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 technology 2. 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 ?