10 Questions
In an economy in which decisions are guided by prices and individual self-interest, there is
the potential to achieve efficiency in production.
Prices direct economic activity in a market economy by
influencing the actions of buyers and sellers.
Which of the following firms is most likely to have market power?
the last gas station in New Mexico for 100 miles
The "invisible hand" directs economic activity through
prices.
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.
A primary function of prices in a market economy is to provide participants with
relevant economic information.
When the government prevents prices from adjusting naturally to supply and demand,
it adversely affects the allocation of resources.
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.
A rationale for government involvement in a market economy is as follows:
All of the above are correct.
Which of the following statements is not true?
In the presence of a market failure, government action will always improve on the market outcome.
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