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Chpt1 Thinking like an Economist

govtana Economics Inglés 10 fichas

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1the COST-BENEFIT approachIf B(x)>C(x), do x; otherwise don't. When using this test, you should express B and C in ABSOLUTE euro terms.
2RESERVATION PRICEThe minimum price. The price at which a person would be indifferent between doing x and not doing x.
B(x)=C(x)
3OPPORTUNITY COSTThe value of all that must be SACRIFICED to do the activity.
4SUNK COSTSCosts that are beyond recovery at the moment the decision is made. These costs should be ignored in the C-B analysis.
5MARGINAL COSTThe increase in Total Cost that results from carrying out one additional unit of an activity.
6MARGINAL BENEFITThe increase in Total Benefit that results from carrying out one additional unit of an activity.
7AVERAGE BENEFIT/COSTThe Average Benefit/Cost of undertaking n units of an activity is the Total Benefit/Cost of an activity divided by n.
8EXTERNAL COSTSA cost that falls on people who are not directly involved in the activity.
9POSITIVE QUESTIONA question about a consequence of specific policies or institutional arrangements.
10NORMATIVE QUESTIONA question about what policies or institutional arrangements lead to the best outcomes.