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Principles of Microeconomics 1. People make decisions to maximize their personal benefit 2. Rational people think at the margin, making small changes to their current behavior 3. Trade-offs must occur to get what people want 4. Opportunity cost is the foregone value of the next highest alternative 5. Trade betters everyone because people can specialize 6. “The Invisible Hand†is the idea that by acting on their own self-interests, people benefit society 7. An incentive is a motivation to take a certain action Production Possibilities Frontier Depicts an economy of two goods
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