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