Chapter 2 - The Key Principles of Economics

Opportunity cost

________ incorporates the notion of scarcity; No matter what we do, there is always a trade- off.

Adam Smith

________ stressed the importance of voluntary exchange as a distinctly human trait.

policy question

A(n) ________ is whether the benefits from a war exceed its opportunity cost.

Production possibilities

________ curve is the set of points on the border between the shaded and unshaded area.

principle of voluntary exchange

The ________ is based on the notion that people act in their own self- interest.

marginal cost

The ___________ is the additional cost resulting from a small increase in the activity.

marginal benefit

The ______________ of an activity is the additional benefit resulting from a small increase in the activity.

nominal value

The __________ of an amount of money is simply its face value.

real value

The _______ of an amount of money is measured in terms of the number of goods the money can buy.