1. It takes hundreds of people to cooperate in order for you to buy a steak dinner: What coordinates their actions? 1.Moral consciousness 2.Benevolence 3.Central economic planning 4.Market prices and profit

2. Are Self Interest and Greed the same? Within the rules of a market economy, self- interest involves serving others and meeting their needs. Greed would harm others and not meet their needs. If Greed > Self-Interest = Market Failure…….leads to govt. intervention Two sources of Market Failure?

3. The invisible hand principle indicates that when individuals are directed by prices determined in competitive markets, their actions will tend to promote the efficient use of resources 1. Only if buyers and sellers really care, personally, about economic efficiency 2. Even when each market participant cares only about his own self-interest rather than the overall efficiency of resource use 3.Even if firms fail to produce goods efficiently 4.If, and only if, firms recognize their social obligation to keep costs low and use resources wisely

4. Market prices generally promote social cooperation because they… 1.Clarify the options available to people and encourage individuals to help others in exchange for income 2.Encourage government officials to levy taxes to provide people with the necessities of life. 3.Eliminate scarcity by allowing prices to rise 4.Reward only altruistic actions, whereby people seek to help others without the expectation of personal gain.