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A country s choice among the production of education and nuclear submarines is an issue of opportunity cost.
Explain the issue using a PPF.
Resources are limited whereas wants are infinite and the choices made lead to opportunity costs - explained as the next-best alternative given up. The PPF determines the opportunity cost in the movement along the PPF; enhance in submarines has an opportunity cost of an amount of education as societal resources are limited.
Let {(y i ; x i ); 1 ≤ i ≤ n} be an i.i.d sequence of random variables where yi and xi satisfy the linear relationship y i = β 0 + β 1 x i + ∈ i with Cov(x i ; ∈ i ) = 0
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