A ECO 110 Study Guide - Midterm Guide: Absolute Advantage, Marginal Cost, Flow Diagram
5 Apr 2016
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Making decisions requires trading of one goal against another. Eiciency vs equality: eiciency is this size of the economic pie and equality is how the pie is divided into slices. Principle 2: the cost of something is what you give up to get it. Opportunity cost: everything involved in what you give up to get that item. Principle 3: raional people think at the margin. A raional decision maker takes an acion if and only if the marginal beneit of the acion exceeds the marginal cost. Marginal: the addiion of one more unit. Principle 5: trade can make everyone beter of. Principle 6: markets are usually a good way to organize economic acivity. Principle 7: governments can someimes improve market outcomes. Principle 8: a countries standard of living depends on its ability to produce goods and services. Principle 9: prices rise when the government prints too much money. Principle 10: society faces a short run trade-of between inlaion and unemployment.
