What It Really Costs
The value of the next-best alternative you give up when you make a choice.
What is opportunity cost?
Points located here on a production possibilities curve show every resource fully and efficiently employed.
What is on the curve?
The additional satisfaction or gain from consuming or producing one more unit.
What is marginal benefit?
The three basic questions every economic system must answer.
What are what to produce, how to produce it, and for whom to produce it?
Which math theorem states that in a right triangle, A² + B² = C²?
Pythagorean Theorem
This term refers to all of the alternatives sacrificed when you choose — not just the best one.
What are trade-offs?
A point in this location tells you resources are sitting idle or being used badly.
What is inside the curve?
The rule that tells a rational decision maker exactly when to stop.
What is stop where marginal benefit equals marginal cost?
In this type of economy, a central government authority answers the three basic questions.
What is a command economy?
Who was the third president of the United States of America?
Thomas Jefferson
Jordan skips a shift paying $15 an hour to attend a four-hour concert. State his opportunity cost.
What is the $60 in wages he gave up — the next-best alternative, not the concert ticket price?
A country is producing 40 fishing boats and 60 solar panels, both on its curve. It wants 50 boats and 70 panels. Explain why it cannot simply decide to produce that combination.
What is the combination lies outside the curve? Every resource is already fully employed, so more of one good requires fewer of the other. Producing more of both isn't a choice the country can make — it requires more resources or better technology, which shifts the curve outward.
A cost that has already been paid and cannot be recovered no matter what you decide next.
What is a sunk cost?
A furniture company replaces its hand-sanding crew with robotic sanders to cut costs. Which of the three basic economic questions is the company answering?
What is how to produce? Not what — they still make furniture. Not for whom — the buyers haven't changed.
What is Mr. Kim's B3 class?
What is Integrated Math?
Explain why economists say there is no such thing as a free lunch, even when someone genuinely hands you a free lunch.
What is the lunch still uses scarce resources, and eating it costs you the time you could have spent otherwise? Free of charge is not free of opportunity cost.
Name two changes that would shift a country's entire production possibilities curve outward.
What are an increase in resources and an improvement in technology? Or: more workers, more capital, better technology, newly discovered resources, improved education or training.
You've eaten three slices of pizza, and the fourth sounds noticeably less appealing than the third did. Name the pattern this illustrates.
What is declining marginal benefit? Each additional unit delivers less added satisfaction than the one before it.
Businesses set most prices and choose what to produce, but the government funds public schools, inspects food, and runs a pension program. Name this type of economy.
What is a mixed economy? Nearly every real-world economy falls here.
How many seconds are there in a year?
31,536,000
A surgeon and a retired neighbor each spend the same Saturday volunteering at the same food bank. The surgeon could have earned $2,000 operating that day; the neighbor would otherwise have watched television. Explain why economists say the identical volunteer day costs these two people very different amounts.
What is opportunity cost depends on the individual's next-best alternative? Same activity, different forgone alternatives. Cost is measured by what you give up, not by what you do.
A country moves from one point on its curve to a different point on the same curve. Explain why this is not economic growth.
What is a reallocation, not growth? The country is trading one good for another along an unchanged frontier — its total productive capacity is exactly the same. Growth means the curve itself moves outward.
You paid $200 for a nonrefundable lift ticket and wake up to rain. Should the $200 be part of your decision about whether to go? Defend your answer. What is this called?
What is no? The $200 is a sunk cost — it's gone whether you ski or not. The only sound comparison is the marginal benefit of skiing in the rain against the marginal cost of going today.
A city imposes a 25-cent charge on disposable bags, and bag use falls sharply. Name the concept at work and explain why a penalty counts as an example of it.
What is an incentive? An incentive is anything that changes the costs or benefits of an action and therefore changes behavior — it can be negative as easily as positive.
A letter that does not appear in the names of the 50 States of America
Q