Microeconomics Chapter 1

Why is this ceteris peribus so useful in economic analysis?

If every variable is allowed to change, it would be impossible to isolate the impact of one variable on another.

efficient market

a market in which profit opportunities are eliminated almost instantaneously

positive

describes current situations and events as they currently are "what is"

normative

describes how the world "should be" (don't base it off of should all the time)

post hoc fallacy

error of infuerring causality from two events happening one after the other. ("after this, therefore becasue of this")

microeconomics

examines behavior of income, employment, output on houseolds and firms

macroeconomics

examines behavior of income, employment, output on the national scale

tradeoff

giving one thing up in order to consume another

fallacy of composition

what is true for a part is necessarily true for the whole

economic theory

a statement or related set of states about cause and effect action and reaction

positive ex.

If a company pays closer attention to its opportunity costs, this should result in higher profits.

Which of the following is the best definition of the opportunity cost of a decision? The difference between the benefits of the first and second best choices Time spent due to the decision The sum of all benefits from all foregone alternatives Actual financial cost of the decision Benefits from the best foregone alternative

Benefits from the best foregone alternative

An educational software company wants to expand the number of economics questions that it offers and is considering hiring another economist. It compares how much adding another worker will improve the product to the additional cost.

marginal colst

Ava finds that there is not enough time after work to have dinner, exercise, and watch TV, and she must make choices about how to use her limited time.

scarcity

marginalism

the process of analyzing the addition or incremental costs or benefits arising from a choice or decision

economis

the study of how individuals and societies choose to use the scarce resources that nature and previous generations have provided

marginal analysis

A marginal change represents a small or incremental adjustment to a plan or action. When using marginal analysis, people consider the extra benefit or cost of an action rather than the total benefit or cost. marginal Ava decides whether or not she should spend an additional hour per day welding burn barrels by looking at how much that hour will produce. not marginal D.A. calculates how many pounds of brisket he needs to eat on a daily basis to survive by looking at the total number of calories he needs.

equity-efficiency trade-off

Actions intended to make economic outcomes fairer can cause efficiency to decrease.

What best describes marginal decision making?

Comparing the additional costs and additional benefits of an action

The five dollar Burger Joint gift card that your friend gave you for your birthday expires today. You can either use the gift card to buy yourself dinner at Burger Joint or you can stay home and eat a delicious home-cooked meal. What is the opportunity cost of eating the home-cooked meal?

Opportunity cost is defined as the value of the next best alternative. In this case your next best alternative is to get a five-dollar dinner at Burger Joint. If you do that, you will enjoy the value of that meal. Also, it is important to note that if you do not have the home-cooked meal, you can use the ingredients for a meal later. So the opportunity cost includes the value of the ingredients that went into the home-cooked meal and the value of a five-dollar dinner at Burger Joint.

Which of the following is an example of the fallacy of composition? Protecting domestic automobile producers with trade restrictions increased employment in that industry, so Congress decides to extend trade restrictions to other sectors of the economy. One person avoids getting the flu after s/he got a vaccination, so everyone would be healthier if everyone got vaccinated. A lighthouse can warn an individual ship if it is nearing a dangerous shore, so all ships will be safer if a lighthouse is built. An individual child benefits from learning how to read, so all children should be taught how to read.

Protecting domestic automobile producers with trade restrictions increased employment in that industry, so Congress decides to extend trade restrictions to other sectors of the economy.

scarcity

Scarcity exists because people virtually have unlimited wants and because the earth has a limited supply of land, labor, capital and entrepreneurial ability.

Which of the following is an example of the post hoc, propter hoc fallacy? Your habit has been to study for exams in your dorm\'s TV lounge. The night before an exam you find the TV broken, so you go to the Library instead. You do well on the exam, and decide to study at the Library for the next exam. A farmer tries a new brand of seed and that year sees much higher harvests. The next year the farmer uses the new brand again. To increase its profit margin, a store raises the price on its most popular item in three steps. Sales fall shortly after the first price increase, and the store decides not to raise the price again. You pick your college to make it to the Final Four in the NCAA basketbal tournament, but they lose in the first round. You decide never to pick them to go that far in the tournament again.

You pick your college to make it to the Final Four in the NCAA basketbal tournament, but they lose in the first round. You decide never to pick them to go that far in the tournament again.

What factors into the opportunity cost for a decision? Select all that apply. The difference between the benefits of the first and second best choices Time spent due to the decision The sum of all benefits from all foregone alternatives Actual financial cost of the decision Benefits from the best foregone alternative

benefits from the best foregone alternative financial cost of the decision Time spent due to the decision

Self-interest

describes the motivation behind a decision-maker who chooses what\'s best for him- or herself without (much) consideration for the impact on anyone else.

social interest

describes the motivation behind an economic entity making choices that are best for society as a whole.For instance, the government has the ability to curtail activities that are deemed too damaging even if there is a market for them.

All of the following concepts are integral to the definition of economics as a social science EXCEPT: choices money scarcity incentives

money

On Black Friday, there are huge sales for electronics at many retail stores. David must decide between buying a camera at one store or a flat screen TV at another store, and buying one means losing out on the ability to purchase the other.

opportunity