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This 2 page Class Notes was uploaded by Kaylee Wakai on Monday October 10, 2016. The Class Notes belongs to ECON 221 at University of South Carolina taught by Elizabeth Watson in Fall 2016. Since its upload, it has received 48 views.
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Date Created: 10/10/16
HowtoProduce? AllocatingResourcesEfficiently Therearemanydifferentproductionmethods,which Needtodeterminewhichproductsareworth onesdoweuseforwhichproducts? producing Efficientmeanswedon’twasteresources; Marginalcostofproduction:Whatwemust weproduceatthelowestpossiblecost giveupforonemoreunit Marginalbenefitof production: What weare ForWhomtoProduce? willingtogiveupforonemoreunit Limitedresources meanslimitedgoods;wecan’tgive everybodyeverythingsohowdowedecidewhogets CalculatingMarginalCostandMarginalBenefit what? Formarginalcostusetheproductionpossibilitycurve Efficientmeanswegetthegoodstothe Formarginalbenefitweneedtothinkaboutwhat peoplewhovaluethemthemost valuepeopleplaceonadditionalunits . Lawofdiminishingmarginalbenefit:Asthe WhattoProduce? consumptionofaproductincreases,the Producingonethingmeanswemustgiveupthe marginalutilityofthatproduct decreasesfor productionofsomethingelse eachadditionalunit Therearelotsofresourceswithvarioususes Howmanytextbookswe Efficient meansweproducethethingsthat giveup areworthit MC Answering“WhattoProduce? Whatispossibletoproduce? Whatispossiblemeanswhatwearecapableof producingnotwhatwewouldliketoproduce Assumethefollowing: Simpleeconomywithonlytwogoods Factors ofproductionarefixed Howmanynovelswegive Methodsofproductionarefixed up Howmanytextbookswe ItisNOTpossibletoproduceoutsideofthe giveup productionpossibility curve Atapointinsidethecurvewehaveeitherunusedor misallocatedresources Textbooks A Notpossible Efficient(Possible) MB A. Allresourcesare usedtomake Howmanynovelswegive textbooks up Inefficient B. Allresourcesare Factors ofChangefortheMarginalCostCurve (Possible) usedtomakenovels B Technology Novels Disaster Newresources Governmentrulesandregulations Factors ofChangefortheMarginalBenefitCurve Disaster Technology TasteandPreferences MC 120 MC2 Worthproducing NotWorthproducing MB 100 N* N2* (300)
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