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Final

ECO 2013 Lecture Notes - Lecture 4: Sunk Costs, Opportunity Cost, Absolute AdvantageExam


Department
Economics
Course Code
ECO 2013
Professor
Eric Levy
Study Guide
Final

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rational behavior
____________________ is making choices to achieve goals in the most
effective way possible
What are the wants and constraints of those involved? (scarcity) What are the
trade offs? (opportunity costs) How will others respond? (incentives) Why isn't
everyone already doing it? (efficiency)
What are the four questions economists ask when breaking down problems?
Include the type of question that it pertains to.
scarcity
________________ is the condition of wanting more than we can get with
available resources
true cost/opportunity cost
The _____________________ of something is not just the amount you have
to pay for it but also the opportunity you lose to do something else instead
opportunity cost
_________________ is the value of what you have to give up in order to get
something
marginal decision making
_____________________________ is the idea that rational people
compare the additional benefits of a choice against the additional costs without
considering related benefits and costs of past choices
sunk costs
______________________ are costs that have already been incurred and
cannot be recovered
Wants and constraints
Which two variables should you know before you know the trade offs of
something?
the collective reaction to a changing trade off
What is a central idea in economics?
incentive
_______________________ is something that causes people to behave in a
certain way by changing the trade offs they face
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disincentive
____________________ makes people less likely to do something
how others will respond
Asking ____________________________________ can help prevent bad
decisions by predicting the undesirable side effects of a change in prices or
policies
collateral
__________________ is a possession pledged by a borrower to a lender
efficiency
____________________ is the use of resources in the most productive way
possible to produce the goods and services that have the greatest total economic
value to society
resource
A __________________ is anything that can be used to make something of
value
innovation, market failure, intervention, goals other than profit
What are four things to consider if the economy isn't functioning normally and
you're wondering why something hasn't been done before?
economic analysis
___________________ requires us to combine theory with observations and
to subject both to scrutiny before drawing conclusions
correlation
____________________ is a consistently observed relationship between two
events or variables
positively correlated
If both events tend to occur at the same time or move in the same direction, we
say they are ____________________________.
negatively correlated
If one event or variable increases while a related event or variable decreases and
the two go in opposite directions, we say they are
_____________________________.
uncorrelated
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