Economics Ch.1 Sect.2
Employers think at the margin when they decide ...
how many workers to hire
Legislatures think at the margin when they decide..
how much to increase government spending on a particular project.
the extra benefit of adding a unit
marginal benefit
the extra cost of adding a unit
marginal cost
Once the marginal costs outweigh the marginal benefit....
no more units can be added
making a decision at the margin is possible only in situations where..
the available alternatives can be divided into increments
Why does every choice involve an opportunity cost?
we always face an opportunity cost. When we select one alternative, we must sacrifice another
to make a good decision on the margin, you must...
weigh marginal cost against marginal benefits
A phrase expressing the idea that a country decides to produce more military goods ("guns") has fewer resources to produce consumer goods ("butter") and vice versa
"Guns or Butter"
How does opportunity cost affect decision making?
-Every time we choose to do something, like sleep in late, we are given up the opportunity to do something less, like study an extra hour for a big test. -When we make decisions about how to spend our scarce resources, like money or time, we are giving up the chance to spend that money or time on something else.
Why does every choice involve an opportunity cost?
-We always face an opportunity cost. -When we select one alternative, we must sacrifice another.
___________________ also make trade-offs when they decide to spend their money on military needs instead of domestic ones, and vice versa.
Governments
_________________ involve things that can be easily measured such as money, property, and time or things that cannot be easily measured, like enjoyment or job satisfaction.
Trade-offs
Thinking at the margin also applies to
businesses and governments
a decision making process in which you compare what you will sacrifice and gain from a specific action
cost/benefit analysis
Using a __________________ _______ can help you decide if you are willing to accept the opportunity cost of a choice you are about to make.
decision-making grid
a decision is made at the margin when..
each alternative considers cost and benefit ranked in progressive units
Businesses make trade-offs when they decide how to use their _____________ ____ ________________________.
factors of production
an increase or addition especially on a fixed scale
increments
Ex: If squash was the most profitable alternative to broccoli, then the ___________________ _________of deciding to plant broccoli was the chance to plant squash.
opportunity cost
The most desirable alternative given up as the result of a decision.
opportunity cost
happening or developing gradually or in stages, proceeding step by step
progressive
deciding by thinking on the margin involves comparing...
the opportunity costs and benefits
What is a cost/benefit analysis?
thinking on the maragin
The process of deciding how much more or less to do
thinking on the margin
The alternatives that we give up when we choose one course of action over another.
trade-off
All individuals, businesses, and large groups of people make decisions that involve _______________.
trade-offs
Every decision involves _______________ because resources are limited.
trade-offs
In most _______________, one of the rejected alternatives is more desirable than the rest.
trade-offs
Using a decision-making grid can help you decide if you are..
willing to accept the opportunity cost of a choice you are about to make