Fundamentals

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

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

5 songs. By choosing to see a movie this week, Martin gives up the 5 songs he could have bought instead.

Land

All natural resources used in production; sometimes referred to as "gifts of nature".

Resource

Any item, whether a gift of nature, the result of production, or the result of human effort, that is used to produce goods and services.

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

Economics

Wind energy is relatively _______ scarce than coal.

Less

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

____________ is a branch of economics that typically deals with how prices are determined in markets and how markets adjust to a variety of different events.

Microeconomics

Due to the ________ of natural resources, we cannot have all the housing and all the forest we may want.

Scarcity

Opportunity costs exist because of ____________.

Scarcity

Marginal Benefit

The additional benefit associated with one more unit of an activity

Marginal Cost

The additional cost associated with one more unit of an activity

Relative Scarcity

The comparison of the scarcity of one good, service, or resource to that of another

Self-interest

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

Optimization

The idea that people make choices in order to maximize the overall benefit, or utility, of an action subject to its cost. If MB>_MC, do it If MB<MC, don't do it

Allocation

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

Marginal Decision Making

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

Macroeconomics

The study of ___________ deals with how the whole economy can be affected by important national and global events- such as wars and natural disasters.

Macroeconomics

The study of the economy at the large-scale level, examining total output, the price level, and other aggregate measure of the economy

Capital

The tools, machinery, infrastructure, and knowledge used to produce goods and services

Scarcity

a condition that results from the inability of limited resources to satisfy unlimited wants

Labor

all physical and mental activity devoted to producing goods and services

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 _________ of public space for recreational use by demolishing a skating park and building an arboretum.

allocation

For an entire economy, the production possibilities frontier is going to be ...............

bowed out because we have different resources with different opportunity costs

The simple model of production assumes that the opportunity cost of production is __________.

constant

How is entrepreneurial ability different from human capital?

entrepreneurial ability is different from human capital in that it primarily involves assuming risk and organizing resources into a productive process.

In economics- resources can also be called.......

factors of production

Optimization behavior implies that if the marginal benefit of an activity is __________ _________ its marginal cost, you should not engage in that activity.

greater than

Economics is about........

how people make choices in a world of scarcity

_______ 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

The law of _____________ opportunity cost says that because some resources are better suited to producing one good or service than another, as the production of a good or a service increases, the _______________ cost of each additional unit rises

increasing, opportunity

Suppose a farmer has three kinds of land for growing peaches; good - better - and best. As the farmer increases production - she will use the best land first - and costs will be low. At some point - she will run out of the best land and will have to start using the better land - and costs will be a little higher. This describes the......

law of increasing opportunity cost

Optimization behavior implies that if the marginal benefit of an activity is _________ _________ its marginal cost, you should not engage in that activity

less than

People will engage in an activity as long as the ___________ ___________ of an activity is greater than or equal to its marginal cost.

marginal benefit

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

The law of increasing opportunity costs exists because......

not all resources are well-suited for all production.

Labor as a resource is defined as all ________ and ________ activity devoted to producing goods and services.

physical/manual and mental

When people trade - producers can achieve something they can't without trade. Thus - only with trade is it............

possible to operate outside the production possibilities frontier.

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

rational decision making

Physical capital

refers to tangible items that are created to increase productivity

Human capital

refers to the knowledge and skills that people acquire in order to increase productivity

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

relative scarcity

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

relatively more scarce than food in genereal

Every person's and every economy"s standard of living relies on the effective use of ______________.

resources/inputs

Because resources are _________ , they must be allocated between competing uses.

scarce

Economics is the study of how individuals and societies allocate.....

scarce resources among many competing users

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

scarce than automobiles in general

Economics studies how individuals and businesses make decisions in a world of ________ resources.

scarce/limited

For an entire economy, the production possibilities frontier is going to be bowed out because..............

some resources are better suited for producing some goods or services than others.

In the real world, the opportunity cost increases as production increases, because.................

some resources are better suited for producing some goods or services than others.

Microeconomics

the study of the economy at the small-scale level, examining individuals and specific markets

Entrepreneurial Ability

the talent or ability to combine land, labor, and capital to produce goods and services

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

uses resources too quickly

Clara can spend her afternoon doing one of three things, study economics, garden, or wash her car. Suppose she values gardening the most, then washing her car, then studying the least. What is the opportunity cost of spending most time gardening?

washing her car