Insurance Companies Facilitate The Transfer Of Risk From

Question:

Answer: Market systems manage risk better because entrepreneurs taking risks bear the costs of poor decisions, whereas in command systems government decision makers don’t bear those costs.

Question: Specialization in production is important primarily because it

results in greater total output.

allows society to trade by barter.

allows society to avoid the coincidence-of-wants problem.

allows society to have fewer capital goods.

Answer: results in greater total output.

Question: With specialization in a market economy, individual

producers consume little or none of the products they produce.

firms produce a wide range of products.

producers consume most of the output that they produce.

consumers have to produce most of what they consume.

Answer: producers consume little or none of the products they produce.

Question: Specialization in production is economically beneficial primarily because it

guarantees full employment.

permits the production of a larger output with fixed amounts of resources.

facilitates trade by bartering.

allows everyone to have a job that he or she likes.

Answer: permits the production of a larger output with fixed amounts of resources.

Question:

Answer: An individual’s success in business is based on political savvy rather than economic profitability.

Question: Payments that a firm makes to obtain needed resources comprise its

revenues.

capital.

costs.

profits.

Answer: costs.

Question:

Answer: those who have a low-risk tolerance to those with high risk-tolerance.

Question: An increase in consumer desire for strawberries is most likely to

reduce the need for strawberry pickers.

increase the number of strawberry pickers needed by farmers.

reduce the number of people willing to pick strawberries.

reduce the supply of strawberries.

Answer: increase the number of strawberry pickers needed by farmers.

Question: If a nation restricts trade with other nations, then the most likely effect is

expanded economic wealth of the nation.

increased specialization of production.

lower prices of goods and services in the nation.

consumers in the nation are made worse off.

Answer: consumers in the nation are made worse off.

Question:

Answer: Insurance transfers risk from those with a lower tolerance for risk to those with a higher tolerance for risk.