Studied by 5 peopleRival resource
resource that can only be used once by a single person.
non rival resource
a resource that can be used by individuals simultaneously.
positive incentive
expected reward
negative incentive
expected punishment
positive economics
economic analysis based on facts
normative economics
economic analysis based on morals
cost benefit analysis
process of accounting for all potential losses and gains when making a trade off.
net benefit
total benefit - total cost
marginal analysis
examination of a change in additional benefit and change in additional cost from repeated additional action.
marginal benefit
additional benefit from additional unit
marginal cost
additional cost from one additional unit
explicit cost
out of pocket payments that are actually made
implicit cost
value of benefits that are actually made
constant opportunity cost
same opportunity cost between all points in a ppc.
law of increasing opportunity cost
as you produce more of a good, the opportunity cost will increase. resources aren’t easily adaptable.
Absolute advantage
ability to produce more of a good/service with fixed resources
comparative advantage
ability to produce more of a good/service at a lower opportunity cost
marginal utility
additional satisfaction from each additional unit consumed.
law of diminishing marginal utility
additional utility of spending one more dollar on that good or service
consumption possibilities
shows set of possible consumption bundles.
optimal consumption bundle
number of each good that consumed in order to maximize one’s utility.
utility maximization/ optimal consumption rule
to maximize utility, marginal utility per dollar sent must be equal for all goods
output problems
focus on data associated with what each party can produce with a given set of resources, as well as who should specialize in each good.
input problems
focus on how much of a resource is needed to produce one unit of a particular good or service.
How to find total cost?
Multiply cost per unit by each quantity.
How to find marginal cost?
Subtract first total cost with the following total cost, this will give you the marginal cost for the second and not first.
How to find marginal benefit?
Find difference of first total benefit and second total benefit (subtract) this will give you the marginal benefit for the second row and not the first..
The bigger the *blank* the better
net benefit
marginal benefit should be greater than
marginal cost
produce up to where
marginal benefit equals marginal cost.
how to find total net cost
find marginal utility/marginal benefit, then find total cost (price per unit times quantity) and subtract difference, stop until total benefit is bigger than marginal cost with that subtract the difference with total cost.
Producing at a point outside the curve is….
impossible because we do not have the resources to produce there, yet.
producing at a point on the curve is…
efficient because we are using all of our resources to the maximum of our ability.
producing at a point inside the curve is…
inefficient because we are not using all of our resources to the maximum of our ability.
Bowed out ppcs
indicates that there are increasing opportunity costs of production.
Note
Flashcard