ECON 1002 new updated practice exam questions and answers solution

ECON 1002 new updated practice exam questions and answers solution Self-interest helps achieve society’s economic goals because producers know which goods consumers want the most. consumers and producers both operate based on society’s economic goals. consumers know which goods can be produced at the lowest cost. as consumers and producers exercise their freedom to act in their own self-interest, markets will produce the desired goods at the lowest possible cost. There is a wide variety of desired goods and services in a market system because producers determine what to produce. there is always a need to produce something new and improved. consumers change their minds frequently. individual wants are diverse. What is produced is ultimately determined by producers, because they are driven by profits. consumers, because if the goods offered are not what consumers want, consumers will not buy them. producers, because they determine what to produce. consumers, because they participate in marketing surveys. Explanation The motive of self-interest gives direction and consistency to the economy. The primary driving force of the market system is self-interest. Entrepreneurs try to maximize their profits; property owners want the highest price for their resources; workers choose the job with the best wages, fringe benefits, and working conditions. Consumers allocate their income to maximize their utility while seeking the lowest possible prices. As individuals express their free choice, the economy is directed to produce the most wanted goods at the lowest possible cost. Each individual consumer will choose a combination of goods and services that will maximize his or her satisfaction (utility). There is a wide variety of goods and services because individual wants are diverse. To maximize profits, producers must respond to the desires of the individual consumer. Although producers are free to choose what products they will produce, if the producers are to maximize profits, these goods and services must be what consumers desire. Entrepreneurs can drive the economic ship where they want (at least for a while), but the ship will run aground (businesses will fail) if entrepreneurs at the helm don’t listen to the consumers that command them. The market system depends on private property ownership and the protection of private property rights to establish the cost of administration and transfer of property. make sure that there are adequate safeguards against theft. ensure that those who own property use it wisely. provide an incentive to maintain property and allow for the orderly transfer of property ownership. Explanation The ownership of private property provides an incentive to maintain and use the property to earn a private return. Ownership of private property along with the protection of property rights encourages investment, innovation, and, therefore, economic growth. Protection of private property rights facilitates the orderly exchange of property and property rights. The use of capital in the production process is more expensive than labor. replaces labor. improves efficiency, increases output, and provides for growth. improves efficiency, reduces output, and provides for growth. “Division of labor” means that workers identify the products than can be produced so that they can take advantage of their individual abilities and skills. specialize in tasks that take advantage of their individual abilities and skills. develop skills needed to complete a job. share the labor needed to complete a job.