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Exam 2: Understanding Economics and How It Affects Business

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Question 61

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You read the Electricity City Utility Company has problems. Its headquarters had an expansive retaining wall collapse during a flood last week. This led to toxic coal ash flows that buried homes and even caused a few fatalities. An editorial claims that the company will not be held accountable to the same standards as the asbestos companies that paid severe fines and even went out of business due to their lack of attention to environmental clean-up. You agree with the writer because you recently studied about the various competitive markets and utility companies clearly fall under monopolistic competition.

A) True
B) False

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Question 62

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Subtle differences, such as the right to one's religious preference, make the command economic system known as communism more like a mixed economy than a socialistic system.

A) True
B) False

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Question 63

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A prediction that GDP will increase significantly over the next six months is bad news for most businesspeople.

Economist Thomas Malthus believed that ________ would limit economic progress.

In an effort to promote rapid growth, the government of Cashland has kept taxes low, offered little regulation of business activities, and implemented only modest social programs. The government is now facing political pressure to do more to clean up the environment and to reduce the inequalities of income and wealth. Cashland's government is currently taking a

Free-market capitalism has made it more difficult for individuals to gain wealth.

Recently the government of Evensplitia announced that it is standing behind the concept of state-owned utilities and public schools in the nation. Although not all its industries are owned and managed by the government, this would lead one to believe that Evensplitia has a preference for socialism.

Prestigious economics professor, Tom Ruland, recently urged government policy makers to cut taxes and increase government spending in order to pull the economy out of a downturn. The policy measures called for by the professor are examples of fiscal policy.

Senator Shulei Lee is alarmed at the state of the economy. Unemployment is high and GDP is low. Senator Lee has called for Congress to take action to increase government spending and cut taxes in order to stimulate the economy. The actions called for by Senator Lee are examples of

The CPI measures the pace of inflation or deflation.

A simple supply curve shows that an increase in the price of a good will cause the quantity supplied to

Fatima resides in a country where the economic system is primarily based on free-market capitalism. Fatima is likely to have the freedom to buy and sell property.

As you drive to school in the morning, you will probably flip through several radio stations before deciding to settle on one for the duration of the drive. For instance: you can listen to a "fair and balanced" talk show; an "intelligent talk" program; an interactive "call-in" talk show; a "self-improvement" talk show; and, even an "all sports" talk show. With so much monopolistic competition in radio programming, radio stations focus on offering you something just a little different.

The PowerPlus Utility Company recently built a nuclear power plant in a southern state and started competing against Electricity City Utility Company that has served customers in that region for 65 years. Due to deregulation, consumers now have a choice among utility companies in this area. Although PowerPlus has made a sizeable capital investment, if it successfully grows market share, eventually prices for electricity may stabilize or fall.

In the U.S., the ________ has the role of managing the money supply and interest rates.

Although changes in the CPI provide interesting insights into the overall performance of the economy, these changes have little practical impact on the lives of ordinary people.

In a free-market economic system, ________ is the key determinant used to signal to producers what to produce and how much to produce.

Shimmer Sisters, a popular nail polish and cosmetics company, is gaining popularity among teens and young professionals. Differentiating itself from the sea of companies that compete for the same business, it focuses on creating products using trending color palettes and the finest ingredients. Shimmer Sisters clearly operates in an oligopolistic environment.

Adam Smith believed that incentives to seek personal gain would create wealth, but that the government must then step in to make sure that this wealth is equitably distributed.

________ is the study of how a society employs its limited resources to produce goods and services and how it distributes them among competing groups and individuals.