#1
2. Which economic principle suggests that individuals acting in their own self-interest unintentionally contribute to the overall economic well-being of society?
Invisible Hand
ExplanationIndividual pursuit of self-interest leads to beneficial outcomes for society as a whole.
#2
6. What is the term for the total value of all goods and services produced within a country's borders in a specific time period?
Gross Domestic Product (GDP)
ExplanationGDP measures the economic output of a nation over a given period.
#3
13. Which economic concept refers to the situation where the quantity demanded for a good equals the quantity supplied, resulting in a stable price?
Equilibrium
ExplanationEquilibrium occurs when demand equals supply, establishing a stable price.
#4
18. In the context of capitalism, what is the role of the government in enforcing property rights?
To protect and enforce property rights
ExplanationGovernment ensures property rights are upheld to facilitate efficient market operations.
#5
23. What is the economic term for a situation where a good or service is both excludable and rivalrous?
Private good
ExplanationPrivate goods are both excludable and rivalrous, meaning consumption by one individual reduces availability for others.
#6
1. According to Adam Smith's concept of the 'Invisible Hand,' what is the role of self-interest in a capitalist economy?
It promotes overall economic well-being
ExplanationSelf-interest drives individuals to actions that unintentionally benefit society.
#7
3. In capitalism, what is the primary mechanism for allocating resources and determining prices?
Supply and demand in the market
ExplanationPrices and allocation of resources are determined by the interaction of supply and demand.
#8
7. In capitalism, what is the significance of the price mechanism?
It allocates resources based on supply and demand
ExplanationPrices signal resource allocation and adjust according to supply and demand dynamics.
#9
8. According to the concept of 'utility' in economics, what does it refer to?
The satisfaction or pleasure derived from consuming goods and services
ExplanationUtility represents the subjective satisfaction or value gained from consuming goods or services.
#10
11. What economic term describes the situation where one person's consumption of a good or service does not reduce its availability for others?
Excludability
ExplanationConsumption of the good or service by one person does not diminish its availability for others.
#11
12. According to the concept of comparative advantage, why do countries engage in international trade?
To benefit from differences in opportunity costs
ExplanationCountries trade to specialize in producing goods with lower opportunity costs, thereby benefiting from efficiency gains.
#12
16. According to the law of diminishing marginal utility, what does it suggest about the consumption of goods and services?
The additional satisfaction decreases as more units are consumed
ExplanationAs consumption increases, the additional satisfaction derived from each additional unit decreases.
#13
4. According to classical economic theory, what is the role of government in a capitalist system?
To minimize its intervention
ExplanationGovernment interference should be limited to ensure free market operation.
#14
5. Which economist is known for his theory of 'creative destruction' as an essential part of capitalist development?
Joseph Schumpeter
ExplanationSchumpeter emphasized innovation and destruction of old structures as drivers of economic progress.
#15
9. What is the primary goal of profit-maximizing firms in a capitalist system?
Maximizing shareholder wealth
ExplanationFirms aim to increase profits which, in turn, enhance shareholder value.
#16
10. In the context of capitalism, what is the role of entrepreneurship?
To innovate and take risks in pursuit of profit
ExplanationEntrepreneurs drive economic growth by introducing innovations and assuming risks for potential profits.
#17
14. What is the primary function of the Federal Reserve in the United States in the context of capitalism?
Managing monetary policy and the money supply
ExplanationThe Federal Reserve regulates monetary policy to stabilize the economy and manage the money supply.
#18
15. In capitalism, what role does the concept of 'elasticity' play in determining the responsiveness of demand to price changes?
It measures the sensitivity of quantity demanded to price changes
ExplanationElasticity quantifies how responsive quantity demanded is to changes in price.
#19
19. What is the economic term for the situation where a market fails to allocate resources efficiently?
Market failure
ExplanationMarket failure occurs when the market fails to efficiently allocate resources due to various factors like externalities or imperfect competition.