Podcast
Questions and Answers
What do people have in economics?
What do people have in economics?
- Unlimited economic wants
- Limited resources
- Both A and B (correct)
- None of the above
What is one major part of the opportunity costs of one's decision to go to college?
What is one major part of the opportunity costs of one's decision to go to college?
full-time job that one could have gotten instead of going to college
What does economic analysis assume about behavior?
What does economic analysis assume about behavior?
rational or purposeful behavior
How can marginal cost be defined?
How can marginal cost be defined?
Jane's opportunity cost of producing 1 pound of corn is ______ pound(s) of green beans.
Jane's opportunity cost of producing 1 pound of corn is ______ pound(s) of green beans.
What does it mean if an individual has a comparative advantage in the production of a good?
What does it mean if an individual has a comparative advantage in the production of a good?
Sophie and Ruby agree on a price of $45 for a used economics textbook. The gains from trade for Sophie equals ______ and the gains from trade for Ruby equals _______.
Sophie and Ruby agree on a price of $45 for a used economics textbook. The gains from trade for Sophie equals ______ and the gains from trade for Ruby equals _______.
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Study Notes
Economic Wants vs. Resources
- Individuals possess unlimited economic wants, yet face constraints due to limited resources.
Opportunity Cost of Education
- A significant component of the opportunity cost when choosing college post-high school is the income from a full-time job foregone.
Rational Economic Behavior
- Economic analysis is based on the assumption that people act rationally, aiming to make decisions that enhance their overall well-being.
Definition of Marginal Cost
- Marginal cost is defined as the incremental change in cost associated with producing one additional unit of output.
Opportunity Cost in Production
- Jane's opportunity cost for producing 1 pound of corn is equivalent to the production of 1 pound of green beans.
Comparative Advantage
- When an individual holds a comparative advantage in production, they have the lowest opportunity cost associated with producing that good.
Gains from Trade Example
- In a transaction where Sophie sells her economy textbook for $45 (her willingness to sell being $30 and Ruby's willingness to pay $60), both Sophie and Ruby realize a gain from trade of $15 each.
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