Chapter 2 Concepts and Terms Flashcards
Worth of an individual’s life by that individual…
find out how much a worker will accept to take a dangerous job
If the marginal cost of a good as zero, how much of the good would a consumer consume?
the consumer would consume the item until the marginal value of that good was zero
Why does marginal cost rise as more of a good is consumed?
The Optimal Arrangement Principle
How are decisions made using marginal analysis?
Take an action if, and only if, the marginal value is at least as great as the marginal cost.
Why does marginal cost slope upward in production?
The Law of Diminishing Returns
Are jobs costs or benefits to society?
Labor is a resource - it has both costs and benefits.
True or False: Demand and Supply depend on each other.
False
Why does the Supply curve slope upward?
the Law of Diminishing Returns and the Optimal Arrangement Principle (marginal cost rises and MC=Supply)
Why does the Demand curve slope downward?
the marginal value decreases as more is consumed
Supply will change if:
technology or the price of the resources change
What does a movement up and down the demand line show?
a change in price and the quantity demanded
What does a shift in the line itself show?
a change in demand
A shortage in the market can only be caused by…
a price that is lower than the equilibrium price.
Social gain is equal to…
consumer gain + producer gain; total value - total cost.
The consumer gain is equal to…
the total value minus the total amount paid as a price.
