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Chapter 2

Econ Ch.2 Text Book Notes .docx

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Department
Economics
Course
Economics 1021A/B
Professor
Bruce Hammond
Semester
Fall

Description
Economics 1021: Chapter 2 Textbook Notes The Economic Problem Production Possibilities and Opportunity Costs  The production possibilities frontier is the boundary between production levels that are attainable and those that are not attainable when all the available resources are used to their limit.  Production efficiency occurs at points on the production possibilities frontier  Along the production possibilities frontier, the opportunity cost of producing more of one good is the amount of the other good that must be given up  The opportunity cost of all goods increases as the production of goods increases Using Resources Efficiently  Allocative efficiency occurs when good and services are produced at the least possible cost and in the quantities that bring the greatest possible benefit.  The marginal cost of a good is the opportunity cost of producing one more unit of it.  The marginal benefit from a good is the benefit received from consuming one more unit of it and is measured by the willingness to pay for it.  The marg
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