Chapter 2: Economists' View of Behavior Flashcards
Individuals assign priorities to their wants and choose their most preferred option. Subject to the constraints of _____ and _____
limited resources & costly and imperfect information
Individuals learn from their _____
mistakes
When choices are made, people think at the _____
margin
The additional benefits obtained if the choice is made
Marginal benefits
The additional costs incurred if the choice is made
Marginal costs
When should action be taken in relation to a marginal analysis?
If marginal benefits are greater than the marginal costs
Benefits and costs that have preceded the decision are _____ and therefore irrelevant to the decision
Sunk
True or False
Choices involve trade-offs
True
The value of the foregone option is the _____ _____ of the option selected
Opportunity cost
_____ _____ are direct dollar expenditures
Explicit costs
_____ _____ reflect opportunity costs that are not direct dollar expenditures
Implicit costs
Individuals maximize their personal satisfaction given _____ _____
Resource constraints
_____ are things people value
Goods
Expresses the relation between total utility and the goods consumed
Utility function
Since nothing is guaranteed, we make decisions based on the _____ _____ of the outcome
Expected value
