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A Shift of the PPC

A Shift of the PPC. 225. A 2. Defense Goods. A 1. B 2. 200. B 1. 175. C 2. 150. C 1. D 2. 125. 100. E 2. D 1. 75. E 1. F 2. 0. 150. 125. 25. 50. 75. 100. Nondefense Goods. Marginal Opportunity Cost .

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A Shift of the PPC

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  1. A Shift of the PPC 225 A2 Defense Goods A1 B2 200 B1 175 C2 150 C1 D2 125 100 E2 D1 75 E1 F2 0 150 125 25 50 75 100 Nondefense Goods

  2. Marginal Opportunity Cost • The Production Possibilities Curve (PPC) illustrates the concept of opportunity cost. Each point on the PPC means that every other point is a forgone opportunity. • The PPC bows outward because there are ever-increasing marginal opportunity costs to the production of any good.

  3. Specialization • Economic agents (individuals, firms, nations) will be better off if they choose to produce those things for which they have the lowest opportunity costs, and trade for those with higher costs. • Agents do this because such choices involve giving up the least amount of other things.

  4. Specialization & Trade • Comparative Advantage: the ability to produce a good or service at a lower opportunity cost than someone else. • Law of comparative advantage: • proposition that the joint output of trading partners will be greatest when each good is produced by the low opportunity cost producer.

  5. Finagle A Bagel

  6. Optimism and the Economy • How do natural disasters and terrorist attacks affect international trade and economic growth? • A recent report from the World Trade Organization (WTO) says while the immediate effect on particular industries can be notable, the economy-wide impact these events have on trade and growth is short-term and generally minimal.

  7. Private Property Rights • Private property rights are necessary for a market economy to develop. If no one owns something, no one has the incentive to take care of it.

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