Chongxi Guo
EC101
Vlad Grenkov
1/28/2013
Homework 2
Problem 1.
Opportunity cost- Opportunity cost is the cost of any activity measured in terms of the value of the next best alternative forgone.

Centrally planned economy-A planned economy is an economic system in which decisions regarding production and investment are embodied in a plan formulated by a central authority, usually by a government agency.[1][2] A planned economy may be based on either centralized or decentralized forms of economic planning, but usually refers to a centrally-planned economy. The goal of central planning is to enable planners to take advantage of more perfect information through a consolidation of economic resources when making decisions regarding investment and the allocation of economic inputs within production.
Marginal revenue - marginal revenue is the additional revenue that will be generated by increasing product sales by 1 unit. It can also be described as the unit revenue the last item sold has generated for the firm. In a perfectly competitive market, the additional revenue generated by selling an additional unit of a good is equal to price the firm is able to charge the buyer of the good.

Production possibilities frontier - In economics, a production–possibility frontier, sometimes called a production–possibility curve, production-possibility boundary or product transformation curve, is a graph that compares the production rates of two commodities that use the same fixed total of the factors of production. Graphically bounding the production set, the PPF curve shows the maximum specified production level of one commodity that results given the production level of the other.

Law of increasing opportunity costs - The law of increasing opportunity costs states that as production of a product increases, the cost to produce an additional unit of that product increases