Ch. 1 Thinking Like an Economist
Constant
A quantity that is fixed in value is known as a(n):
Take an action if, and only if, the extra benefits from taking the action are at least as great as the extra costs
According to the Cost-Benefit Principle, an individual or society should.
Is more likely to take the action
According to the Incentive Principle, when the benefit of an action rises, a person...
Equation
An ____________ is a mathematical expression that describes the relationship between two or more variables.
Average
An activity's ____________ benefit is the total benefit of carrying out n units of an activity divided by n.
An unavoidable
Economists view scarcity as...
Opportunity Cost
Is the value you place on the next best alternative.
Positive Economic Principle
One that predicts how people will behave.
Normative Economic Principle
One that says how people should behave.
As proportions rather than absolute dollar amounts.
People sometimes apply the Cost-Benefit Principle incorrectly because they evaluate costs and benefits.
Normative
The Cost-Benefit Principle is a ________________ economic principle.
Economic Surplus.
The benefit of an action minus its cost is known as...
Doesn't mean that economic models aren't useful for predicting behavior.
The fact that people don't always consciously weigh costs and benefits when making decisions
Increase in total benefit that results from carrying out one additional unit of the activity.
The marginal benefit of carrying out an activity is the...
Rise/Run
The slope of a straight line is often calculated as the:
Average Benefit
The total benefit of undertaking n units of an activity divided by n.
Average Cost
The total cost of undertaking n units of an activity divided by n.
Dependent
The value of a(n) ___________ variable is determined by the value taken by another variable in the equation.
Opportunity
The value of what must be foregone in order to undertake an activity is the ____________ cost of that activity.
Variable
A quantity that is free to take on different values is a(n:
A cost that is beyond recovery at the time a decision is made.
A sunk cost is...
Independent
A variable that determines the value of another variable in an equation is known as a(n)__________ variable.
People must make trade-offs.
An implication of the Scarcity Principle is that...
Incentive Principle
Predicts how people will behave.
As absolute dollar amounts rather than proportions.
When assessing the cost and benefits associated with taking an action, it is generally best to consider costs and benefits:
Should be ignored.
When deciding whether to take an action, sunk costs:
Fail to consider implicit costs.
When making decisions, people sometimes make mistakes because they:
The value you place on studying for your economics course.
You are considering whether to spend the evening watching TV or studying for your economics course. Your opportunity cost of watching TV is:
A downward parallel shift
In the graph of a line, a decrease in the vertical intercept will lead to:
Both implicit and explicit costs.
In calculating opportunity cost, the textbook includes:
Makes choices by weighing the extra benefits of an action against its extra costs.
In standard economic models, a rational person:
An upward parallel shift
In the graph of a line, an increase in the vertical intercept will lead to:
Sunk Costs
Costs that have already been incurred and cannot be recovered.
How people make choices under conditions of scarcity and the results of those choices for society.
Economics is best defined as the study of...
Individual choice under scarcity and its implications for the behavior of prices and quantities in individual markets.
Microeconomics is the study of:
Decrease in b
If you graph the equation Y= a + bX with Y on the vertical axis and X on the horizontal axis, a(n) _____________ will lead to ta decrease in the slope.
Vertical Intercept
In the graph of a straight line, the value taken by the dependent variable when the independent variable is equal to zero is known as the:
Economic Surplus
Is the benefit of taking an action minus its cost.
