MACRO Test One (CH 1)

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.

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

specialization.

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 disagree with which of the following statements?

Resources and inputs used in production are unlimited.

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.

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

Macroeconomics is the branch of economics studying:

fluctuations in the overall level of business activity.

The focal point of economic inquiry is:

individual choice

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

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.