Ch. 7

• What is the concept of the margin in economics?

  The margin explains decision-making based on small changes.
• What is total utility?

  Total utility is the overall satisfaction from consumption.
• What is marginal utility?

  Marginal utility is the additional satisfaction from one more unit.
• What does diminishing marginal utility refer to?

  Diminishing marginal utility means less satisfaction from additional units.
• How does diminishing marginal utility affect the demand curve?

  It causes the demand curve to slope downwards.
• How do you calculate marginal values?

  Marginal values are calculated by finding the change in utility.
• What is economic efficiency?

  Economic efficiency occurs when productive and allocative efficiency are achieved.
• What is productive efficiency?

  Productive efficiency is using resources to maximize output.
• What is allocative efficiency?

  Allocative efficiency occurs when production matches consumer preferences.
• What are the key terms related to utility in economics?

  • Utility: Satisfaction from consuming goods/services
  • Marginal principle: Decisions based on small changes
  • Rational decision making: Maximizing objectives by equating marginal benefit and cost
  • Law of diminishing marginal utility: Decreasing satisfaction from additional units
  • Marginal utility: Additional satisfaction from one more unit
  • Price signal: Price information guiding market equilibrium
  • Allocative efficiency: Production matches consumer preferences
  • Economic efficiency: Achieving both productive and allocative efficiency
• How does one decide how many pieces of chocolate to eat?

  By eating until no more benefit is gained.
• What is the relationship between marginal benefit and marginal cost?

  Decisions are made by weighing marginal benefit against marginal cost.
• What happens to marginal utility as more chocolate is consumed?

  Marginal utility decreases with each additional piece.
• How is utility used in economics?

  Utility quantifies subjective preferences in consumption decisions.
• When is total utility maximized?

  Total utility is maximized when marginal utility is zero.
• What is rational choice theory?

  It assumes consumers behave rationally to maximize satisfaction.
• How do consumers respond to lower prices?

  Consumers increase demand when prices decrease.
• How do firms respond to higher profits?

  Firms increase supply when profits rise.
• What is the role of price signals in economics?

  Price signals guide producers and consumers in the market.
• What is the impact of a poor coffee harvest on equilibrium price?

  A poor harvest raises the equilibrium price.
• What is the definition of allocative efficiency in terms of supply and demand?

  Allocative efficiency occurs when supply equals demand.
• What is productive efficiency in terms of resource use?

  Productive efficiency is using all resources to maximize output.
• How can points of productive efficiency be identified on a graph?

  They lie on the production possibility frontier.
• What is required to reach an unattainable point on a production possibility frontier?

  Improvement in technology or resources is needed.
• What are the factors that could lead Sandy to increase the price per customer in her restaurant?

  • Increase in ingredient costs
  • Higher demand for buffet services
• What is the significance of the marginal utility in Sandy's buffet restaurant?

  Marginal utility decreases as customers eat more food.
• How does Sandy's pricing strategy relate to marginal utility?

  Sandy sets prices based on expected marginal utility per customer.
• What is the purpose of the textbook questions at the end of the material?

  They reinforce understanding of key concepts.
• What is the relationship between total utility and the sixth plate of food in Sandy's restaurant?

  Total utility may decrease after the sixth plate is consumed.