Macroeconomics Chapter 1 Quiz

Equilibrium is when no individual ____

would be better off making a different choice

True/false? Resources and inputs in production are unlimited.

False

When should government intervene to improve society's welfare?

If market failures exist

True/false? Economists believe people respond to incentives.

True

True/false? Exchanges taking place in a market system are voluntary.

True

True/false? Making a choice involves an opportunity cost.

True

True/false? Markets move toward equilibrium.

True

True/false? People usually exploit opportunities to make themselves better off.

True

True/false? Trade allows for specialization

True

The purpose of an economic system is to

allocate scarce resources

Scarcity means that

choices must be made

Macroeconomics is the branch of economics studying:

fluctuations in the overall level of business activity

The focal point of economic inquiry is

individual choice

An economy is efficient when

it has exploited all opportunities to benefit someone without making anyone else worse off

Invisible hand means that

market economies are able to harness the power of individual self-interest for the good of society as a whole

Market failure results when

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

Adam Smith uses the example of pin-making to introduce the concept of:

specialization

Economists think people change behavior when ______

they are given incentives to do so

Opportunity cost

what you give up in order to get something