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Chapter 1  1. We make choices based on opportunity cost because resources are limited. Since we have scarce resource, we choose a side that is best for us. 2. Governments sometimes help the economy when there is a market failure such as externality or market power. 3. Inflation occurs when the government prints too much money, which decreases the value of money. 4. Rational people think at the margin and base their decisions where marginal benefit exceeds the marginal cost. 5. Specialization is when a country focuses its resources on one product, which increases the efficiency.  Chapter 5 1. Since sailboat is a luxury, it's elastic. Foods are necessities so they're inelastic. 2. Since peanut butter and jam are complements, they have a negative sign. As coke and Pepsi are substitutes, they have a positive sign. 3. Goods with substitutes are more elastic because if the price of a good with substitutes increases, consumers have more options to choose among those substitutes, reducing the quantity of that good. 4. The total revenue increases because when the demand is elastic, the price and total revenue move in an opposite direction.

Chapter 9 1. When the country exports goods, producers are the winners because the producer surplus increases. Since producers can sell the goods at higher price, they are better off than the consumers. The consumers are the losers because they have to buy the goods at higher price. 2. Tariff helps the producers when the country imports too much goods because it reduces the quantity of good imported. 3. Dead weight loss appears because tariff is a kind of the tax that decreases the quantity of the good. 4. Trade is restricted due to several reasons such as to protect the domestic producers from competition.

Chapter 13 1. The marginal cost decreases at first because when the quantity of output is small, less input is used. 2. Marginal cost intersects ATC at efficient scale. 3. In short run, there is at least one fixed cost whereas there is no fixed cost in long run. 4. Economies of scale occurs because at higher production, firms benefit from the increased size that they can focus on specialization. Therefore, the ATC decreases as the quantity increases due to the specialization.

Chapter 17 1. Firm gains positive profit when the price is above/higher than the ATC. 2. Price is tangent to ATC. 3. LR monopolistic competition has excess capacity and higher price than LR perfect competition. 4. It's a negative externality because new firm's entry other firms lose profits and consumers. It also reduces the price of the product. New firm's entry isn't beneficial to other existing firms. 5. They induce the firms to produce at high quality because firms have reputations from those brand names.