ECON 101 Study Guide - Midterm Guide: Variable Cost, Production Function, Hitech
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ECON 101 Full Course Notes
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People tend to specialize (concentrating ones efforts in a specific activity or field), especially when in large industrialized societies. Through specialization and trade we get an increases standard of living, increased economic welfare, and make ourselves better off. Heart of why we choose to specialize. Some can produce at a lower cost than others. Allows for specialization an gains from trade. Opportunity cost of producing an additional (incremental) unit of a good. First producer has lowest mc why supply curves are upward sloping. When one producer can produce more of a good than another producer in a certain period of time. When one producer can produce at a lower opportunity cost than another producer. The key to specialization is each side producing according to their comparative advantage. Not how much one can produce that is important (aa) but opportunity cost of production (ca) that matters for benefits from exchange to exist.