Chapter 1 part 3

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In an economy in which decisions are guided by prices and individual self-interest, there is

the potential to achieve efficiency in production. (correct)

a strong need for government intervention in the market.

less efficiency than would be observed in a centrally-planned economy.

more need for a strong legal system to control individual greed than would be needed in a centrally-planned economy.

Prices direct economic activity in a market economy by

influencing the actions of buyers and sellers. (correct)

reducing scarcity of the goods and services produced.

eliminating the need for government intervention.

allocating goods and services in the most equitable way.

Which of the following firms is most likely to have market power?

a fast food restaurant in a college town

a wheat farm in Kansas

the last gas station in New Mexico for 100 miles (correct)

a shoe store in Kentucky

The "invisible hand" directs economic activity through

prices. Signup and view all the answers

The invisible hand's ability to coordinate the decisions of the firms and households in the economy can be hindered by

government actions that distort prices. Signup and view all the answers

A primary function of prices in a market economy is to provide participants with

relevant economic information. Signup and view all the answers

When the government prevents prices from adjusting naturally to supply and demand,

it adversely affects the allocation of resources. Signup and view all the answers

A company that formerly produced software went out of business because too many potential customers bought illegally-produced copies of the software instead of buying the product directly from the company. This instance serves as an example of

inadequate enforcement of property rights. Signup and view all the answers

A rationale for government involvement in a market economy is as follows:

All of the above are correct. Signup and view all the answers

Which of the following statements is not true?

In the presence of a market failure, government action will always improve on the market outcome. Signup and view all the answers

Chapter 1 part 3

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Questions and Answers

In an economy in which decisions are guided by prices and individual self-interest, there is

Prices direct economic activity in a market economy by

Which of the following firms is most likely to have market power?

The "invisible hand" directs economic activity through

The invisible hand's ability to coordinate the decisions of the firms and households in the economy can be hindered by

A primary function of prices in a market economy is to provide participants with

When the government prevents prices from adjusting naturally to supply and demand,

A company that formerly produced software went out of business because too many potential customers bought illegally-produced copies of the software instead of buying the product directly from the company. This instance serves as an example of

A rationale for government involvement in a market economy is as follows:

Which of the following statements is not true?

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