Summary: Economics

Read the summary and the most important questions on economics

• module 2 test

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• Which of the following represents a core economic fallacy from which other economic fallacies are derived?

  the fallacy of examining only the short-term consequences of any given economic policy

• How does the market price system incentivize production to meet consumer demand?

  Prices incentivize producers to meet demand by drawing them into various production efforts through the profit motive, and thus meeting consumer demand

• An ______ is a basic motivating element which spurs us to make decisions and pursue actions—any kind of action—as well as market-related ones.

  incentive

• The bottom line is that incentives do matter, and ______ direct productive efforts and activities to gain advantages and benefits.

  profits

• Profits actually guide the factors of production, such as ______, labor and capital in accordance with demand.

  land

• Profits will quickly solve a shortage, provoke greater levels of economic ______, especially a more efficient use of a property and scarce resources.

  efficiency

• Profits are calculated by relating ______ to prices by communicating which goods to produce, and how to most efficiently produce them

  costs

• Which of the following is not characteristic of the nature of profit in free market economics?profits reward for services rendered. Profits render markets dynamic, innovative and efficient.  Profits are generally the result of the continual rise of prices.Profits providean incentive for investment.

  profits are generally the result of a continual rise of prices

• Which of the following best defines or characterizes economic profit in a free market?

  economic profit is understood as total revnue minus cost

• Which of the following represents a consequence(s) of profits?

  
  Profits will positively alter innovation, resulting in quality products, efficiently distributed goods and services, and an economical use of scare resources.