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Introductory Microeconomics (ECO 2023) Chapter 1 Homework

Sandra Watson
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microsoft charges a price of​ $599 for a copy of windows 7. is this pricing decision​ rational?

The University of Texas at San Antonio

Introductory Microeconomics (ECO 2023)

Chapter 1
1. When the federal government crafts environmental policies that make it less expensive
for firms to follow green initiatives,
a. The policies are consistent with economic incentives—economists emphasize that
consumers and firms consistently respond to economic incentives, they choose the
option that provides the most money. So, ceteris paribus, (everything else equal)
people choose the option that returns the highest net monetary benefits.
2. Economics is the study of the choices people make to attain their goals, given their scarce
3. Economists use the word marginal to mean an extra or additional benefit or cost of a
decision. An optimal decision occurs when
a. Marginal benefit equals marginal cost—economists use the word marginal to
mean an extra or additional benefit or cost of a decision. Economists reason that
the optimal decision is to continue any activity up to the point where the marginal
benefit equals the marginal cost—in symbols, where MB=MC. Marginal analysis
involves comparing marginal benefits and marginal costs.
4. A market is a group of buyers and sellers of a good or service and the institution or
arrangement by which they come together to trade.
5. Microsoft charges a price of $599 for a copy of Windows 7. Is this pricing decision
a. When we assume the managers at Microsoft have used all available information
and have weighed all known benefits and costs, we are assuming rationality—
rationality is the assumption economists make that consumers and firms use all
available information as they act to achieve their goals. Rational individuals
weigh the benefits and costs of each action, and they choose an action only if the
benefits outweigh the costs.
6. One of the basic facts of life is that people must make choices as they try to attain their
goals. This unavoidable fact comes from a reality an economists calls



Introductory Microeconomics (ECO 2023) Chapter 1 Homework

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