Core Priciples

Question 1

What is Economics?

Answer 1

Our desires are unlimited
Our resources are not

Question 2

Economics is

Answer 2

the study of how people use their limited resources

Question 3

Microeconomics

Answer 3

deals with individuals households & markets
(households, workers, businesses, prices of business)

Question 4

Macroeconomics

Answer 4

examines the entire economy of a society
(growth of production, unemployment, inflation, gov deficits, exports & imports)

Question 5

Cost benefit principle

Answer 5

evaluate the full set of benefits and costs for any choice you face

benefits are at least as large as the cost

Question 6

Willingness to pay

Answer 6

the amount is your willingness to pay

Question 7

Opportunity cost principle

Answer 7

the true cost of something is what you give up to get it

second best choice

Question 8

Marginal principle

Answer 8

break “how many” decisions down into a series of smaller decisions

Question 9

Rational rule

Answer 9

something is worth doing, keep doing it until MB=MC

Question 10

Marginal benefit

Answer 10

the benefit associated with consuming one more unit of a good

MB=benefit/quantity

Question 11

Decreasing marginal benefit

Answer 11

negative relationship between quality consumed and marginal benefits

Question 12

Marginal cost

Answer 12

the cost associated with consuming one more unit of a good

MC= cost/quantity

Question 13

Increasing marginal cost

Answer 13

the positive relationship between quantity produced and marginal cost

Question 14

Thinking on the margin

Answer 14

MB>MC: do it more
MC>MB: do it less

Question 15

Optimization

Answer 15

goal is to replicate the result of the decision mailing process