Chapter 1 MacroEconomics
Do to ____ opportunity cost people with serve illnesses are willing to take risks that others are not
lower
decisions about quanities
marginal principle
how many?
marginal principle
Matthew has been diagnosed with cancer and doctors estimate that he has roughly 5 months to live. From an economic standpoint, which best explains why Matthew might be more likely than a healthy person to take a risky experimental drug?
His opportunity cost is lower than that of healthy people.
what are the four types of interdependence
Dependencies between each of your individual choices, Dependencies between people or businesses in the same market, Dependencies between markets, Dependencies through time
Which of these MOST often occurs due to competition for society's scarce resources?
Dependencies between people or businesses
Cost-Benefit Principle
Evaluate the full set of costs and benefits associated with that choice. Pursue that choice, only if the benefits are at least as large as the costs.
Economists always put things into monetary terms; as a result, economics can most appropriately be called the study of money."
False, economists use monetary terms because they can be quantified and compared, but economics is better described as an approach to decision making.
Which of these best describes what people should base their decisions on?
Opportunity costs
You are willing to pay $4 for a cheeseburger. According to the cost-benefit principle, when should you buy a cheeseburger?
When the cost is less than or equal to $4.
When are out-of-pocket costs also opportunity costs?
When the out-of-pocket costs do not exist in the next best alternative.
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.
The difference between the benefits you enjoy and the cost you incur
cost benefit principle
cost and benefit of choice
cost benefit principle
determine whether the marginal benefit exceeds the marginal cost
cost benefit principle
sunk cost
cost put into a project that you can not reverse
rational rule
if something is worth doing keep doing it until your marginal benefits equal your marginal cost
rational rules leads to good decisions if marginal benefits exceeds marginal cost it will ____ surplus
increase
You are considering starting a sandwich shop, but are comparing that to the idea of staying at your current job instead. Which economic principle are you taking into account?
opportunity cost
or what
opportunity cost
Which core principles relates to this question? What happens if you pursue your choice? What happens under your next best alternative?
opportunity costs
Either/Or Choices
rational rule
framing effect
small differences in how alternatives are described can lead people to make different choices.
What are the lessons regarding opportunity cost
some out of pocket costs are opportunity cost,opportunity costs need not involve out-of-pocket financial costs,Not all out-of-pocket costs are real opportunity costs,Some nonfinancial costs are not opportunity costs.
opportunity cost
something you have to give up to get it
when do you maximize your surplus
the point where the marginal cost equals the marginal benefit
Microeconomics
the study of individual decisions
Economics
the study of people in the ordinary business life
True or false: Following the cost benefit principle and your choice, will increase your economic surplus
true
true or false: your marginal benefit should not be more than your marginal cost
true
interdependence principle
which recognizes that your best choice depends on your other choices, the choices others make, developments in other markets, and expectations about the future.
When applying the opportunity cost principle, why is it important to ask, "or what?"
your next best alternative
Scarity
your resources are limited
economic surplus
your willingness to pay for something minus your actual money