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RIVAL CONSUMPTION: Consumption of a good by one person imposes a cost on, or prevents consumption of the good by, another person. Some goods, like food, have extremely rival consumption. One person, and only one person, gets the benefit. Other goods, like national defense, have no consumption rivalry, everyone can benefit simultaneously without imposing a cost on others. This is one of the two key characteristics of a good (the other is excludability) that distinguishes between common-property goods, near-public goods, private goods, and public goods.
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Lesson 4: Production Possibilities | Unit 1: Getting Started
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Page: 2 of 24
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Every economic analysis builds on certain preconditions or assumptions. Assumptions, whether reasonable or seemingly unrealistic, let us:- Establish abstract benchmarks for comparison or
- Break an analysis into simpler, more easily manageable parts.
Four key assumptions: - Two Goods: Resources are used to produce one or both of only two goods. This is a simplifying assumption that lets us display graphs on the screen.
- Fixed Resources: The quantities of the labor, capital, land, and entrepreneurship resources do not change. This is a reasonable assumption that we can change to analysis resource changes.
- Fixed Technology: The information and knowledge that society has about the production of goods and services is fixed. This is another reasonable assumption that we can change to analysis technology changes.
- Technical Efficiency: Resources are used in a technically efficient way. We get the maximum possible production out of the resource inputs.
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MARGINAL COST AND LAW OF DIMINISHING MARGINAL RETURNS Decreasing then increasing marginal cost, reflected by a U-shaped marginal cost curve, is the result of increasing then decreasing marginal returns. In particular the decreasing marginal returns is caused by the law of diminishing marginal returns. As such, the law of diminishing marginal returns affects not only the short-run production of a firm but also the cost of short-run production. This translates into a positively-sloped supply curve for profit-maximizing competitive firms.
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RED AGGRESSERINE
[What's This?]
Today, you are likely to spend a great deal of time at a flea market hoping to buy either a birthday greeting card for your father or a T-shirt commemorating the first day of spring. Be on the lookout for defective microphones.
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This isn't me! What am I?
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Paper money used by the Commonwealth of Massachusetts prior to the U.S. Revolutionary War, which was issued against the dictates of Britain, was designed by patriot and silversmith, Paul Revere.
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"Defeat is simply a signal to press onward. " -- Helen Keller, author, lecturer
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IAB
Inter-American Bank
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