![]() Governments Can Sometimes Improve Economic Outcomes.Adam Smith made the observation that when households and firms interact in markets guided by the invisible hand, they will produce the most surpluses for the economy.Markets Are Usually a Good Way to Organize Economic Activity.Trade allows countries to specialize according to their comparative advantages and to enjoy a greater variety of goods and services.Higher taxes on cigarettes to prevent smoking Because people use cost and benefit analysis, they also respond to incentives Incentive is something that causes a person to act.People will only take action of the marginal benefit exceed the marginal cost.Deciding to produce one more pencil or not Marginal changes are small, incremental changes to an existing plan of action.The opportunity cost of going to college is the money you could have earned if you used that time to work. Opportunity cost is the second best alternative foregone.The Cost of Something is What You Give Up to Get It.To get one thing, we usually have to give up something else.Gregory Mankiw, in his text Principles of Economics, describes 10 principles of Economics, which are summarized below: This article is part of the EconHelp Tutoring Wiki
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