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Chapter 2
The Economic Problem
7
Economics
Undergraduate 1
10/20/2009

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Term
production possibilities frontier (PPF)
Definition
the boundary between those combinations of goods and services that can be produced and those that cannot
Term
production efficiency
Definition

producing goods and services at the lowest possible cost

 

*occurs at all the points on the PPF

Term
opportunity cost
Definition
the highest-valued alternative forgone
Term
allocative efficiency
Definition
when goods and services are produced at the lowest possible cost and in the quantities that provide the greatest possible benefit
Term
marginal cost of a good
Definition
the opportunity cost of producing one more unit
Term
preferences
Definition
a description of a person's likes and dislikes
Term
marginal benefit of a good/service
Definition
the benefit recieved from consuming one more unit of it
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