Chapter 1 Flashcards
If doing activity x means not being able to do activity y, then the value to your of doing y is a(an)______ of doing x.
opportunity cost
The study of broader aggregations of markets falls within the realm of
macroeconomics
The descriptor “Home Economicus” describes an individual motivated by
self-interest alone
Reservation Price
Price at which a person would be indifferent between doing x and no doing x
Costs that are beyond recovery at the moment a decision is made are known as ____ costs.
sunk
Costs that are beyond recovery at the moment a decision is made are known as ____ costs.
sunk
The benefit of doing activity x, denoted as B(x), is the ____ amount one would be willing to pay to do x.
maximum
When using the cost-benefit test to decide upon an action, it is best to express costs and benefits in
absolute dollar terms
The marginal benefit (or cost) of an activity ____ the average benefit (or cost) of the activity.
may be greater than, equal to, or less than
A benefit that is bestowed upon people who are not directly involved in an activity is called a(n)
external benefit
“Useful predictions about human behavior _____ possible if human actors do not actually undertake the calculations
economists assume to be necessary for optimal decision making. “
are still
An upward sloping marginal cost curve tells us that each additional unit of the activity generates _____.
an ever-larger cost.
“Invisible Hand” shows that a beneficial result is secured for all society when individual producers aim to
advance their own selfish interests
“Invisible Hand” shows that a beneficial result is secured for all society when individual producers aim to
advance their own selfish interests
If the benefit of an activity exceeds its cost…
DO IT
