The Idea That Business Failure Is a Positive Force for Progress

question 174

Multiple Choice

The idea that business failure is a positive force for progress in a market economy is often summarized by the term "creative destruction." Which of the following best states the central idea of this principle?

• A) When a business fails, the assets and resources from that business become unemployed, resulting in higher government subsidies.
• B) Business failure allows the assets and resources from that business to move into other areas where those resources are now more productive and highly valued.
• C) Only through frequent business failure will it be possible to avoid income being concentrated in a few rich entrepreneurs.
• D) The new, rival businesses that drive out old competitors tend to be less efficient and less creative than the older established businesses.

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Definitions:

Self-Serving Bias

A common cognitive bias that causes individuals to attribute their successes to internal factors and failures to external factors.

Introvert

Describes a person who tends to be more focused on internal thoughts and feelings rather than seeking external stimulation.

Extravert

An individual characterized by an outgoing, energetic, and sociable disposition.

External Locus

A belief that one's successes or failures result from external factors beyond their control.