Standard SSEF2a- Illustrate the production

possibility curve SSEF2b-Marginal Cost v. Marginal

Benefit = Rational Decision Making

Marginal Cost v. Marginal Benefit Marginal Cost-

Anything negative about an alternative/cons

Marginal Benefit – Anything positive about an alternative/pros

Marginal Cost v. Marginal Benefit People make

decisions based on costs and benefits.

The benefits must always outweigh the costs.

When rational decisions occur, marginal benefit outweighs marginal cost. ******

Production Possibility Curves (PPC)The Curve illustrates opportunity

cost It graphically depicts the trade-offs

we make

Production Possibility Curve*Measures the maximum amount

of output that can be achieved from any given input.

Output- the result of an activity Input- what you put in to receive

an output

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Production Possibility Curves

Any point ON or INSIDE the curve is a possible production combination

Fully Employed Resources All points on

the curve represent the maximum combinations of output is all resources are fully employed

Production Possibility Curves

As long as some resources are idle, the country cannot produce to its full potential. This is represented by points inside the curve.

Moving the Curve You can move the curve outward when

output increases Ways to increase output:

1. New technology2. More resources

Figuring out Opportunity Cost

What you could have produced vs. what you are producing now

It’s what you give up to produce more of a given product.

Figuring out Opportunity Cost

If this economy decides to increase

production of GUNS from 30 to 60, what is the

opportunity cost in terms of BUTTER?

PPC 1. What do points A,B, and E represent?

2. What does point C represent?

3. Can I produce at point D?

4. What is my opportunity cost if I produce at point A instead of point E ?