Micro Chapter 1 Quiz

Exchanges taking place in a market system:

are voluntary.

An equilibrium outcome is one in which:

no one has as incentive to change his or her decisions or behavior.

If market failures exist, the market can become efficient when:

the government intervenes to improve society's welfare.

Most individuals choose careers in which they specialize in producing only one type of good or service, yet as consumers they have access to a wide variety of goods and services. What principle allows for this?

trade

Which one of the following statements is not true of a market economy?

A central planning authority makes decisions about production and consumption.

Economists would most likely agree with which one of the following statements?

People usually exploit opportunities to make themselves better off.

Economists would most likely disagree with which of the following statements?

Resources and inputs used in production are unlimited.

Economists generally agree that people are most likely to change their behavior when they:

are given incentives to do so.

The purpose of an economic system is to:

allocate scarce resources.

The condition of scarcity means that:

choices must be made in the allocation of productive resources.

An economic system is in __________ when no individual would be better off by making a different choice.

equilibrium

An economy is __________ if it has exploited all opportunities to benefit someone without making anyone else worse off.

efficient

Macroeconomics is the branch of economics studying:

fluctuations in the overall level of business activity.

Adam Smith used the idea of the invisible hand to refer to the ability of market economies to:

harness the power of individual self-interest for the good of society as a whole.

The focal point of economic inquiry is:

individual choice.

After finishing high school, LeBron James decided to enter the NBA rather that going to college to begin his studies to become a doctor. This choice between the two careers can best be described by:

opportunity cost.

Market failure results when the:

pursuit of individual self-interest leads to bad results for society as a whole.

In his book The Wealth of Nations, Adam Smith used the example of pin-making to illustrate the advantages of:

specialization.

An opportunity cost arises:

whenever any choice is made.

Economic theory asserts that people will behave in ways that:

will enhance their own overall well-being.