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Exam 2: Understanding How Economics Affects Business

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Question 71

True/False

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A monopoly occurs when there is a single seller for a product or service. Level of Learning 1: Knowledge of key terms

A) True
B) False

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Question 72

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One of the drawbacks of free markets is the fact that competition in such markets undermines the ability of price to adjust to its equilibrium value in the long run. Level of Learning 1: Knowledge of key terms

A) True
B) False

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Question 73

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__________ unemployment refers to persons who purposefully quit their jobs and have not yet found a new job.

Both socialism and communism are variations of:

Mini-Case Gig Abite is a bright,hard-working engineer who once owned a successful engineering consulting firm in his native country of Frinezia.Gig became discouraged by the high tax rates in Frinezia,so he immigrated to the United States eleven years ago.Soon after moving to the U.S. ,Gig again started his own business,which he named Giganeers Consulting.The company struggled at first,and almost went under midway through its second year.However,Gig never lost faith,the company survived,and it soon developed a growing reputation for quality work and dependable service.Giganeers began experiencing sustained growth early in its fourth year.In fact,Gig hired additional employees over the next few years to keep up with the increasing workload.His company,which started with only Gig and 2 other full time workers,now provides jobs for 43 full-time employees as well as many part time workers. Despite these past successes,some clouds are on the horizon.The company recently suffered its first drop in business since its very early years.Gig 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 news anchor went on to state that many economists believe that this downward trend is likely to continue for several more months.Gig 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. -Gig recently heard a radio report that the Fed will try to help get the U.S.economy back on track.If the Fed takes action,Gig would likely see:

If the national debt is $13 trillion,the national deficit will be considerably higher. Level of Learning 2: Understanding of concepts and principles

Incentive to own and operate businesses is high in nations whose governments are proponents of socialistic practices. Level of Learning 1: Knowledge of key terms

If a shortage exists in a market for a good,the price of that good will tend to fall. Level of Learning 1: Knowledge of key terms

Neo-Malthusians (followers of Thomas Malthus) believe that the solution to poverty is:

One strength of a free-market economic system is that it emphasizes the fair and humane treatment of the less fortunate in society. Level of Learning 1: Knowledge of key terms

When prices are free to adjust over time,in the long run,the market price of a good tends to:

A surplus currently exists for a product called widgets.In a free market system,the government must step in and buy any widgets that consumers do not buy in order to eliminate the surplus and establish equilibrium. Level of Learning 2: Understanding of concepts and principles

Inflation refers to the persistent rise in the purchasing power of money. Level of Learning 1: Knowledge of key terms

In the boxed material "Making Ethical Decisions," the textbook describes corruption practices in nations such as Mexico and the United States.These practices include payoffs to government officials in order to get an edge on competing better in one's industry.Which of the following statements best describes the ethical message of this boxed material?

The Federal Reserve Board is responsible for controlling the money supply. Level of Learning 1: Knowledge of key terms

Capitalism is the foundation of the U.S.economic system. Level of Learning 1: Knowledge of key terms

___________ studies the operation of a nation's economy as a whole.

A major trend in the world today is that:

In the past,socialist nations have realized that some of the government run businesses do not grow as quickly as businesses that operate for a profit. Level of Learning 2: Understanding of concepts and principles

Yesterday,Casey received a cable company ad for bundled TV,telephone,and Internet service that cost appreciably more than what she is currently paying.At the same time,she received a notice from her utility company that summer rates would be increasing.Her school books are costing almost twice what they cost last year,and yesterday,gasoline cost her 30 cents more per gallon than it did last week.As she ponders the situation,she can't help but wonder how prices could be rising when so many people have lost their jobs and are cutting back on expenditures.She is certain that this situation characterizes her economics professor's description of stagflation. Level of Learning 3: Application of principles