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macsg01 - 1 The Scope and Method of Economics C hapter...

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3 1 The Scope and Method of Economics C hapter objectives: 1. Define economics. 2. State four reasons for studying economics. 3. Distinguish between the concepts of opportunity cost and marginal cost. 4. Define market efficiency in terms of profit opportunities. 5. Make clear the difference between microeconomic and macroeconomic concerns. 6. Distinguish between positive economics and normative economics. 7. Explain the value of the ceteris paribus assumption within the context of economic modeling. 8. State the fallacies discussed in the text, give examples, and explain why such statements are fallacious. 9. State and explain the four criteria used to assess the outcomes of economic policy. 10. Construct and interpret graphs and linear equations. Much of this chapter is devoted to setting out the framework of economics. Don’t be overwhelmed and don’t try to remember it all. Chapter 1 is simply a good place to gather together this information, which will be dealt with more fully as the chapters go by. B RAIN T EASER : An increasing number of basketball players move directly to the NBA draft without graduating from college. Some, such as LeBron James, even go to the NBA straight from high school. James, the first pick in the NBA draft of 2003, went to the Cleveland Cavaliers with whom he signed a three-year, $12.96 million contract. He also signed a $90 million endorsement deal with Nike. What was the opportunity cost for LeBron James of choosing to go directly to the NBA, given that he was eligible for college? S OLUTION : The answer to this and subsequent brain teasers will be found after our discussion of the learning objectives and before the Practice Tests.
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