Session 1: Scarcity, Opportunity Cost, and Incentives Flashcards Preview

Microeconomics > Session 1: Scarcity, Opportunity Cost, and Incentives > Flashcards

Flashcards in Session 1: Scarcity, Opportunity Cost, and Incentives Deck (13):
1

Two things about economics

No such thing as a free lunch Incentives matter

2

____ is the root of economics

Scarcity

3

____ is the root of all economic problems

Scarcity

4

____ forces people to choose between options

Scarcity

5

What is the production possibility frontier?

A graph that has a different product on each axis, and a curve between them that describes the maximum possible combinations of production

6

What does a point within the production possibility frontier represent?

Inefficiency

7

What does a point outside the production possibility frontier represent?

Infeasibility

8

What does general movement of the production possibility frontier represent?

General growth in production

9

What is opportunity cost?

Highest valued alternative that must be given up when making a decision

10

Do you have a choice when calculating opportunity cost?

Yes

11

Do you have a choice when calculating value?

No

12

What are incentives?

Motivations for taking an action. They can be material, moral, or physical

13

How do incentives motivate people?

By appealing to their self interest