Econ Ch. 1 Quiz

Market failure results in

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

An opportunity cost arises:

whenever any choice is made.

True of False? Economists would likely agree that Resources and inputs used in production are unlimited.

False

The focal point of economic inquiry is

individual choice

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

specialization

If market failures exist, it becomes more economically efficient for:

the government to intervene to improve society's welfare.

theory asserts that people will behave in ways that

will enhance their own overall well-being.

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

True or False? In a market economy productive resources are scarce, every choice involves an opportunity cost, and people will respond to incentives.

True

True or False? People usually exploit opportunities to make themselves better off.

True

The purpose of an economic system is to:

allocate scarce resources

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

are given incentives to do so.

Exchanges taking place in a market system:

are voluntary

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

efficient

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

equilibrium

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 condition of scarcity means that:

must be made in the allocation of productive resources.

An equilibrium outcome is one in which

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

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