Econ DSM 2

What is the name given to the highest-valued alternative that must be given up to engage in any activity?

Opportunity cost

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

What are copyrights designed to accomplish?

Protect intellectual property rights

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

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

firms

When nations specialize in their comparative advantage and engage in trade:

overall standards of living increase

The role of the entrepreneur always involves:

taking risks

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

Ms. Boulware is the best lawyer and the best secretary in town. She has:

an absolute advantage in both jobs

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

an import

In the United States, property rights:

are guaranteed by two amendments to the U.S. Constitution

If a country has a comparative advantage in the production of a good, then that country:

has a lower opportunity cost in the production of that good

Contracts, insurance, patents and accounting rules are:

inventions that make a market work better

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(n):

invisible hand.

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

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

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

Centrally planned economy