a. An important insight by early economists was that an economy based on free-market transactions is self-organizing. Adam Smith developed the idea that not benevolence, but self-interest, is the foundation of economic order.
b. Self-interested buyers and sellers respond to prices.
c. Identify the types of decision makers in any economy. (Select all that apply.)
A. Law enforcement B. Government C. Consumers D. Marketers E. Producers
d. Consumers are assumed to make decisions that will maximize their utility.
e. Producers are assumed to make decisions that will maximize their profits.
f. Consumers and producers are assumed to weigh the costs and benefits of their decisions. For example, for a consumer, the benefit of buying one more unit of a good must outweigh the cost of buying that unit.