Ch 1 Thinking Like An Economist Flashcards
Normative economic principle
One that says how people should behave
Average benefit
The total benefit of undertaking n units of an activity divided by n
Marginal cost
The increase in total cost that results from carrying out one additional unit of activity
Marginal benefit
The increase in total benefit that results from carrying out one additional unit of activity
Economics
The study of how people make choices under conditions of scarcity and of the results of those choices for society
Average cost
The total cost of undertaking n units of an activity divided by n
Rational person
Someone with well-defined goals who tries to fulfill those goals as best he or she can
Economic surplus
The economic surplus from taking any action is the benefit of taking the action minus its cost
Positive economic principle
One that predicts how people will behave
Sunk cost
A cost that is beyond recovery at the moment a decision must be made
Microeconomics
The study of individual choice under scarcity and its implications for the behavior of prices and quantities in individual markets
Opportunity cost
The value of what must be forgone to undertake an activity
Macroeconomics
The study of the performance of national economies and the policies that governments use to try to improve that performance
