Economic way of thinking

Lessons

• Introduction
  Economic Way of Thinking Overview:
  a)

  Rational Choices

  • Comparing Benefit and Cost
  • Net Benefit = Benefit - Cost
  
  
  b)

  Cost and Benefit

  • Cost: the opportunity cost of something
  • Benefit: the gain or pleasure that it brings
  
  
  c)

  Choices are Made at the Margin

  • An edge from which a choice is made
  • Marginal Benefit and Marginal Cost
  • MB = MC
  
  
  d)

  Respond to Incentives

  • Choices respond to incentives
  • Incentives is a reward or penalty
  • Encourages or Discourages action
  
  

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• 1.
  Understanding the 5 Key Ideas
  Net benefit can be calculated by using the formula:
  a)

  Benefit - Cost
  
  
  b)

  Benefit + Cost
  
  
  c)

  Cost - Benefit
  
  
  d)

  Benefit
  
  

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• 2.
  The maximum benefit can be found when
  a)

  MB > MC
  
  
  b)

  MB < MC
  
  
  c)

  MB ≠ MC
  
  
  d)

  MB = MC
  
  

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• 3.
  Making rational choices will lead us to respond to _________________.
  a)

  Costs
  
  
  b)

  Benefits
  
  
  c)

  Margins
  
  
  d)

  Incentives
  
  

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• 4.
  When the Marginal Benefit is great than the Marginal Cost, then we want to:
  a)

  Increase the unit
  
  
  b)

  Decrease the unit
  
  
  c)

  Let the unit stay the same
  
  
  d)

  Examine the Net Benefit
  
  

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