Economics 101 Exam Study Set |100% Correct Answers|

Economics 101 Exam Study Set |100% Correct Answers| economics *Ans* the study of how people make choices under conditions of scarcity and of the results of those choices for society rational person *Ans* someone with well-defined goals who tries to fulfill those goals as best as he or she can economic surplus *Ans* the benefit of taking any action minus its cost opportunity cost *Ans* the value of the next-best alternative that must be foregone in order to undertake the activity positive economics *Ans* economic analysis that offers cause-and-effect explanations of economic relationships; the propositions, or hypotheses, that emrege from positive economics can, in principle, be confirmed or refuted by data; in principle, data can also be used to measure the magnitude of effects predicted by positive economics normative economics *Ans* economic statements that reflect subjective value judgments and are based on ethical positions The Scarcity Problem *Ans* Having to make a choice- more of one good thing means having less of another The Cost-Benefit Principle *Ans* An individual will be better off taking an action if, and only if, the extra benefits from taking the action are greater than the extra costs time value of money *Ans* the fact that a given dollar amount today is equivalnet to a larger dollar amount in the future, because the money can be invested in an interestbearing account in the meantime sunk cost *Ans* a cost that is beyond recovery at the moment a decision must be made marginal cost *Ans* the increase in total cost that results from carrying out one additional unit of an activity marginal benefit *Ans* the increase in total benefit that results from carrying out one more unit of an activity average cost *Ans* total cost of undertaking n units of an activity divided by n average benefit *Ans* total benefit of undertaking n units of an activit