Economics Chapter 2

Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be.

Normative Statement

"If I didn't have class tonight, I would save the $4 campus parking fee and spend four hours at work where I earn $10 per hour." The opportunity cost of attending class this evening is:

$44

Which of the following would most likely shift the production possibilities curve inward?

A decrease in the average number of hours worked per week as the labor force chooses to enjoy more leisure time

Refer to Figure 2-1. Along the production possibilities frontier, the most efficient point of production depicted is:

All points on the production possibilities frontier are equally efficient.

The choice on a production possibilities set that is socially preferred, or the choice on an individual's budget constraint that is personally preferred, will display _____________________.

Allocative efficiency

Why is there scarcity?

Because our unlimited wants exceed our limited resources

Refer to Figure 2-1. An economy is operating at full employment, and then workers in the bread industry are laid off. This change is portrayed in the movement from:

C to F

Marginal thinking is best demonstrated by:

Choosing to spend one more hour studying economics because you think the improvement in your score on the next quiz will be worth the sacrifice of time.

Refer to Figure 2-1. The most inefficient point depicted is:

D

The law of ____________________________ explains why people and societies rarely make all-or-nothing choices.

Diminishing Marginal Utility

Economists refer to this pattern, the ___________________________________, which means that as a person receives more of a good, the additional or marginal utility from each additional unit of the good declines.

Law of diminishing marginal utility

Most choices involve _________________, which involves comparing the benefits and costs of choosing a little more or a little less of a good.

Marginal Analysis

As a person receives more of a good, the _______________ from each additional unit of the good declines.

Marginal Utility

The marginal benefit of a slice of pizza is the:

Maximum amount that a consumer is willing to pay for the slice.

The model that economists use for illustrating the process of individual choice in a situation of scarcity is the budget constraint, sometimes also called the _______________, a diagram which shows what choices are possible.

Opportunity Cost

The lesson of __________ is to forget about the money that's irretrievably gone and instead to focus on the marginal costs and benefits of future options.

Sunk Cost

Gomer decides to spend an hour playing basketball rather than studying. His opportunity cost is:

The benefit to his grades from studying for an hour

As depicted in _________________________________, it is necessary to give up some of one good to gain more of the other good.

The production possibilities frontier

In deciding how many hours to work, Beulah will make a choice that maximizes her _______; that is, she will choose according to her preferences for leisure time and income.

Utility

The general pattern that consumption of the first few units of any good tends to bring a higher level of _______ to a person than consumption of later units is a common pattern.

Utility