Micro economics final review

Between USA and Nepal, Nepal invests less in new factories and equipments. This will likely cause

USA's production possibilities curve to shift outward faster than Nepal

The cost-benefit principle indicates that an action should be taken

if the extra benefit is greater than or equal to the extra costs

What is your opportunity cost, if you go to work on Saturday

$35

You paid $35 for a ticket (which is non-refundable) to see JAM, a local rock band, in concert on Saturday. (Assume that you would not have been willing to pay any more than $35 for this concert.) Your boss called and she is looking for someone to cover a shift on Saturday at the same time as your concert. You will have to work 4 hours and she will pay you time and a half, which is $9/hr.

$36

Every time you go to the grocery store, you try to choose the shortest line. But all of the lines always seem to be the same length. Why?

Everyone else is trying to choose the shortest line, too.

Jenna decides to see a movie that costs $7 for the ticket and has an opportunity cost of $20. After the movie, she says to one of her friends that the movie was not worth it. Apparently,

Jenna overestimated the benefits of the movie

14. If Leslie can produce two pairs of pants in an hour while Eva can make one pair an hour, then it must be the case that

Leslie has an absolute advantage.

Should you go to the concert instead of working Saturday

No, your benefit is less than your cost

Chris has a one-hour break between classes every Wednesday. Chris can either stay at the library and study or go to the gym and work out. This is

an economic problem, b/c the one-hour time limit means Chris must make a choice.

Economics always deal with

choice in the face of limited resources.

Microeconomics is distinguished from macroeconomics in that microeconomics focuses on

choices made by individuals or groups in the context of individual markets.

The scarcity principle indicates that_______________and the cost-benefit principle indicates______________ .

choices must be made; how to make the choices

if a given production combination is known to be attainable, then it must be

either an inefficient or efficient point.

Tony notes that an electronics store is offering a flat $20 off all prices in the store. Tony reasons that if he wants to buy something with a price of $50 that it is a good offer, but if he wants to buy something with a price of $500 it is not a good offer. This is an example of

inconsistent reasoning; saving $20 is saving $20.

In general, rational decision making requires one to choose the actions that yield the

largest economic surplus

the slope of any production possibilities curve is because .

negative; to produce more of one good means less production of the other

If a given production combination is efficient, then it must be

on the production possibilities curve.

According to the principle of increasing opportunity cost, expanding production requires using resources in which order:

start with the resource with the lowest opportunity cost and proceed to the higher opportunity cost resources

The production possibilities curve shows

the maximum production of one good for every possible production level of the other good.

The opportunity cost of an activity is the value of

the next-best alternative forgone