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The economic problem (economic growth (causes (capital accumulation,…
The economic problem
economic growth
D
expansion of production possibilities
causes
capital accumulation
technological change
F
benefit of increased future consumption
production possibilities and oppertunity cost
RC
production possibility frontier
D
The boundary between attainable an not attainable productions levels when all available resources are used to their limit
F
MOC is the amount of the other good that must be given up
OC increases with the amount produced of the good
production efficiency
D
occurs at points on the PPF
using resources efficiently
RC
Allocative efficiency
D
occurs when goods and services are produced to the least possible cost and at the quantities that brings the greatest possible benefit
MC=MB
F
MC = OC ofproducing one more
MB = benifit from consuming one more as measured by willingness to pay
MB decreases with supply
gains from trade
RC
comparative advantage
D
a person/organization has a CA if it can produce the good with lower OC than the other agents
F
agents gain from specializing in the activity in which they have a CA and trading with others
economic coordination
RC
markets
F
coordinates economic choices of people and firms
Depends on property rights in order to work efficiently
firms
F
coordinates alot of economic activity
limit to the efficient size of firms
money
F
makes trading in markets mor efficient