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Exam 2: Understanding Economics and How It Affects Business

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Question 131

True/False

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In a free market economic system, the lack of government control and regulation means that businesses find it easy to take advantage of customers by offering poor-quality products at high prices.

A) True
B) False

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Question 132

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One of the greatest concerns associated with capitalism is that

A) it rarely creates wealth.
B) some people may let greed guide their behavior.
C) there is very little economic freedom for consumers.
D) producers are unlikely to supply the goods and services that consumers value the most.

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

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Question 133

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High tax rates that put money into the government's funds tend to slow spending, and ultimately slow the economy.

The price of the Samsung Galaxy Tablet is falling. In a free-market economic system where everything else is equal, the most likely explanation is

There are innovations involving new ways to produce and conserve energy. If we can turn this new technology into marketable products and services that produce energy to run our businesses and homes, the U.S. could see a surge in output of goods and services. What would be measured to document this surge?

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. -The newscast cited forecasts that national output might continue to fall in the future. If total output shows decline for two consecutive quarters, economists would classify this as a ________.

The CPI is based on the prices of a carefully selected market basket of goods, all of which consumers can purchase at a supermarket.

Socialists believe that wealth should be more evenly distributed than what actually occurs in a free-market capitalistic system.

America's business success is largely due to an economic and social climate that allows businesses to operate freely.

The nation of Winstone's economic system closely approximates pure capitalism. While Winstone's economy is likely to generate a great deal of wealth, it may do a poor job of providing an acceptable level of income for the elderly or disabled.

The producer price index measures what is happening to prices at the wholesale level.

The market price of corn is falling. In a free-market economy, the most likely explanation of this price change is that:

Recently, the government of Evensplitia announced that it is standing behind the concept of state-owned utilities, public schools, and the communications industry of the nation. Although not all industry is owned and managed by the government, these ideas would lead one to believe that the nation has a preference for a ________ state.

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 created Coop's Consulting to earn a profit, but by working hard and increasing his market share, he was able to create jobs for others. This is an example of the ________ concept.

The measure used to report price changes at the wholesale level is the

________ is a condition characterized by slowing price increases.

A rising GDP, rising unemployment rate, and rising inflation rate signify a healthy economy.

Patrick just landed a job working for an up and coming online gaming company in Palo Alto, California. In a lot of ways, this is his dream job come true-the chance to work for a company that makes gaming software and live in California at the same time. As his plane lands at San Jose International, he pictures a snazzy apartment with a palm tree right outside the front door. A few hours later, as he meets a property manager of a large apartment complex, his heart sinks. The price of apartments is outrageous! Back at the hotel, he checks the Bureau of Labor Statistics site to try to get a better picture of why the cost of housing is so high in this region of the country. Which factors may be causing the rise in the price of housing?

Product differentiation is a key to success in monopolistic competition.

An increase in productivity means that a worker is now able to produce more goods and services in the same amount of time.