by weighing the sacrifices involved. Explicit costs Explicit costs
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limited resources and available technology‚ as they use more of their resources for corn production‚ there are fewer resources available for breeding poultry. Maximum annual output options | Quantity of Corn(pounds) | Quantity of Poultry(pounds) | 1 | 1200 | 0 | 2 | 1000 | 300 | 3 | 800 | 500 | 4 | 600 | 600 | 5 | 400 | 700 | 6 | 200 | 775 | 7 | 0 | 850 | 1. Draw a production possibility frontier with corn on the horizontal axis and poultry on the vertical axis illustrating
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Summer 2013 Name: Answer key Date: SFU ID: Section: 1. Explain how three economic concepts are illustrated by the production possibility boundary. Scarcity: The production possibilities boundary (PPB) separates attainable combinations of goods from those that are unattainable. Thus scarcity is shown by the existence of some unattainable bundles of goods. Choice: Because of scarcity‚ societies
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Economics 101 Spring 2011 Answers to Homework #1 Due 2/2/11 Directions: The homework will be collected in a box before the lecture. Please place your name‚ TA name and section number on top of the homework (legibly). Make sure you write your name as it appears on your ID so that you can receive the correct grade. Please remember the section number for the section you are registered‚ because you will need that number when you submit exams and homework. Late homework will not be accepted so make
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