Exam 2: Eight Powerful Ideas

When considering whether or not to consume a second slice of cake, an individual is following marginal thinking if she compares the total cost of consuming both the first and second slices with their total benefit before making a decision.

An individual has a comparative advantage in production if that individual:​

Economists would predict that if salaries increased for engineers and decreased for MBAs, fewer people than before would go to graduate school in business and more than before would go in engineering, ceteris paribus.

Which of the following is true"

Scarce goods are:​

The opportunity cost of a decision is the value of the best foregone alternative to the decision-maker.

Tom is a castaway who washes up on a remote island. He can kill eight birds per hour or catch ten fish per day. The natives on the island can kill ten birds per day or catch twenty fish per day. The natives have a comparative advantage in:

As student reasons that "If I didn't go to class tonight, I would spend three hours at work where I earn $10 per hour. In addition, my annual parking permit costs the equivalent of $2 per day." The opportunity cost to that student of attending that class this evening is:

Unemployment can be caused by downswings in the business cycle, people changing jobs, different skills needed by employers, or seasonal fluctuations in demand.

The marginal (dollar) cost of an additional plate of food to a patron at an "All-You-Can-Eat" restaurant is:

A permanent change to a much higher price of gasoline would lead us to expect fewer gas guzzlers on the road, ceteris paribus.

Government price controls