AP Macroeconomics / Unit 1: Basic Economic Concepts
1.2 Opportunity Cost and the Production Possibilities Curve
Notes
Opportunity cost is the value of the next best alternative given up.
- A PPC shows maximum output combinations. Points on it are efficient; inside, inefficient; outside, unattainable.
- A bowed-out PPC shows increasing opportunity costs. Growth shifts it outward.
Practice
A point inside the PPC shows:
Could produce more.
More capital goods and technology would:
Economic growth.
You skip a 15-dollar movie to work 3 hours for 30 dollars. The opportunity cost of working:
The next best alternative.
Ready for more? Take the Unit 1 test.