Economic way of thinking
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- Economic Way of Thinking Overview:
- Rational Choices
- Comparing Benefit and Cost
- Net Benefit = Benefit - Cost
- Cost and Benefit
- Cost: the opportunity cost of something
- Benefit: the gain or pleasure that it brings
- Choices are Made at the Margin
- An edge from which a choice is made
- Marginal Benefit and Marginal Cost
- MB = MC
- Respond to Incentives
- Choices respond to incentives
- Incentives is a reward or penalty
- Encourages or Discourages action
- Understanding the 5 Key Ideas
Net benefit can be calculated by using the formula:
- Benefit - Cost
- Benefit + Cost
- Cost - Benefit
- The maximum benefit can be found when
- MB > MC
- MB < MC
- MB ≠ MC
- MB = MC
- Making rational choices will lead us to respond to _________________.
- When the Marginal Benefit is great than the Marginal Cost, then we want to:
- Increase the unit
- Decrease the unit
- Let the unit stay the same
- Examine the Net Benefit