Week 2 ; chapter 2
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.
Marginal thinking is best demonstrated in this example
The opportunity cost of an action:
is a subjective valuation that can be determined only by the individual who chooses the action.
Scarcity implies that:
it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.
The marginal benefit of a slice of pizza is the:
maximum amount that a consumer is willing to pay for the slice.
Philosophers draw a distinction between positive statements, which describe the world as it is, and ___________________s, which describe how the world should be.
normative statemnts
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 set
Philosophers draw a distinction between ___________________, which describe the world as it is, and normative statements, which describe how the world should be.
positive statements
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
The leader of a federal political party made the following campaign promise: "My administration will increase national defense without requiring sacrifices elsewhere in the economy." The promise can be kept if:
the economy moves from a point inside the production possibilities curve toward a point on the production possibilities curve. the production possibilities frontier shifts outward due to an improvement in technology.
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
Why is there scarcity?
Because our unlimited wants exceed our limited resources
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
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
The model that economists use for illustrating the process of individual choice in a situation of scarcity is the _________________, sometimes also called the opportunity set, a diagram which shows what choices are possible.
budget constraint
The slope of the _________________ is determined by the relative price of the two goods, which is calculated by taking the price of one good and dividing it by the price of the other good.
budget constraint
The law of _______________ explains why people and societies rarely make all-or-nothing choices.
diminishing marginal utility
scarcity implies that:
it is impossible to completely fulfill the unlimited human desire for goods and services with the limited resources available.
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
