“In what way does an understanding of the shifts in the PPC help businesses/countries make production decisions?” Rubric: ensure the importance of absolute and comparative advantage is made clear.

Introduction Production Possibility Curve (PPC) is an economic model that illustrates the trade-offs…

Answered: “In what way does an understanding of…

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter18: Trading With Other Nations

Section: Chapter Questions

Problem 10AA

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“In what way does an understanding of the shifts in the PPC help businesses/countries make production decisions?”

Rubric: ensure the importance of absolute and comparative advantage is made clear.

Definition Video Definition Ability of a country to produce goods and services at a lower opportunity cost compared to other countries. Here, opportunity cost refers to the forgone units of one good in order to produce one more unit of another good. For example, the opportunity cost of producing good X in country A is 2Y and in country B is 1.25Y. Country B has a lower opportunity cost of producing good X than country A. Therefore, country B has a comparative advantage in the production of good X. Video

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