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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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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required for HW1)) CP2. Why does the downward-sloping production possibilities curve imply that factors of production are scarce? CP2. A downward-sloping production possibilities curve shows that in order to obtain more of one good (or service)‚ another must be forgone. That is the meaning of scarcity—the situation where we are forced to choose among alternatives. CP3 In what ways are the bowed-out shape of the production possibilities curve and the law of increasing opportunity cost related
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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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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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INTRODUCTION TO ECONOMICS Problem Set 1 1. Labour is the only resource in an economy with the following maximum production possibilities. (The graph is drawn as a curve rather than points under the assumption that opportunity cost is constant between options.) Option 1 2 3 4 a) b) c) d) e) f) Clothes (Tons) 50 40 20 0 Food (Tons) 0 30 70 100 What is the opportunity cost of increasing Clothes production from 20 to 40 tons? What is the opportunity cost of increasing Food output from 70 to 100 tons? Is point
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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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home country can produce three cars or two televisions. Assume that Home has four workers. a. Graph the production possibilities frontier for the home country. b. What is the no‐trade relative price of cars at Home? 2. Suppose that each worker in the Foreign country can produce two cars or three TVs. Assume that Foreign also has four workers. a. Graph the production possibilities frontier for the Foreign country. b. What is the no‐trade relative price of cars in Foreign? c. Using the information provided in Problem 1 regarding Home
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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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The federal government should spend more on diabetes research. iii. Rising paper prices will increase book prices. iv. The price of bagels at Bruegger’s is too high. 3. Identify the effect of each of the following on the United States Production Possibilities Frontier (PPF). Does it shift inward‚ outward‚ or not at all? i. A decrease in the average length of annual vacations ii. An increase in immigration of foreign workers to the U.S. iii. An increase in the average retirement age
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