ECON 111

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

Evaluate the following statement: "I love ice cream. But I've eaten so much ice cream today, I can't possible eat another cup."

The marginal benefit of eating ice cream is falling.

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

At a local town council, people debated a proposal that would change the use of public space for recreational use by demolishing a skating park and building an arboretum. This is known as the problem of:

allocating scarce resources

The process of assigning a good, a service, or a resource to one use instead of another describes _____________

allocation

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

attainable

The more of a good or a service that is consumed in a given period of time, the lower the marginal ____________ that is associated with each additional unit.

benefit

When production is characterized by __________ opportunity costs, the resulting production possibilities frontier will be a straight line.

constant

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.

When resources are fixed, increasing the production of one good causes a(n) ___________ in the production of the other.

decrease

As the amount of an activity increases, its marginal benefit

decreases

On a production possibilities frontier (PPF) with Good X on the horizontal axis and Good Y on the vertical axis, we can say that the slope of the PPF (in absolute value) equals the opportunity cost of producing Good X with respect to the production of Good Y. This is true because the slope:

describes the trade-off resulting from the production of Good X in terms of Good Y.

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:

efficient

In economics - resources can also be called

factors of production

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

false

Martin has given himself an entertainment budget of $5 per week. He has decided that each week he will spend that $5 by either attending a matinee movie at his local theater or downloading five songs by one of his favorite artists. What is the non-monetary opportunity cost of seeing a movie this week?

five songs

Graphing the information in the production possibilities schedule produces the production possibilities:

frontier

The quality of an economic model can be measured by how well it reflects reality and whether it gives us insights that can be used in the real world.

how well it reflects reality and whether it gives us insights that can be used in the real world.

____________ capital refers to the knowledge and skills that people acquire to increase productivity.

human

Suppose a firm spends $10,000 to train its employees on a new, company-wide software program that it has already purchased and intends to adopt in the following month. In this case, the knowledge gained through the training is considered

human capital

You are wasting resources that would be better spent elsewhere:

if you continue producing when marginal benefit is less than marginal cost.

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

Wind energy is relatively ________(less/more) scarce than coal.

less

When the opportunity cost associated with increasing the production of one good or service in terms of another is constant at every level of production, then the production possibility frontier is:

linear

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

marginal

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

________________ explores how market prices for individual goods are determined and how the prices adjust to a variety of different events - such as weather conditions or even government regulation.

microeconomics

The value of the next-best forgone alternative is the __________ cost

opportunity

__________ cost is most plainly visible when spending more money on one thing as it means that less money can be spent on another thing.

opportunity

The value of the next-best - forgone alternative is the

opportunity cost

When the marginal benefit equals the marginal cost, that stable level is referred to as an _________ level.

optimal

When a decision maximizes overall benefit, it is called:

optimization

___________ is the idea that people make choices to maximize the overall benefit - or utility - of an action subject to its cost

optimization

Combinations lying ________ the production possibilities frontier are impossible to produce with the current resources and technology.

outside

Combinations of production that fall inside the production possibilities frontier are ________ but not efficient.

possible

The line (or curve) that represents the combinations of the two goods produced on the production possibilities frontier is a boundary between output levels that are _______ and output levels that are unattainable.

possible

Combinations inside the production possibilities frontier are:

possible and 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 frontier

A table that shows the possible combinations of two different goods or services that can be produced with fixed resources and technology is the:

production possibilities schedule

The production possibilities frontier, or curve, is a graphical representation of the

production possibilities schedule.

Self interest, marginal decisions, and optimization all form the basis of_________

rational decision making

Self-interest, marginal decision making, and optimization form the basis for:

rational decision making

Drinkable water is ______ water in general.

relatively more scarce than

Tomatoes represent a small subset of food, so tomatoes are:

relatively more scarce than food in general

Because the world is characterized by scarcity, people must allocate the limited ______ at their disposal among many competing uses

resources

Economics is the study of how individuals and societies allocate __________ resources among many competing uses.

scarce

Economics is the study of how individuals and societies allocate

scarce resources among many competing users

A major problem faced by developing countries is the relative ______ of drinkable water as compared to water in general.

scarcity

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

scarcity

___________ means that resources are limited.

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.

The _______ of the production possibilities frontier equals the trade-off of the production of one good or service in terms of the other.

slope

The opportunity cost of producing a good or a service can be found by:

solving for the cost of one good in terms of another.

Marginal benefit is:

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

Increasing marginal cost describes

the direct relationship between the marginal cost associated with the use of a good or a service and quantity produced

Equilibrium occurs when:

the marginal benefit equals the marginal cost.

The optimal level of economic activity 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.

Opportunity cost is defined as:

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

Opportunity cost is:

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

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

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

A society's ability to produced needed goods and services is permanently reduced if it

uses resources too quickly

Individuals and countries specialize because the opportunity cost of producing goods and services:

varies

Clara can spend her afternoon doing one of three things: She can study economics, plant a sapling in her garden, or wash her car. Suppose she values spending time in the garden most; next her time washing the car; and her time studying economics the least. What is the opportunity cost of planting a garden?

washing her car

If you continue producing when marginal benefit is less than marginal cost, you are:

wasting resources that would be better spent elsewhere.

Combinations lying _________ the production possibilities frontier are possible but inefficient with the current resources and technology.

within