Page 19 1.2. what are five foundations of economics? calvin and hobbes run a company that sells wallet chains and wallet decals. calvin is faster at making decals than chains, and hobbes is faster at making chains than decals. which statements accurately describe the situation?

Five Foundations of Economics

Incentives

Trade-Offs or Economic Thinking

Opportunity Cost

Marginal Thinking

Trade Creates Value

Incentives: Aspects that inspire you to performance or to employ effort.

Opportunity Cost: The highest-valued substitute test that essential be surrendered in order to acquire something else.

Marginal Thinking: Requires decision-makers to appraise whether the advantage of one more unit of somewhat is larger than its cost.

Economic Thinking: Contains a decisive assessment of the accessible chances to make the best result possible.

Trade: The intentional altercation of goods and services among two or more parties.

Company productivity will be maximized if Calvin creates all the signs and Hobbes creates all the chains.

Hobbes has advanced opportunity cost of manufacture decals than that of Calvin

Calvin has a proportional advantage for manufacture decals.

Explanation:

It is an instance of comparative advantage and Calvin can create decals more productively than that of Hobbes and Hobbes can deliver chains more effectively than that of decals. In this way, Calvin has lower opportunity cost for Decals, and Hobbes has lower opportunity cost of delivering chains. It makes Calvin to have similar bit of leeway in making decals and Hobbes has near favorable position in making chains.

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