HW 1: Fundamentals (microeconomics)

If an activity is performed where the marginal benefit is greater than the marginal cost (MB > MC), there is:

a net gain to the economy.

A production possibilities frontier that illustrates a 1-for-1 trade off between goods is drawn as:

a straight, downward-sloping line.

Because the world is characterized by scarcity, people must choose between different uses for the resources at their disposal. In economics, we refer to this as:

allocating resources

'' The production combinations that fall directly on the production possibilities frontier (curve) are ______ and efficient.

attainable

A producer has a(n) _____ advantage in the production of a good or a service if his or her relative opportunity cost of production is lower than the opportunity cost of other producers.

comparative

If the marginal benefit of an activity exceeds the marginal cost of the activity (MB > MC), we should

continue to increase output until MB = MC.

As the amount of an activity increases, its marginal benefit:

decreases

The wealth - or additional well-being - created by trade -

does not have to be monetary

_______________ ability involves assuming risk and organizing resources into a productive process.

entrepreneurial

Someone who is self-interested only performs actions for his or her own benefit and not for the benefit of others.

false

As the amount of an activity increases, its marginal cost:

increases

When resources are allocated in such a way that it is possible to increase the production of one good only by decreasing the production of another, then the allocation of resources is:

inefficient.

On a production possibilities frontier (PPF), if you are able to increase the production of both goods at the same time then, initially, resources were allocated

inefficiently

The additional benefit associated with one more unit of an activity is the _____ benefit.

marginal

An economy should continue producing a good or a service so long as:

marginal benefit exceeds marginal cost.

When you decide - after studying for three hours - that another hour of sleep is more beneficial to you than a fourth hour of studying, you are engaging in:

marginal decision making

When you decide to turn off the bedroom light on your way to the kitchen so that you can save a little money on your electric bill, you are engaging in:

marginal decision making

combinations lying __ the production possibilities frontier are impossible to produce with the current resources and technology.

outside

Combinations inside the production possibilities frontier are:

possible but inefficient.

A useful way to visually represent the data in a production possibilities schedule is by means of a graph called a(n)

production possibilities curve

Self interest, marginal decisions, and optimization all form the basis of _________ decision making

rational

'' The comparison of the scarcity of one good, service, or resource to that of another is called "___________ scarcity"

relative

The term ___________ describes the fact that unlimited wants cannot be completely satisfied with limited resources.

scarcity

-interest is the idea that people choose to do the things that interest them.

self

A strong economic model allows us to analyze the economic events of the world by:

simplifying a very complex economic world.

In the real world, the opportunity cost increases as production increases, because:

some resources are better suited for producing some goods or services than others.

______ is the result of low-cost producers focusing all their efforts on producing a single good or service.

specialization

Marginal cost is:

the additional cost associated with one more unit of an activity.

Equilibrium occurs when:

the marginal benefit equals the marginal cost.

There is no incentive to either increase or decrease the level of the activity performed when:

the marginal benefit equals the marginal cost.

The optimal level of economic activity occurs when:

the total benefit equals the marginal cost.

Opportunity cost is:

the value of the opportunity that you give up when you choose one activity instead of another.

The marginal benefit of an activity can be found by calculating the change in:

total benefits as the level of the activity increases by one unit.

The marginal cost of an activity can be found by calculating the change in:

total benefits as the level of the activity increases by one unit.

The term "scarcity" describes the fact that people's ______ wants cannot be completely satisfied with ______ resources.

unlimited; limited