211 Microeconomic Thought Chapter 1 Quiz

A sunk cost is

a cost that is beyond recovery at the time a decision is made.

Economists believe that scarcity is

a fundamental fact of life for everyone.

People sometimes apply the Cost-Benefit Principle incorrectly because they evaluate costs and benefits ______.

as proportions rather than absolute dollar amounts

in calculating opportunity cost, the textbook includes ______.

both implicit and explicit costs

The benefit of taking an action minus its cost is known as

economic surplus

When deciding whether to take an action, one common decision pitfall is to ______.

ignore the implicit cost of the action

The marginal benefit of carrying out an activity is the

increase in total benefit that results from carrying out one additional unit of the activity.

The marginal cost of carrying out an activity is the

increase in total cost that results from carrying out one additional unit of the activity.

If undertaking an activity includes both explicit and implicit costs, then, according to the textbook, the opportunity cost of that activity ______.

is the sum of its explicit and implicit costs

One common decision pitfall is to ______.

measure costs and benefits as proportions rather than absolute dollar amounts

An economic principle that says how people should behave is known as a ______.

normative economic principle

The value of what must be foregone in order to undertake an activity is known as

opportunity cost

A positive economic principle ______.

predicts how people will behave

Costs that are beyond recovery at the moment a decision is made ______.

should not factor into the cost--benefit calculation

The economic surplus of an action is

the benefit of taking an action minus its cost.

When people ignore the implicit cost of activities ______.

they tend to make the wrong choice

A rational person is someone

with well-defined goals who tries to fulfill those goals as best he or she can.