477 test 1
rational rule
If something is worth doing, keep doing it until your marginal benefits equal your marginal costs
a baker makes 15 cakes a day, the bakery decides to hire a second baker who only bakes 9 cakes a day who will use the kitchen when the first baker does. What is this an example of?
diminishing marginal product
grapes become more expensive, why might this be?
grape production is the same, but wine production has gone up, which means more grapes are needed
if US raised tariffs on Chinese imports, the us market for these Chinese imports would...
have an increase in price
opportunity cost
highest valued alternative that must be given up to engage in an activity
rational buyer
keeps buying a product until marginal benefit equals price
market equilibrium
quantity demanded equals quantity supplied
when faced with a quantity decision, the economic surplus is always maximized by following the
rational rule
diminishing marginal product leads to
rising marginal costs for a seller
calculate marginal benefit
subtracting marginal cost from marginal benefit. ex: Marginal net benefit of the first drink is $13 ($20 - $7)
price of coffee is $3 but Cheryl is willing to pay $6 each day. The marginal benefit to her of each cup of coffee falls by $2. How many cups of coffee should Cheryl purchase?
2
opportunity cost principle
next best alternative you have to give up to get it
estimate willingness to pay quantifies ___costs or benefits associated with a choice
non-financial
what is a factor that will not shift supply?
price of the product
economic surplus
total benefit minus total costs arising from the decision
does price cause movement along curves NOT shifts?
true
shifts in market demand can result from a change in
types and number of buyers
rising marginal costs imply
upward sloping supply curve
cost benefit principle
benefits are greater than the costs