Ch 1 Flashcards
(10 cards)
1
Q
What is the scarcity principle?
A
Boundless wants, limited resources
2
Q
What is the cost-benefit principle?
A
Take action if, and only if the extra benefits are as great as the extra costs
3
Q
Economic surplus is
A
surplus of an action is equal to its benefit minus its costs
4
Q
Opportunity cost is
A
the value of what must be foregone in order to undertake an activity
5
Q
The three decision pitfalls are
A
- Measuring costs and benefits as proportions instead of absolute amounts
- Ignoring implicit costs
- Failure to think at the margin
6
Q
Marginal cost is
A
the increase in total cost from one additional unit of an activity
7
Q
Marginal benefit is
A
the increase in total benefit from one additional unit of an activity
8
Q
Normative economic principle states
A
how people should believe
9
Q
Positive economic principle
A
predicts how people will behave
10
Q
Incentives
A
are central to people’s choices
