Question 17(1 point)

Which of the following statements is true?

a

New technologies that reduce production costs, and thus the price of the good, will spread rapidly throughout the industry as a result of competition.

b

"Creative destruction" occurs when new goods and production methods make firms that are not able or willing to adjust go bankrupt.

c

The market system leads to even greater capital accumulation as it rewards the worst firms with more profits (and thus more available funds for them to invest and expand their operations).

d

All of the above.

e

Only a) and b)

Question 18(1 point)

Which of the following statements is true?

a

In 1996, Adam Smith (the Father of Economics) wrote "The Wealth of Nations".

b

Adam Smith was an advocate of "Laissez-faire", which means "let (the markets) alone".

c

"Laissez-faire" advocates believe that there is no need for government interference in markets because the (economic) system is a self-correcting one, and that the role of government should be limited (basically) to providing a legal environment for protection of private property, and to the enforcement of private contracts.

d

All of the above.

e

Only b) and c)

Question 19(1 point)

Which of the following statements is true in the simple circular flow model?

a

Income flows into the households as a result of their supply of resources to firms.

b

Since there is no saving in this simple model, households use all their income for spending in goods and services supplied by firms.

c

When firms sell their goods, the money they receive is called revenue, which is used to pay for the resources firms hire.

d

All of the above.

e

Only a) and b)