Chapter 2 Flashcards
What is the fundamental principle that every choice has?
Opportunity cost
When will a rational consumer purchase additional units?
Marginal utility exceeds opportunity cost
What is a key concept in economics related to choices?
Efficiency
What does a flatter PPF indicate about opportunity cost?
Lower opportunity cost
Why would someone choose a high-pressure, high-paying job?
To earn and spend money
What is a tradeoff?
Choosing more of one good at the cost of less of the other
What is the equation for any budget constraint?
P * Q = Budget
What characterizes an inefficient organization?
Long delays, high costs
What does allocative efficiency represent?
Society’s desired combination
What does the individual opportunity set show?
Constraints on individual consumer choices
What is a sunk cost?
Money spent that cannot be recovered
What characterizes an efficient organization?
Meets schedules, focused
What does allocative efficiency mean?
Producers supply consumer demand
What is a characteristic of a job that someone might choose that leaves time for family and friends?
Flexible hours, low workload
What does the social production possibilities frontier show?
Constraints on society’s production choices
What does productive efficiency mean?
Impossible to increase one good’s production
What fundamental economic problem does every society face?
Scarcity
What does the slope of the PPF represent?
Opportunity cost
What is positive analysis?
Analyzing benefits vs. costs
What exceeds the monetary cost of attending college?
Opportunity cost
What does the budget constraint framework emphasize?
Not all-or-nothing choices
What is allocative efficiency?
Mix of goods society desires
What happens when an economy improves efficiency?
More goods produced
What is the goal of economic analysis?
Study actual people in the actual economy
What does scarcity mean in economics?
Limited resources
What did Adam Smith name the property that describes market interaction?
invisible hand
What does utility provide?
Satisfaction
What does every choice have?
Opportunity cost
What is economic efficiency?
Max benefit from scarce resources
What do economists assume about consumption and utility?
More consumption, more utility
What is true for any choice inside the production possibilities frontier?
Productively inefficient
What does government spending analysis involve?
Identify beneficial spending
What do economists believe about choices?
They involve tradeoffs
What is opportunity cost?
Lost opportunity to obtain something else
What pattern is common in consumption?
Decreasing utility
What does the market economy facilitate?
Coordination of production
Who coined the phrase ‘we cannot always get what we want’?
Lionel Robbins
What is the law of diminishing marginal utility?
Decline in additional satisfaction
What is scarcity in human nature?
Limitations in time, money, etc.
What happens to utility as more of a good is received?
It declines
What is an example of opportunity cost?
Missing class to sleep
Can you give an example of opportunity cost in relationships?
Choosing one person to marry
