Microeconomics, Chapter 1-2 terms, Bruce McClung

question

Microeconomics is best defined as the study of

answer

how people make choices under the conditions of scarcity and the results of the choices.

question

Scarcity principle

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choices must be made.

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Cost-benefit principle indicates that an action should be taken

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if the extra benefit is greater than or equal to the extra costs.

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Opportunity costs of an activity is the value of

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the next-best alternative forgone.

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Sunk Cost

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the cost that we can not avoid whether or not an action is taken.

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Having a comparative advantage in a particular task means that

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you give up less to accomplish that task than do others.

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Failure to apply the principle of comparative advantage will result in

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smaller total output.

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Production Possibilities Curve shows

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the maximum production of one good for every possible production level of the other good.

question

The slope of any production possibilities curve is _________ because _________.

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negative; to produce more of one good means less production of the other

question

According to the principle of increasing opportunity cost, expanding production requires using resources in which order:

answer

start with the resource with the lowest opportunity cost and proceed to the higher opportunity cost resources.

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Rational, Optimizing Individual (ROI)

answer

is an individual who faces resource limitations and possesses preferences, makes choices to optimize his economic well-being.

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Opportunity Cost

answer

is the next most valuable choice not selected.

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Absolute Advantage

answer

means another person can produce more output in a given time period than the other person.

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Rule of Comparative Advantage

answer

proposes that everyone is better off concentrating on those activities for which they have a comparative advantage, the lowest opportunity costs.

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Rule of Increasing Opportunity Cost

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indicates when the production of a good or service is increased, the resources with the lowest opportunity costs should be used first, followed by the resources with the next lowest opportunity costs.

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Capital goods

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man-made resources

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Consumer goods

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goods or services whose final consumption rests with the consumer; items will never be used by a firm to produce something else.

1 of 17

question

Microeconomics is best defined as the study of

answer

how people make choices under the conditions of scarcity and the results of the choices.

question

Scarcity principle

answer

choices must be made.

question

Cost-benefit principle indicates that an action should be taken

answer

if the extra benefit is greater than or equal to the extra costs.

question

Opportunity costs of an activity is the value of

answer

the next-best alternative forgone.

question

Sunk Cost

answer

the cost that we can not avoid whether or not an action is taken.

question

Having a comparative advantage in a particular task means that

answer

you give up less to accomplish that task than do others.

question

Failure to apply the principle of comparative advantage will result in

answer

smaller total output.

question

Production Possibilities Curve shows

answer

the maximum production of one good for every possible production level of the other good.

question

The slope of any production possibilities curve is _________ because _________.

answer

negative; to produce more of one good means less production of the other

question

According to the principle of increasing opportunity cost, expanding production requires using resources in which order:

answer

start with the resource with the lowest opportunity cost and proceed to the higher opportunity cost resources.

question

Rational, Optimizing Individual (ROI)

answer

is an individual who faces resource limitations and possesses preferences, makes choices to optimize his economic well-being.

question

Opportunity Cost

answer

is the next most valuable choice not selected.

question

Absolute Advantage

answer

means another person can produce more output in a given time period than the other person.

question

Rule of Comparative Advantage

answer

proposes that everyone is better off concentrating on those activities for which they have a comparative advantage, the lowest opportunity costs.

question

Rule of Increasing Opportunity Cost

answer

question

Capital goods

answer

man-made resources

question

Consumer goods

answer

goods or services whose final consumption rests with the consumer; items will never be used by a firm to produce something else.

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