ECN 104 Study Guide - Final Guide: Marginal Utility, Externality, Opportunity Cost

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Ecn review questions: give three examples of important tradeoffs that you face in your life. Money spent on past-times/hobbies vs money saved up for future tuition. Opportunity cost is what you are willing to give up in order to get something. Here, the marginal benefits of the glass of water depend upon the surrounding environment. Incentives are positive/negative effects which cause people to do one thing or another. Trade allows the parties involved to focus on what they are best at producing, and trade excess of that in exchange for something else. Market failure occurs when the allocation of resources is not efficient. Inflation is the overall increase in prices in an economy. The most common cause of inflation is growth in the quantity of money available, resulting form when the government creates a large quantity of money: how are inflation and unemployment related in the short run.

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