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Tradeoffs and Opportunity Costs: Applying Economic Tools

Tradeoffs and Opportunity Costs: Applying Economic Tools. What is the cost of ordering something at a restaurant?. $18. Production Possibility Frontier Illustrates. Use of an Economic Model to Simplify Use of Economic Concepts: Scarcity Choice Opportunity Cost Growth. Assumptions:.

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Tradeoffs and Opportunity Costs: Applying Economic Tools

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  1. Tradeoffs and Opportunity Costs: Applying Economic Tools

  2. What is the cost of ordering something at a restaurant? $18

  3. Production Possibility Frontier Illustrates • Use of an Economic Model to Simplify • Use of Economic Concepts: • Scarcity • Choice • Opportunity Cost • Growth

  4. Assumptions: • Fixed Level of Capital and Labor • Fixed Level of Technology

  5. Shipwrecked Fred • Can carry 4 gallons of water from stream to campsite per hour • Or can gather 2 pounds of nuts from trees per hour • Can work 6 hours per day

  6. Fred’s Production Possibility Frontier gals water per day A 24 F B 16 E C 8 D 4 8 12 lbs nuts per day

  7. Fred invents and produces a nut harvester gals water per day A 24 F B 16 C 8 D 4 8 12 24 lbs nuts per day

  8. Add many more people to island 1,000 gals water per day 100 95 90 A B C G H D 20 E 15 F 0 20 30 75 77 90 1,000 lbs nuts per day

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