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Exam 2: Understanding Economics and How It Affects Business

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Question 31

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For many years, Senator Juliana Higdon has called for more government regulation of business. "After all," the senator said recently, "businesses are out to make a profit, not to create jobs or serve their customers. The government needs to pass more laws to require businesses to take the interests of consumers and workers into account." From these comments, it is clear that Senator Higdon

A) agrees with the ideas of Thomas Malthus.
B) does not accept the "invisible hand" idea brought forth by Adam Smith.
C) is unaware of the fact that most businesses in the United States are owned by the government.
D) does not realize that government regulation is already the main determinant of business decisions in capitalist economies.

E) B) and C)
F) A) and D)

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Question 32

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A major benefit of socialism is the

A) ability to stimulate rapid economic growth.
B) ability to keep taxes low.
C) emphasis on social equality.
D) emphasis on private enterprise instead of public ownership.

E) A) and D)
F) None of the above

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Question 33

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Thomas Malthus was pessimistic about the ability of a society to achieve high standards of living for most of its citizens because he believed that

The top tax rate on personal income in most socialist economies is usually lower than the top tax rate on personal income in capitalist economies.

On its website, Papa John's Pizza compares itself to the competition with the following message: "better ingredients, better pizza." The company is looking to achieve

In the box "World Population is Popping," the textbook describes how the world's population is growing at an incredible rate and discusses the challenges that will face different countries. Which of the following statements best illustrates the challenges that can arise?

Due to the fundamental rights afforded to us by a free-market capitalistic system, people are more willing to take calculated risks.

Louisa is a gifted baker. She plans to open a small café in which she will be the head pastry chef. Louisa is willing to work the long hours because she believes that hard work will allow her business to succeed and earn her sizeable profits. Louisa's efforts are most consistent with the economic theory developed by

________ exists when a large number of firms produce goods that are similar but customers believe there is a difference.

Workers in nations who are strong proponents of communism work much harder and longer hours.

Mini-Case Cooper Collins is a bright, hard-working engineer who once owned a successful engineering consulting firm in his native country of Evensplitia. Cooper was discouraged by the high tax rates in Evensplitia, so he immigrated to the United States seven years ago. Soon after moving to the U.S., Cooper again tried his hand at entrepreneurship and opened Coop's Consulting. The company struggled at first, and almost went bankrupt midway through its second year. However, Cooper never lost faith, the company survived, and eventually developed a great reputation in the community. Coop's Consulting began experiencing sustained growth early in its fourth year. In fact, Cooper hired additional employees to keep up with the increasing workload. His company, which started with only Cooper and two other full-time workers, now provides jobs for 43 full-time employees as well as many part-time workers and interns. Despite these past successes, business ownership is not without complications. The company suffered its first drop in business since its very early years. Cooper is convinced that the problem is not with his company, but rather due to a downturn in the U.S. economy. He heard a national broadcast last week reporting that the value of the total output of final goods and services in the U.S. declined over the last quarter. The anchor went on to state that many economists believe that this downward trend is likely to continue for several more months. Cooper is concerned that he will have to lay off some of his employees if the economy doesn't improve. He hopes that the government does something soon to put the economy back on track. -Cooper's native country of Evensplitia was much different from the United States. In addition to its higher tax rates, the government offered more extensive social programs that were designed to redistribute income and reduce inequality. Although small businesses were privately owned and operated in Evensplitia, many basic industries were owned and operated by the government. From this information, you would classify Evensplitia's economic system as ________.

Inflation refers to a general rise in the prices of goods and services over time.

A command economic system is characterized by

An incredibly rare stone known as Diamontite is used in many consumer products, including watch faces, smartphones, computer monitors, and tablets. In one year, the price of Diamontite has gone from $8/lb. to $107/lb. Under these circumstances and the fact that more companies are looking to use Diamontite in their products, a graph of the supply and demand for this product would show

Countries that rely on a free market system are plagued by persistent shortages or surpluses of goods and services.

140. The government of Ativa has made great progress in its efforts to control its rapid inflation. Although prices are still on the rise, the rate of increase has slowed considerably. This suggests that Ativa is experiencing disinflation.

Adam Smith believed the self-interest of businesspeople would lead them to create needed goods, services, and jobs.

Global economics and politics have significant influence on businesses in the United States.

A basic right under capitalism is the right of businesses to receive government funding.

At the equilibrium price, the quantity consumers desire to buy equals the quantity sellers desire to sell.