| A | B |
|---|
| trade-off | the act of giving up one benefit in order to gain another greater benefit |
| guns or butter | a phrase expressing the idea that a country that decides to produce more military goods (guns) has fewer resources to produce consumer goods (butter) and vice versa |
| opportunity cost | the most desirable alternative given up as the result of a decision (your 2nd. choice) |
| thinking at the margin | the process of deciding whether to do or use one additional unit of some resource |
| cost/benefit analysis | a decision-making process in which you compare what you will sacrifice and gain by a secific action |
| marginal cost | the extra cost of adding one more unit |
| marginal benefit | the extra benefit of adding one more unit |
| production possibilities curve | a graph that shows alternative ways to use an economy's productive resources |
| production possibilities frontier | a line on a production possibilities curve that shows the maximum possible outut an economy can produce |
| efficiency | the use of resources in such a way as to maximize the output of goods and services |
| underutilization | the use of fewer resources than an economy is capable of using |
| law of increasing costs | an economic principle which states that as production shifts from making one good or service to another, more and more resources are needed to increase production of the second good or service |
