ECONS 101 – 1st Edition Lecture 3 Outline of Last Lecture I. Production Possibilities Frontier (PPF)Outline of Current Lecture II. Production Possibilities Frontier (PPF) [Cont.]a. Opportunity Costb. Marginal CostCurrent LectureProduction Possibilities Frontier (PPF) Scenario: [Cont.]- On the PPF you are being productively efficient. o To produce more of one good you must give up some of another.- A point below the PPF is inefficient. o You can improve in some way without sacrificing anything else.- Opportunity Cost: (OC)o The value of what is foregone in order to have something else.In Scenario E, 1 ton of CO2 = 280 bushels of corn.Move to Scenario D, CO2 ↑ by 1 and corn ↓ by 40.Thus, from E to D, we have 1 CO2 = 40 bushels of corn.These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.The opportunity cost of 1 more unit of CO2 = 40 bushels of corn.- Increasing Opportunity Cost:o Law of increasing costs – as we keep increasing production, the opportunity cost of production increases.o The more resources already devoted to an activity, the smaller the payoff to devoting additional resources.o Explains the bowed shaped of the PPF.- Marginal Cost: (MC)o The additional cost of producing one more unit of a good or service.o F to E: Opportunity Cost: 1 ton of CO2 = 20 bushels of corn. Marginal Cost: 1 ton of CO2 = 20 bushels of corn.- If we switch the two situations, our numbers for opportunity and marginal cost change:o A to B: Opportunity Cost: 100 bushels of corn = 1 ton of CO2 Marginal Cost: 1 bushel of corn = 1/100 tons of