ECON 200 Inquizitive CH 1 – Flashcards

Evaluating the cost and benefit of one more unit of something. (Considering "one more unit" means choosing between two outcomes that differ by only one unit's worth of production or consumption.)

1. Sources in limited supply 2. People with wants and needs 3. Decisions about how to allocate resources

"if the carrot doesn't work, try the stick"

Negative- a city will fine a homeowner if the lawn around the house is overgrown, a boy faces timeout if he doesn't clean his room Positive- An electronics store employee earns a commission on each smartphone she sells, In a class, everyone's starting grade is a 0, and students earn points for answering questions correctly.

Microeconomic-A team of three partners starts a new ad agency, A laid-off worker enrolls in job re-training Macroeconomic- the inflation rate rises, Nationwide, new housing construction declines for the third month in a row.

true (Because time, energy, and other resources are scarce, no matter what choices people make, they are always giving up one thing to obtain another. Because all options have opportunity costs, nothing is free.)

1. Each worker does whatever involves the lowest opportunity cost, compared with other tasks. (Specialization is based on comparative advantage.) 2. Each worker does whatever he or she does best, compared with other tasks. (This relates to comparative advantage, which is the basis of specialization.)

miss concert- dinner with sorority sisters (Dinner is the second-most-preferred option, which means that the opportunity cost of performing this activity is the preferred option—that is, the concert.) dinner with mom (The concert is the highest-valued alternative to shopping.) study for exam (The concert is the highest-valued alternative to studying.) miss sorority dinner- concert (Dinner is the second-best option, which means that it is the best available alternative to the concert.)

The coach is weighing a slightly INCREASED risk of losing against a slightly decreased risk of injury to the star quarterback. This weighing of TRADE-OFFS is an example of MARGINAL THINKING, because the star quarterback was in for most of the game, and the coach's decision concerns SMALL shifts in probabilities with the game nearly over.

1. Company output will be maximized if Calvin makes all the decals and Hobbes makes all the chains. (Each partner should focus on the task where he has a comparative advantage.) 2. Calvin has a comparative advantage for making decals. (If someone has a comparative advantage in producing something, that means he also has a lower opportunity cost in producing that object.) 3. Hobbes has a higher opportunity cost for making decals than Calvin.(If Hobbes has a higher opportunity cost for making decals, then Calvin has a lower opportunity cost for making decals. What does that imply about Calvin's comparative advantage?)

The increased hourly wage acts as a(n) DIRECT INCENTIVE to work MORE hours. The wage increase causes the opportunity cost of reading at home to INCREASE.

1. Alicia spends most of her time doing liver transplants. (Because Alicia has a lower opportunity cost for performing liver transplants, she will be able to see more patients than if her time were allocated to heart surgeries.) 2. Christine spends most of her time doing heart surgeries. (Performing heart surgery is Christine's comparative advantage, so she can see more patients by focusing on heart surgery.)

Economics (Because Arshad cares about his midcareer salary rather than starting salary and economics has the highest midcareer salary amongst his options, economics is the highest valued alternative and, thus, represents the opportunity cost.)

1. Pharmaceutical companies reduce their estimate of the profitability of new drug research. 2. Pharmaceutical companies are less willing to invest in drug development. 3. Fewer new drugs are brought to market. (The slowed pace in the development of new drugs would be an unintended, but not surprising, consequence of limiting the incentive for drug companies to bring new drugs to market.)

Iowa has a COMPARATIVE ADVANTAGE in producing corn. We would expect Texas to produce COTTON and trade it for CORN. If these states do not trade, cotton and corn production will be LOWER than if the states did trade.

False (When the price received is lower than the seller's value (or cost), that seller will stay out of the market.)

(This is the lowest point on the graph. It comes just before July 1, which was the date when families were eligible for the baby bonus.)

Direct incentives (have an immediate, easily-predicted connection to an action) Indirect incentives (the connection between an action and the benefit or cost to the agent is not obvious and may be unintentional.) A positive incentive is in effect a reward for doing something. A negative incentive is, in one form or another, a punishment for doing something and thereby a motive not to do it.