ECON CH 1

You make a clay pot for $10 and sell it to a customer for $40. What is your economic surplus associated with the transaction?

$30

Taken together, the cost-benefit principle and the opportunity cost principle say that a decision is worth making if the benefits it yields are:

at least as great as the opportunity cost

According to the cost-benefit principle, under what conditions should a business owner hire an additional worker?

When marginal benefit is greater than or equal to marginal cost

Which of these would indicate that in order to increase production of a good, you need to decrease production of another good?

You are producing at a point on your production possibility frontier.

You have to try to persuade your parents to go to your graduation because your brother's talent show is scheduled for the same time. This BEST exemplifies which of these interdependencies?

dependencies between people or businesses

Ayalon owns a fast food restaurant that is open 18 hours a day. He is considering the idea of having his restaurant remain open 24 hours a day, but he realizes that the success of this plan may be affected by the changing hours of his competitors. Ayalon is taking into account the _____ principle.

interdependence principle

When someone asks whether they could improve their circumstance with a little more or less of something, they are taking into account the _____ principle.

marginal

Which of the four core principles of economics can be used to simplify the question, "How many more products should be produced?" into the question, "Should one more product be produced?"

marginal

Evie, a receptionist at a car dealership, asks herself the question, "Should I go back to school, or should I continue to work at the dealership?" The fact that she is comparing the idea of going to school with her next best option indicates that she is applying the _____ principle.

opportunity cost

The _____ principle states that people should assess the consequences of their choice relative to the best of the alternatives.

opportunity cost

What should people base their decisions on?

opportunity cost

There are far fewer stay-at-home moms today than in 1975 in large part because women's wages have _____, causing the opportunity cost of being a stay-at-home mom to _____.

risen, rise

Amancio is going into his fourth year of school when he is offered a prestigious position at a software company. Instead of applying the opportunity cost principle to see if he should quit school and take the job, he decides to stay in school, because he has already spent so much time and money on furthering his education. Amancio's hasty decision has been negatively affected by:

sunk costs

Nasser owns a business that produces t-shirts, but he is struggling with the dilemma of how many shirts to produce, so he begins by asking himself if he should produce one more shirt. Which economic principle is exemplified by this situation?

the marginal principle

You have decided that you will buy pizza, but you are still trying to decide how many pieces of pizza you should buy. Which economic principle are you taking into account?

the marginal principle

When properly applying the cost-benefit principle, you must calculate the costs and benefits of a decision relative to:

the next best alternative

If a decision boosts a person's economic surplus, then it must be true that the decision boosted:

total benefits more than total costs.