Economics 1021A/B Chapter Notes - Chapter 2: Capital Accumulation, Marginal Cost, Allocative Efficiency

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ECON 1021A/B Full Course Notes
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ECON 1021A/B Full Course Notes
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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. 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.

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