Marcoeconomics

Assumptions for decisions making

1) self interest 2) marginal decision making 3)

MB >= MC

Do it! (do more.)

....is the study of how individuals and societies allocate scarce resources among many competition uses and how this decision- making affects the economy at large

Economics

Is the study of how individuals and institutions make decision in a world of scarce resources

Economics

Self-Interest

The idea that people choose to do the things that interest them

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

MB < MC

dont do it! do less

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

false

Marginal Decision Making

i. The process of making choices in increments by evaluating the additional, or marginal, benefit against the additional, or marginal cost of an action

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

marginal

An economy is better off when it stops producing output at the point where:

marginal benefit = marginal cost

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

marginal benefit exceeds marginal cost

optimal level of the activity

marginal benefit of an activity equals marginal cost = equilibrium and optimal level of the activity

The additional cost associated with one more unit of an activity is the

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 bills

marginal decision making

When the marginal benefit equals the marginal cost - that stable level is referred to as an

optimal level

optimization

ppl make choices to maximize overall benefit or utility

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

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

resources

Since Chevrolet Camaros represent a small subset of all automobiles in existence - they are relatively more:

scarce than automobiles in general

Opportunity costs exists because of ....

scarcity

means that resources are limited

scarcity

The idea that people choose to do things that interest them is

self-interest

marginal benefits

the additional benefit associated with 1 more unit of an activity

marginal cost is

the additional cost associated with one more unit of an activity

marginal cost

the cost of producing one more unit of a good

The optimal level of economics 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

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

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

Opportunity Cost

the value of the next best forgone alternative; the value of the opportunity that you gave up when you chose one activity, or opportunity, instead of another.

recognize that economics is relaly about how ppl make choices in the world of scarcity

true