Mod 4 ECO2000
Why do supermarkets stock thousands of items that people enjoy?
Competition, self-interest, and market prices influence the supermarkets' decisions on which items to stock
The U.S. government subsidizes the production of ethanol from corn and requires gasoline to contain a specific percentage of ethanol. What are the unintended consequences of this program? higher corn prices higher prices for cornbread and tortillas, products made from corn lower prices for gasoline because corn is a renewable resource
I and II
The income and living standard of a country will generally improve when property rights are protected. jobs are protected. banks are protected.
I only
Which of the following is/are a source of economic progress? I. Improvements in technology II. A legal system that protects individuals and markets III. Improvements in human capital
I, II, and III
Which of the following is a predictable, secondary effect of a sharp increase in gasoline prices?
Producers will increase the production of fuel-efficient cars.
Which of the following is a major implication of the invisible hand concept?
When directed by competitive market prices, the actions of self-interested individuals will tend to promote overall economic prosperity.
Higher standards of living are the result of
an increase in the availability of goods and services that people value.
During 2007-2008, the price of gasoline increased from approximately $1.50 to $4.00 per gallon. As a result, the
demand for gas guzzling automobiles, such as the Hummer, decreased, causing their price to decline.
Economic progress comes primarily through
entrepreneurial action directed by competitive markets
The invisible hand principle indicates that competitive markets can help promote the efficient use of resources
even when each market participant cares only about their own self-interest rather than about the overall efficiency of resource use.
If a nation wants to get the most out of its resources, each productive assignment should be carried out by those persons who
have a comparative advantage in the productive activity
Many Americans have been hurt by recent economic events. Raising the minimum wage is the best policy to improve the wages and employment opportunities of Americans. This argument is
incorrect because while some people will receive higher wages, others will experience less employment and fewer training opportunities.
When individuals increase their personal wealth through production and exchange, they
increase the wealth of others
Voluntary trade promotes economic progress because
it moves goods, services and resources from people who value them less to individuals who value them more.
Which of the following is most important for the achievement of higher income levels and living standards?
production of additional goods and services that people value highly relative to the cost of their production
Economic progress
reflects that people are achieving higher income levels and living standards.
In a free market economy, current consumption, saving and investment decisions
shape the future course of the national economy.
Adam Smith's invisible hand principle stresses the tendency of
the competitive market process to direct self-interested individuals into activities that enhance the economic welfare of society.
Mediocre economists often consider only the immediate direct effects of a change, whereas a good economist will also consider indirect effects that may only become observable over time. This statement most clearly emphasizes
the importance of secondary effects
