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Canada (158,220)
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ECON 101 (211)
Chapter 2

Chapter 2 - Possibilities Production Frontier.docx

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University of Waterloo
ECON 101
Corey Van De Waal

Chapter 2 The Economic Problem Key Terms and IdeasProduction possibilitieso The boundary between those combinations of goods and services that can be produced and those that cannot o Points inside frontier are attainableo Points outside frontier are unattainableProduction efficiency o Producing more of one good while producing less of another good o Points along frontier are efficient o Points inside the frontier is inefficient o Inefficiency means resources are either unemployed unused or misallocated resources are not used properlyOpportunity cost is a ratio o The opportunity cost of one goods is the inverse of the opportunity cost of the other goodie one can costs 5 cans of cola one can of cola costs 15 of a pizzaIncreasing opportunity cost o The PPF bows outward because resources are not equally productive in all activitiesThe quantity produced of each good increases therefore the opportunity costs do
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