All Flashcards
In a graph of MB and MC, what does the intersection point represent?
The optimal quantity where total benefit is maximized (MB = MC).
On a MB/MC graph, what does the area where MB > MC indicate?
Consuming more of the good will increase total benefit.
On a MB/MC graph, what does the area where MB < MC indicate?
Consuming less of the good will increase total benefit.
How would a change in price affect the MC curve?
An increase in price would shift the MC curve upward.
How would increased consumer preference affect the MB curve?
Increased consumer preference would shift the MB curve upward.
If the MC curve shifts upward, what happens to the optimal quantity?
The optimal quantity decreases.
If the MB curve shifts upward, what happens to the optimal quantity?
The optimal quantity increases.
What does the area under the MB curve represent?
Total Benefit.
What does the area under the MC curve represent?
Total Cost.
How does the steepness of the MB curve relate to diminishing marginal utility?
A steeper MB curve indicates a faster rate of diminishing marginal utility.
What is Cost-Benefit Analysis?
A method to evaluate if a project or policy's benefits outweigh its costs.
Define Explicit Costs.
Direct, out-of-pocket monetary costs.
Define Implicit Costs.
Indirect costs, also known as opportunity costs. The value of the next best alternative you give up.
What is Total Benefit?
The overall benefit from consuming a certain quantity of goods or services.
What is Total Cost?
The overall cost from consuming a certain quantity of goods or services.
Define Marginal Benefit.
The additional benefit from consuming one more unit of a good or service.
Define Marginal Cost.
The additional cost from consuming one more unit of a good or service.
What are Utils?
Imaginary units of utility or satisfaction used to quantify how much we like something.
Define Diminishing Marginal Utility.
As you consume more of a good, the additional satisfaction you get from each additional unit decreases.
What is Marginal Surplus?
The difference between marginal benefit (MB) and marginal cost (MC).
What are the differences between accounting profit and economic profit?
Accounting profit considers only explicit costs, while economic profit considers both explicit and implicit costs.
Differentiate between total utility and marginal utility.
Total utility is the overall satisfaction from consuming a quantity of goods, while marginal utility is the additional satisfaction from consuming one more unit.
What is the difference between a need and a want in economics?
A need is essential for survival, while a want is something desired but not essential.
What is the difference between positive and normative economics?
Positive economics deals with facts and testable hypotheses, while normative economics involves value judgments and opinions.
Compare and contrast short-run and long-run costs.
Short-run costs include both fixed and variable costs, while long-run costs are all variable as firms can adjust all inputs.
What is the difference between consumer surplus and producer surplus?
Consumer surplus is the difference between what consumers are willing to pay and what they actually pay, while producer surplus is the difference between what producers receive and their minimum acceptable price.
Differentiate between fixed costs and variable costs.
Fixed costs do not change with the level of production, while variable costs do.
What is the difference between efficiency and equity in economics?
Efficiency refers to optimal resource allocation, while equity refers to fairness in the distribution of resources.
What is the difference between market demand and individual demand?
Individual demand refers to the quantity a single consumer is willing to purchase at various prices, while market demand is the sum of all individual demands.
Compare and contrast economic growth and economic development.
Economic growth refers to an increase in the quantity of goods and services produced, while economic development involves improvements in living standards, education, and healthcare.