Micro

A product produced in a foreign country and purchased by residents of the home country is called:

IMPORT

In the circular flow model, which of the following refers to markets where goods such as computers or services such as medical treatment are offered?

Product markets

Adam Smith observed that people pursuing their own self-interest in a free market will actually result in the best interest of society as if these actions were guided by a:

Invisible hand.

According to the theory of comparative advantage, specialization and free trade will benefit:

all trading partners who specialize in goods where they have comparative advantage

Contracts, insurance, patents and accounting rules are:

inventions that make a market work better

Absolute advantage is the ability of an individual, firm, or country to:

produce more of a good or service than competitors using the same amount of resources

The principle of increasing marginal opportunity cost states that the more resources devoted to any activity, the _____ the payoff to devoting additional resources to that activity.

smaller : As you devote more and more resources to a given activity, you will begin to see the payoff decline at some point. EX: When a farmer plants a crop, he will likely use the best and most fertile land first. However, as production expands, he will be forced to use the land that requires more preparation, fertilizers, and use of equipment to generate smaller yields.

In what type of economy does the government decide how most economic resources will be allocated?

Centrally planned economy: Not the ladder which.. In a market system, the markets determine the allocation of economic resources. In a mixed economy, some of the resources are distributed by the government and other are allocated using the market system.

In his 1776 book, "An Inquiry into the Nature and Causes of the Wealth of Nations," Adam Smith notes that specialization increases productivity. Which of the following was the cause of this phenomenon?

The division of labor Explanation: Adam Smith explains how the making of a pin can be divided into many operations, and the he points to the very high output that can be produced in the factory that divides those tasks. Combining the production steps would have the opposite impact and decrease output while increasing the factory size will not directly impact the productivity of workers unless additional specialization is introduced.

Which of the following is critical to the success of the market system?

To allow individuals or firms to have exclusive use of their property : explanation : If owners of private property are prevented from buying or selling property depending on the circumstances, then it removes much of the incentive necessary for an entrepreneur to start a business. By the same token, too much government control also removes incentive.

In the circular flow model of the economy, __________ are the suppliers of goods and services.

firms