Econ Ch. 1 Quiz

Macroeconomics is the branch of economics studying...

fluctuations in the overall level of business activity

Economists generally agree that people are most likely to change their behavior when they:

are given incentives to do so.

True or False? People usually exploit opportunities to make themselves better off.

True

True of False? Economists would likely agree that Resources and inputs used in production are unlimited.

False

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

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.

Exchanges taking place in a market system:

are voluntary

The condition of scarcity means that:

must be made in the allocation of productive resources.

The purpose of an economic system is to:

allocate scarce resources

The focal point of economic inquiry is

individual choice

An economic system is in ________ when no individual would be better off by making a different choice.

equilibrium

An economy is ________ if it has exploited all opportunities to benefit someone without making anyone else worse off.

efficient

theory asserts that people will behave in ways that

will enhance their own overall well-being.

An equilibrium outcome is one in which

no one has as incentive to change his or her decisions or behavior

True or False? In a market economy productive resources are scarce, every choice involves an opportunity cost, and people will respond to incentives.

True

Market failure results in

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

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.

After finishing high school, LeBron James decided to enter the NBA rather that going to college to begin his studies to become a doctor. This choice between the two careers can best be described by:

opportunity cost

If market failures exist, it becomes more economically efficient for:

the government to intervene to improve society's welfare.