ECO 101 Unit 2 Learn Smart Questions

Anita knits scarves that she sells on Etsy. When she knits 12 scarves a week her total cost is $144, and when she knits 13 scarves a week, her total cost is $169. Thus, her marginal cost of knitting the 13th scarf is

$25

You are considering whether to go to lunch with a friend. Lunch will take about an hour and will cost $9. Assuming there are no other costs associated with going to lunch, the opportunity cost of going to lunch is

$9 plus the value of the hour you spend at lunch

learning more about economic models

can help us make better decisions even if most people don't consciously use economic models to make decisions

the __________________ principle states that an action should be taken if, and only if, its benefits exceed its costs

cost-benefit

____________ is the study of how people make choices under conditions of scarcity and the implications of those choices for society

economics

economics is the study of

how people make choices under conditions of scarcity

people often fail to correctly apply the cost-benefit principle because they

ignore the implicit costs of their actions

the cost-benefit principle states that an action should be taken if, and only if

its benefits exceed its costs

the ____________ benefit of an activity is the increase in total benefit that results from carrying out one additional unit of the activity

marginal

the increase in total cost that results from carrying out one additional unit of an activity is its _________ cost

marginal

_______________ is the study of individual choice under conditions of scarcity and its implications for the behavior of prices and quantities in individual markets, while _______________ is the study of the performance of national economies and the policies that governments use to try to improve that performance

microeconomics; macroeconomics

Suppose you're trying to decide what to cook for dinner. Both the chicken and the salmon you have in your fridge are about to go bad, and whichever one you don't eat tonight, you'll have to throw away. In deciding which one to cook, should it matter to you that the salmon was slightly more expensive than the chicken?

no, it's a sunk cost

a _____________ economic principle is one that says how people should behave

normative

the cost-benefit principle is an example of a _____________ economic principle because it says how people should behave

normative

the value of what must be forgone in order to undertake an activity is the __________ of the activity

opportunity cost

when the benefit of an action goes up

people generally will be more likely to take that action

A positive economic principle

predicts how people will behave

a cost that is beyond recovery at that moment a decision is made is a(n)

sunk cost

economic ___________ is the benefit of taking an action minus its cost

surplus

the economic surplus of an action is

the benefit of taking an action minus its cost

the average benefit of carrying out an activity is

the total benefit of undertaking n units of an activity divided by n

Although we have boundless needs and wants, the resources available to us are limited. As a result,

trade-offs are inevitable

True or false: people's behavior is often consistent with the Cost-Benefit Principle

true

a rational person is someone

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

For Buzz, the benefit of drinking an additional cup of coffee is $3. If a cup of coffee costs $1.50, and if Buzz has to use $1 worth of his time to go buy the coffee, should Buzz drink another cup of coffee?

yes, the benefit to Buzz drinking another cup of coffee is greater than the cost ($3>$2.50)