Chapter 1 Questions
If market failure exist, the market can become efficient when
the government intervenes to improve society's welfare
Economists would most likely agree with which one of the following statements?
People usually exploit opportunities to make themselves better off
Economists would most likely disagree with which of the following statements?
Resources and inputs used in production are unlimited
Most individuals choose careers in which they specialize in producing only one type of good or service, yet as consumers they have access o a wide variety of goods and services. What principle allows for this?
Trade principle
What is not true of a market economy?
a central planning authority makes decisions about production and consumption
The condition of scarcity means that...
a choice must be made in the allocation of productive resources
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
Market failure results when the
pursuit of individual self-interest leads to bad results for society as a whole
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 focal point of economic inquiry is...
individual choice
An equilibrium outcome is one in which
no one has an incentive to change his or her decisions or behavior
After finishing high school, LeBron James decided to enter the NBA rather than going to college to begin his studies to become a doctor. This choice between the two careers can best be described by
opportunity cost
In his book, The Wealth of Nations, Adam Smith used the example of pin-making to illustrate the advantages of...
specialization
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