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ECON 1001 Lecture Notes - Lecture 4: Opportunity Cost

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rubyllama377
13 Mar 2018
School
UC
Department
Economics
Course
ECON 1001
Professor
Erhardt

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Document Summary

Mrt is the ratio of units of one good sacrificed to produce one more unit of the other good. For example, if production of two units of y is sacrificed to obtain production of one unit of x. Rate of sacrifice can also be explained in terms of marginal opportunity cost. In other words it is defined as the addition to the cost in terms of number of units of a good sacrificed to produce one more unit of the other good. Both mrt and moc convey the same meaning in the context of pp frontier. Yes, if mrt is constant the ppc will be a straight line. It means that every time the society requires to produce one more unit of good, the number of units of the other good to be sacrificed is the same. It also means that each resource is equally efficient in production of all the goods.

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Related Questions

Which of the following trade-offs does the production possibilities frontier illustrate?

a. If an economy wants to increase efficiency in production, then it must sacrifice equality in consumption.

b. Once an economy has reached the efficient points on its production possibilities frontier, the only way of getting more of one good is to get less of the other.

c. For an economy to consume more of one good, it must stop consuming the other good entirely.

d. For an economy to produce and consume goods, it must sacrifice environmental quality.

A production possibilities frontier is bowed outward instead of a straight line when:

1.  The more resources the economy uses to produce one good, the fewer resources it has to produce the other good.

2.  The economy is self-sufficient and does not participate in global trade. 

3.  The opportunity cost of producing either good is constant.

4.  The opportunity cost of producing either good depends on how much of either good is being produced. 

The bowed shape of the production possibilities frontier can be explained by the fact that:

A) all resources are scarce.

B) economic growth is always occurring.

C) the opportunity cost of one good in terms of the other depends on how much of each good the economy is producing.

D) the only way to get more of one good is to get less of the other.