Midterm 1 - Midterm 1 Econ 002 Chap. 1-4 Chapter 1 Marginal...

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Midterm 1 Econ 002 Chap. 1-4 Chapter 1 Marginal Thinking – the smaller picture, the short term instead of everything Positive Analysis – testable “facts” Normative Analysis – “opinions” Scarcity – limited resources and unlimited wants/ desires - People respond to incentives, since what we gain or lose guides our decisions Free goods – unlimited resources free of charge (low cost) Sunk Cost – money already spent that you cannot get back when you compare the M.C. and M.B. Rationality – in economics people are assumed to be rational and that guides choice Productive efficiency – you make as much with given inputs (using lowest resources) Allocative efficiency – resources are devoted to something as long as the value of the object is greater Chapter 2 Opportunity Cost – highest valued alternative forgone in order to do something Example: You give up something that costs $20 but you value it at $30 So the O.C. would be 30-20 = $10 Production Possibilities Frontier
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This note was uploaded on 03/30/2008 for the course ECON 002 taught by Professor Mcleod,markpehlivan,ayseozg during the Spring '08 term at Penn State.

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Midterm 1 - Midterm 1 Econ 002 Chap. 1-4 Chapter 1 Marginal...

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