Scarcity and resource allocation:
What’s the fundamental economic problem?
Limited resources and unlimited wants.
Which of the following points shows under production?
Point E
When a country produces more they say they have__Advantage?
Absolute advantage
What is the primary goal of Cost-Benefit Analysis in microeconomics?
To determine whether the benefits of a decision outweigh its costs
What is the optimal quantity to consume of a good that is free?
The quantity where total utility from that good is maximized
Payment for labor is usually referred to as?
Wages
If a country is producing at point C, it can produce more capital goods by moving to which other point?
Point D
The country that’s more efficient at producing a product is referred to as having
Comparative advantage
What term describes the value of the next best alternative forgone when making a decision?
Opportunity Cost
What best describes how a consumer makes an optimal decision?
They choose the optimal combination of goods subject to a budget constraint
What is a market economy?
An economic system where the price and quantity of goods and services are guided by interactions between the firms and consumers.
Point F is possible with the countries ressources:
False
Who was the absolute advantage for bread in this table?
Natalia —————— Julian:
10 bread 5 Bread
20 cookies 5 cookies
Natalia
This economic law states that as a person consumes more units of a good, the additional satisfaction from each new unit decreases. What is the name of this economic law?
The law of diminishing marginal utility
What is the definition of marginal cost?
The total cost of producing all units of output
What is Adam Smith's invisible hand?
The idea that in a free market can self adjust via interactions between firms and consumers.
What is the PPC line called:
Frontier
A Trade that improves quality of life is referred to as__?
Mutually beneficial trade
A chef quits a $50k/year job to start a food truck. They spent $30k on ingredients. Name the implicit cost in this scenario.
The $50k forgone salary
If marginal benefit is greater than marginal cost, what should a rational decision-maker do?
Continue the activity.
Which of the following are key differences between market economies and command economies?
Resources are owned by private individuals, rather than by the government, in a market economy.
Which goods are made to help other companies make their product?
Capital goods
Who has comparative advantage for bread?
Natalia —————— Julian:
10 bread 5 Bread
20 cookies 5 cookies
Julian
A student is deciding whether to study an extra hour for an exam. The marginal benefit of studying is a 5% increase in their grade, while the marginal cost is the loss of 1 hour of leisure. If the student values their leisure time at $20 per hour and a 5% grade increase is worth $30, should they study the extra hour?
Yes, because the marginal benefit ($30) exceeds the marginal cost ($20).
Carlos has a van with 20 seats and charges $10 per person per ride to the airport from downtown. Carlos' cost of the trip is $140 for any number of passengers. On one trip, Carlos has 19 seats filled when a person offers him $5 for the last seat. Should Carlos accept the offer?
Yes, since the marginal benefit exceeds the marginal cost.