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Exam 1

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If nominal GDP is $10 trillion and Price Index (GDP deflator) is 1.0, real GDP is A. $10.00 trillion B. $12.50 trillion C. $8.00 trillion D. $ 5.00 trillion

A. $10.00 trillion

What is the economy's depreciation? A. $15.0 B. $20.0 C. $25.0 D. $30.0

A. $15.0

Why doesn't Utah produce cars? A. Technologically impossible. B. Too far from big markets. C. Opportunity cost is too high. D. Both A and B are correct.

C. Opportunity cost is too high.

According to the Invisible Hand Theorem, the market system will: A. Distribute income correctly. B. Guarantee equality of opportunity. C. Produce goods that people want and demand. D. Eliminate Scarcity.

C. Produce goods that people want and demand.

The primary cause behind the development of Keynesian economics was: A. The Great Depression of 2008 - 2010. B. The Banking Crisis of 1838. C. The Great Depression of the 1930s. D. World War 1.

C. The Great Depression of the 1930s.

Given the following information, what is Aggregate Income? Employee Compensation=$20.0 trillion, Gross Investment=8.0, Net Investment=7.0, Rent=5.0, Transfer Payments=4.0, Interest=5.0, Profits=10.0 A. $40.0 B. $50.0 C. $60.0 D. $70.0

A. $40.0

What is the economy's net exports? A. $5.0 B. - $5.0 C. - $10.0 D. $10.0

A. $5.0

If the nominal interest rate is 3% and inflation is 8%, the real interest rate is A. -5.0% B. 5% C. 3% D. 8%

A. -5.0%

Economics as a discipline A. Is defined more by its methodology than its areas of inquiry. B. Typically assumes that individuals are rational when making decisions. C. Typically assumes that individuals are self interested when making decisions. D. All of the above correct.

A. ???

Which of the following is not associated with Keynesian economics? A. A policy prescription of Laissez Faire. B. The Great Depression. C. A focus on aggregate demand. D. A focus on the short run.

A. A policy prescription of Laissez Faire.

The principle of increasing marginal opportunity cost does not hold in which of the following cases? A. All inputs are equally useful in the production of all goods. B. Some inputs are more useful in the production of certain goods. C. Some inputs are less useful in the production of certain goods. D. Each input is useful in the production of a limited number of goods.

A. All inputs are equally useful in the production of all goods.

Which of the following would shift the U.S. AD curve to the right? A. An increase in government spending. B. A dollar appreciation. C. A crash in the stock market. D. A decrease in consumption spending.

A. An increase in government spending.

Adam Smith's book, The Wealth of Nations: A. Argued in favor of allowing markets to answer the question of what to produce. B. Argued in favor of primarily using political forces to answer the question of how to produce. C. Supported a policy of government intervention into the economy. D. All of the above are correct.

A. Argued in favor of allowing markets to answer the question of what to produce.

The largest component of GDP is: A. Consumption spending. B. Gross investment spending. C. net exports. D. government spending.

A. Consumption spending.

Professor Diamond in his book, Guns, Steel, and Germs, argues that the institutional arrangements that emerged in Europe and allowed European nations to colonize other areas of the globe were primarily due to: A. European geography, animals, and plants. B. European genetics. C. Luck. D. God.

A. European geography, animals, and plants.

In the context of the circular flow model, in which market does the supply and demand for baby formula interact to determine the price of baby formula? A. Goods B. Resources C. Factors D. Both A and B are correct.

A. Goods

Which of the following is not one of the three economic questions faced by all societies? A. How to eliminate scarcity. B. What to produce. C. How to produce. D. Who gets what is produced.

A. How to eliminate scarcity.

An increase in P will, ceteris paribus? A. Increase profits and move the economy up the SAS curve. B. Decrease profits and move the economy down the SAS curve. C. Not effect profits. D. Decrease profits and shift the SAS curve to the left.

A. Increase profits and move the economy up the SAS curve.

Trade: A. Is based on voluntary exchange. B. Requires coercion. C. Allows the world to solve the scarcity problem. D. All of the above are correct.

A. Is based on voluntary exchange.

Which approach is most concerned with the economy's movements away from potential output rather than the level of potential output itself. A. Keynesian. B. Freudian. C. Classical. D. Socialist.

A. Keynesian.

Which approach would argue that expansionary fiscal policy was the correct response to the recession caused by COVID? A. Keynesian. B. Freudian. C. Classical. D. Socialist.

A. Keynesian.

If you make decisions as assumed by economists, you are in college rather than working as a truck driver because you perceive the _____________ of a college degree as greater than the ________________ of a college degree A. Marginal Benefit; Marginal Cost. B. Marginal Cost; Marginal Benefit. C. Total Cost; Total Benefit. D. Total Benefit; Total Cost.

A. Marginal Benefit; Marginal Cost.

Even though 80,000 individuals in the United States wait for kidney transplants and, for a price, there are many individuals who would be willing to supply a kidney, it remains illegal to buy and sell kidneys in the United States. A market for kidneys does not exist because of: A. Political Forces. B. Social Forces. C. Economic Forces. D. Market Forces.

A. Political Forces.

Conceptually, along a given SAS curve, as P increases, A. Profits improve causing firm to produce more. B. Profits improve causing firm to produce less. C. Profits are constant. D. Profits decrease.

A. Profits improve causing firm to produce more.

The U.S. Government's response to the unemployment that emerged in 2020: A. Reflected a Keynesian view of the economy. B. Likely increased the time it took to reduce cyclical unemployment. C. Was consistent with a policy of Laissez Faire. D. All of the above are correct.

A. Reflected a Keynesian view of the economy.

A machinist who loses her job due to imports and cannot find another job due to the lack of jobs for machinists would most likely be classified as which type of unemployment? A. Structural B. Cyclical C. Frictional D. Classical

A. Structural

Typically, birth rates in a nation fall as incomes rise since: A. The marginal cost of having children rises. B. The marginal benefit of having children rises. C. Rich people are more selfish. D. Poor people are more selfish.

A. The marginal cost of having children rises.

A large recession in Europe, a large U.S. trading partner, would most likely cause: A. a decrease in U.S. exports and U.S. AD curve shifts left. B. a decrease in U.S. exports, so the U.S. AD curve shifts right. C. an increase in U.S. exports, so the U.S. AD curve shifts left. D. an increase in U.S. exports, so the U.S. AD curve shifts right.

A. a decrease in U.S. exports and U.S. AD curve shifts left.

If the U.S. Dollar were to depreciate against the Mexican Peso, the U.S. would experience: A. an increase in U.S. exports and a shift right of the U.S. AD curve. B. an increase in U.S. exports and a shift left of the U.S. AD curve. C. a decrease in U.S. exports and a shift right of the U.S. AD curve. D. a decrease in U.S. exports and a shift left of the U.S. AD curve.

A. an increase in U.S. exports and a shift right of the U.S. AD curve.

Two countries that specialize their production based on comparative advantage and then trade with each other will be able to: A. both produce and consume more. B. produce more and consume less. C. produce less and consume more. D. both produce and consume less.

A. both produce and consume more.

When quantity supplied is greater than quantity demanded, prices tend to: A. fall. B. rise. C. stay the same. D. remain constant until the next season.

A. fall.

As of January 2022, the U.S. economy: A. has an unemployment rate below 4.0 percent. B. has 10.0 million cyclically unemployed individuals. C. experiencing no frictional unemployment. D. experiencing no structural unemployment.

A. has an unemployment rate below 4.0 percent.

During the Covid recession, the unemployment rate reached 14.7% or 23 million people in April 2020. This level of unemployment: A. includes some cyclical unemployment. B. comprised of only frictional unemployment. C. comprised of only structural unemployment. D. comprised of only structural and frictional unemployment.

A. includes some cyclical unemployment.

Households are on the: A. supply side of factor markets and the demand side of goods markets. B. demand side of factor markets and the supply side of goods markets. C. supply side of both factor markets and goods markets. D. demand side of both factor markets and goods markets.

A. supply side of factor markets and the demand side of goods markets.

If the price in a market is above its equilibrium level, there will be a: A. surplus and downward pressure on price. B. surplus and upward pressure on price. C. shortage and downward pressure on price. D. shortage and upward pressure on price.

A. surplus and downward pressure on price.

A primary, root source of economic growth over the last 200 years is: A. the development of market economies. B. the collapse of the British Royal Navy. C. the rise and persistency of autocracy. D. the wisdom of Queens, Kings, and all manner of imps and demons.

A. the development of market economies.

The text attributes the growth of economies over the last 200 years largely to: A. the development of markets. B. the discovery of additional resources. C. a decrease in the size of the world population. D. Government social policies.

A. the development of markets.

For a given benefit, a rational person chooses the option that has: A. the lowest opportunity cost. B. the highest opportunity cost. C. the average opportunity cost. D. the highest social status.

A. the lowest opportunity cost.

Households (i.e., consumers): A. ultimately determine the answer to the question, What to produce? B. are on the demand side of factor market and the supply side of goods market. C. are on the supply side of both the factor market and goods market. D. None of the above are correct.

A. ultimately determine the answer to the question, What to produce?

The law of supply states that, other thing equal, as the price of a good goes: A. up, the quantity supplied goes up. B. up, the supply goes down. C. down, the quantity supplied goes up. D. down, the supply goes down.

A. up, the quantity supplied goes up.

Applying the economic decision rule, you would not get the Covid vaccine if you perceived that: A. Marginal benefit to society of you getting vaccinated > marginal cost to you of getting vaccinated. B. Marginal benefit to you of you getting vaccinated < marginal cost to you of getting vaccinated. C. Marginal benefit to society of you getting vaccinated < marginal cost to you of getting vaccinated. D. Marginal benefit to you of you getting vaccinated > marginal cost to you of getting vaccinated.

B. Marginal benefit to you of you getting vaccinated < marginal cost to you of getting vaccinated.

Which of the following is most important to Classical economics? A. Consumer spending. B. Technology and capital. C. Aggregate demand. D. The business cycle.

B. Technology and capital.

Which of the following will shift the PPC out? A. Less technology. B. Less capital. C. More labor. D. Both A and B are correct.

C. More labor.

Which of the following can be negative? A. Nominal GDP B. Real GDP C. Net Exports D. Gross Investment

C. Net Exports

The total labor force is 100,000 out of a possible working age population of 300,000. The total number of unemployed is 5,000. The labor force participation rate is: A. 10 percent B. 33 percent C. 50 percent D. 80 percent

B. 33 percent

The total labor force is 100,000 out of a possible working age population of 300,000. The total number of unemployed is 5,000. What is the unemployment rate? A. 2.5 percent B. 5.0 percent C. 8.0 percent D. 10.0 percent

B. 5.0 percent

Professor Bowles would argue that the timing and pattern of economic growth shown in Figure 2-6 in the text is a consequence of: A. enlightenment ideas of individual freedom and reason. B. the development of the market system in Europe in the 18th century. C. a general rejection in Britain and North America of the ideas expressed in Smith's Wealth of Nations. D. A and B are correct but not C.

B. ???

Markets, without government intervention, likely will: A. Produce too many college graduates due to external benefits of education. B. Produce too few college graduates due to external benefits of education. C. Produce too many college graduates due to external costs of education. D. None of the above are correct.

B. ??? (not A.)

Which of the following would cause a change in quantity demanded? A. A change in income. B. A change in the price of the good. C. A change in tastes and preferences. D. A change in the price of a substitute good.

B. A change in the price of the good.

By driving interest rates down (i.e., monetary policy) as a response to COVID, the Federal Reserve was trying to shift the: A. SAS curve right. B. AD curve right. C. LAS curve right. D. AD curve left.

B. AD curve right.

Which of the following is an example of the U.S. government's role as an actor? A. Equal opportunity and labor laws that restrict businesses' freedom to hire and fire whomever they want. B. Building a highway C. The FTC requiring accurate labels on foods. D. Laws that require states and the federal government to balance their budgets.

B. Building a highway

California will have a comparative advantage in producing oranges compared to Alaska if, A. California is good at producing oranges B. California has a lower opportunity cost of producing oranges. C. California has warm, sunny weather. D. Alaska has cold weather.

B. California has a lower opportunity cost of producing oranges.

A point outside of an existing PPC: A. Is presently possible. B. Could become possible with better technology. C. Likely will never be possible. D. None of the above are correct.

B. Could become possible with better technology.

Which sequence is in the correct chronological order? A. Mercantilism, Feudalism, Capitalism, publication of Wealth of Nations. B. Feudalism, Mercantilism, publication of Wealth of Nations, U.S. Constitution. C. Feudalism, Mercantilism, U.S. Constitution, publication of Wealth of Nations. D. Capitalism, Feudalism, Obama, Trump.

B. Feudalism, Mercantilism, publication of Wealth of Nations, U.S. Constitution.

For which of the following questions can the discipline of economics provide an explanation as to the correct answer? A. For Whom to Produce? B. How to Produce? C. What is the correct income distribution? D. None of the above.

B. How to Produce? ???

A decrease in price of a Google phone would: A. Increase the demand for Google phones. B. Increase quantity demanded for Google phones. C. Increase the demand for iPhones. D. Cause inflation.

B. Increase quantity demanded for Google phones.

An improvement in the genetics of chickens, which causes them to grow faster will: A. increase the quantity supplied of chicken meat. B. Increase the supply of chicken meat. C. Increase the demand for chicken meat. D. Both B and C are correct.

B. Increase the supply of chicken meat.

Which of the following best defines Aggregate Income? A. The revenue businesses receive from providing goods to government. B. The income households receive from providing land, labor, capital, and entrepreneurs to businesses. C. The profit businesses earn from selling land to households. D. All of the above are correct.

B. The income households receive from providing land, labor, capital, and entrepreneurs to businesses.

Typically, USU would have more seniors on its men's basketball team compared to UNC since: A. USU players are not rational. B. UNC players face a higher marginal cost of staying in college. C. USU players face a higher marginal cost of staying in college. D. UNC players face a higher marginal benefit of staying in college.

B. UNC players face a higher marginal cost of staying in college.

Which best defines inflation? A. a continuous rise in wage rates. B. a continuous rise in the average price of goods and services. C. a continuous rise in the average price of gas and food. D. tuition at Utah State University.

B. a continuous rise in the average price of goods and services.

A given increase in the price of natural gas will cause? A. decrease in quantity demanded. B. decrease in quantity supplied. C. an increase in supply and a decrease in demand. D. Both A and B are correct.

B. decrease in quantity supplied.

Businesses are on the: A. supply side of factor markets and the demand side of goods markets. B. demand side of factor markets and the supply side of goods markets. C. supply side of both factor markets and goods markets. D. demand side of both factor markets and goods markets.

B. demand side of factor markets and the supply side of goods markets.

According to Bowles, the current __________ being experienced in the US is a result of too ___________ in the ____________ market. A. deflation; much demand; factor. B. inflation; much demand; goods. C. inflation; much demand; factors. D. inflation; too little supply; factors.

B. inflation; much demand; goods.

Compared to 2021 Q4, 2022 Q2 Real GDP A. is higher by about 30 percent. B. is lower by about one percent. C. is higher by about one percent. D. is lower by about 10 percent.

B. is lower by about one percent.

In a Market economy, A. the government answers the questions of what, how, and for whom. B. markets answer the questions of what, how, and for whom. C. society as a whole owns the factors of production (resources). D. Laissez faire is not an acceptable principle.

B. markets answer the questions of what, how, and for whom.

If the hourly wage of U.S. workers is $16, the hourly wage of Mexican workers is $4, and U.S. workers produce 5 times as much output per hour as Mexican workers, then, other things equal, it would be efficient to locate production facilities in: A. the United States since the cost per unit of output will be higher. B. the United States since the cost per unit of output will be lower. C. Mexico since the cost per unit of output will be higher. D. Mexico since the cost per unit of output will be lower.

B. the United States since the cost per unit of output will be lower.

Countries gain from trade by producing: A. the goods they produce at the highest opportunity cost. B. the goods they can produce at the lowest opportunity cost. C. where the production possibility curve has a slope of -1. D. all goods in equal amounts.

B. the goods they can produce at the lowest opportunity cost.

In explaining why a typical taxpayer living in Park City, UT is helping to pay for your education at Utah StateUniversity, your best economic argument would rely on: A. some concept of fairness. B. the notion of external benefits. C. the notion of external costs. D. the coercive power of government.

B. the notion of external benefits.

The SAS is most likely to shift to the right if A. consumer confidence falls. B. wages decrease. C. the price level decreases. D. input prices increase.

B. wages decrease.

Real GDP would decrease by 3 percent if nominal GDP increased by: A. 1.0 percent and prices increased by 2.0 percent. B. 6.0 percent and prices increased by 2.0 percent. C. 0.0 percent and prices increased by 3.0 percent. D. 3.0 percent and prices increased by 0 percent.

C. 0.0 percent and prices increased by 3.0 percent.

If nominal GDP is $10 trillion and real GDP is $8 trillion, the price index (GDP deflator) is A. 0.750 B. 1.125 C. 1.250 D. 2.000

C. 1.250

As of December 2021, the inflation rate in the U.S. was approximately _______ and most economists would place some of the blame on ______________________. A. 12%; too much government spending over the past two years. B. 4%; monetary policy that was too aggressive over the past two years. C. 7%; monetary policy that was too aggressive over the past two years. D. 10%; the election of Joseph Biden.

C. 7%; monetary policy that was too aggressive over the past two years.

In the supply and demand model, better technology causes a(n) _________ in ____________ which leads to ________ prices. A. decrease; demand; lower. B. increase; quantity supplied; lower. C. increase; supply; lower. D. increase; supply; higher.

C. ??? (not B.)

Markets: A. Often have shortages but not surpluses. B. Often have surpluses but not shortages. C. Typically have neither shortages or surpluses that persist for very long. D. Set fair prices.

C. ??? (not D.)

Which equation best defines Aggregate Demand (AD)? A. MV=PY B. AD = C + I + G + (X + M) C. AD = C + I + G + (X - M) D. AD = SAS + LAS

C. AD = C + I + G + (X - M)

Which of the following is most important to Keynesian economics? A. Saving. B. Technology and capital. C. Aggregate demand. D. Economic growth.

C. Aggregate demand.

Which of the following factors will not shift the long-run aggregate supply curve right? A. An increase in the size of the labor force. B. Better institutional arrangements. C. An increase in the money supply. D. An improvement in productivity.

C. An increase in the money supply.

Which of the following is/are true concerning trade and specialization. For two states to benefit fromspecialization and trade? A. All that is required is a differences in goods. B. All that is required is a differences in resources. C. Both differences in goods and resources are required. D. All of the above are correct.

C. Both differences in goods and resources are required.

Which approach is most concerned with the economy's potential level of output rather than movements away from potential output? A. Keynesian. B. Freudian. C. Classical. D. Socialist.

C. Classical.

If the economy is in an inflationary gap, the government may be able to help solve the problem by: A. Lowering interest rates B. Increasing government spending. C. Decreasing government spending. D. Both A and B are correct.

C. Decreasing government spending.

A person with marketable skills who recently decided to start looking for a job after 10 years as a stay-at-home dad would most likely be classified as which type of unemployment? A. Structural B. Cyclical C. Frictional D. Classical

C. Frictional

Which would most likely suggest that the current inflation problem in the U.S. is thefault of government policy? A. Krugman B. Keynes C. Friedman D. Both B and C are correct.

C. Friedman

Which of the following is (are) true? A. The number of individuals employed in December 2021 was higher than in December 2019. B. The December 2021 unemployment rate was over 6 percent with significant levels of cyclical unemployment. C. From December 2019 to December 2021, the U.S. labor force participation rate fell. D. A and C are correct, but not B.

C. From December 2019 to December 2021, the U.S. labor force participation rate fell.

Which of the following best describes the source of comparative advantage among individuals? A. All individuals have about the same set of talents. B. Different activities or goods require different skills. C. Individuals have different skills and different goods require different skills. D. Some individuals are good at everything.

C. Individuals have different skills and different goods require different skills.

Which statement best summarizes the Invisible Hand theory? A. Social forces channel individual self-interest to achieve the common or social good. B. It requires political forces to channel individual self-interest to achieve the common good. C. Markets typically channel individual self-interest to achieve the common or social good. D. Socialism results in a more equitable distribution of income.

C. Markets typically channel individual self-interest to achieve the common or social good.

Graphically, a change in price causes: A. both supply and demand to shift. B. the demand curve to shift. C. a movement along a given supply curve, not a shift. D. the supply curve to shift.

C. a movement along a given supply curve, not a shift.

John Locke: A. primarily defended the Devine Right of Kings as the source of truth. B. offered a theory of gravity that supported Newtonian physics. C. argued in favor of individual rights, equality and access to the truth. D. All of the above are correct.

C. argued in favor of individual rights, equality and access to the truth.

In socialism: A. economic forces do not operate. B. individuals are encouraged to act for their own benefit. C. government planning, rather than the market, is relied upon to coordinate economic activity. D. distribution is determined by the individual's ability.

C. government planning, rather than the market, is relied upon to coordinate economic activity.

The more the current price is above the equilibrium price, the: A. greater the resulting shortage will be. B. smaller the resulting shortage will be. C. greater the resulting surplus will be. D. smaller the resulting surplus will be.

C. greater the resulting surplus will be.

Between July 2021 and July 2022, the consumer price index: A. increased by over 10.0 percent. B. held steady. C. increased by over 8.0 percent. D. cannot be determined without knowing the base year.

C. increased by over 8.0 percent.

If the economy is in a recession, eventually A. input prices will rise and output will fall. B. both input prices and output will rise. C. input prices will fall and output will rise. D. both input prices and output will fall.

C. input prices will fall and output will rise.

In principle, socialism is: A. less concerned about fairness than capitalism. B. just as concerned about fairness as capitalism. C. more concerned about fairness than capitalism. D. not concerned about fairness at all.

C. more concerned about fairness than capitalism.

Per capita output would be certain to increase if: A. both real output and population increase. B. both real output and population decrease. C. real output increases and population decreases. D. real output decreases and population increases.

C. real output increases and population decreases.

Compared to market based economies, both feudalism and mercantilism: A. required strong central governments to allocate resources. B. relied on tradition to answer the three economic questions. C. relied much less on the invisible hand to coordinate economic decisions. D. produced rapid economic growth.

C. relied much less on the invisible hand to coordinate economic decisions.

Suppose that nominal GDP doubles while prices double. We can conclude that real GDP A. more than doubled. B. doubled. C. remained constant. D. Decreased

C. remained constant.

What effects the potential level of output? A change in: A. the price level. B. AD. C. technology. D. monetary policy.

C. technology.

What is the economy's NDP? A. $250 B. $275 C.$295 D. $300

D. $300

Refer to the table below. What is the economy's GDP? Consumption=$220.0 trillion, Gross Investment=40.0, Net Investment=25.0, Government Purchases=50.0, Exports=25.0, Imports=20.0 A. $250 B. $290 C. $310 D. $315

D. $315

An economic argument that might support Utah State University issuing a mandate that all students show proof of Covid Vaccination in order to attend class would rely on: A. being vaccinated produces an external benefit. B. not being vaccinated produces an external cost. C. political forces are generally more efficient than market forces in deciding how to produce. D. Both A and B are correct but not C.

D. ???

Which explains why average income per capita in the world started to increase rapidly around 1750? A. Broader adoption of specialization and trade. B. Broader adoption of markets as the system for answering the questions of what, how, and for whom. C. Smarter Kings and Queens. D. Both A and B are correct but not C.

D. ???

Consider chicken, an inferior good. A decrease in incomes will: A. Decrease the demand for chicken. B. Increase the demand for chicken. C. Decrease the quantity demanded for chicken. D. Increase the quantity demanded for chicken.

D. ??? (Not A.)

In response to Covid, starting in early 2020 the U.S. government ______________ and the Federal Reserve______________. A. passed a series of large spending bills; drove interest rates to exceptionally low levels. B. attempted to shift the AD curve to the right; attempted to shift the AD curve to the right. C. pursued activist monetary policy; pursued activist fiscal policy. D. A and B are correct but not C.

D. A and B are correct but not C.

The U.S. Government's response to the unemployment in early 2020 caused by COVID can best described as: A. Keynesian. B. Activist. C. Classical. D. A and B are correct but not C.

D. A and B are correct but not C.

Which of the following is the most likely cause of cyclical unemployment? A. Technological Innovation. B. International Trade. C. Increase in the labor force participation rate. D. A recession.

D. A recession.

The cost of your college education includes: A. The explicit cost of books. B. The implicit cost of your time. C. An opportunity cost. D. All of the above

D. All of the above

Which of the following are scarce? A. Oil B. Capital (i.e., machinery) C. Labor or workers D. All of the above are correct

D. All of the above are correct

A Market economy tends to, A. maximize voluntary exchange. B. align incentives in such a way that individual decisions, which are good for both the individual and society, are encouraged. C. produce goods efficiently. D. All of the above are correct.