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Exam 2: Understanding Economics and How It Affects Business

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Question 71

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Cashland is a nation that supports a free-market economy with private ownership of businesses. But lately, the government of Cashland has developed policies designed to help the needy and lessen the level of income inequality. These programs are funded by relatively high taxes on businesses and workers. These arrangements suggest that the economy of Cashland is trending toward pure capitalism.

A) True
B) False

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Question 72

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Economists refer to a market in which a few sellers dominate the supply side as monopolistic competition.

A) True
B) False

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Question 73

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The chair of the Federal Reserve Bank spoke to the American public. The message she conveyed is that Fed economists are worried about inflation and believe the best course of action would be to slow the economy. Which of the following policies is the Fed most likely to pursue?

The concept of the invisible hand begins with the assumption that the primary motivation of entrepreneurs is that they will prosper from their own hard work.

Monetary policy is directly under the control of the U.S. Department of the Treasury.

________ unemployment refers to loss of jobs due to a recession or a similar downturn in the economy.

A surplus currently exists for fidget spinners. In a free-market economic system, the government must step in and buy any spinners that consumers do not buy in order to eliminate the surplus and establish equilibrium.

There is general agreement in the United States on the degree to which the government should be involved in the economy.

Countries that wish to avoid shortages and surpluses of goods should adopt a communist system.

Adam Smith believed that countries would prosper if businesspeople were free to start and run their own businesses. Businesspeople would make a profit by providing the goods, services, and ideas that others in the economy wanted, and they would hire others to help increase those profits, leading to social and economics benefits for many. This idea was called the

If nearly 28% of Cashland's citizens under the age of 65 are without healthcare and an advocacy group convinces its current administration to vote for basic healthcare for everyone, which of the following is likely to occur?

Which of the following statements about capitalism is the most accurate?

Mariska left her home country to become a nanny for a family in a suburb of San Diego, California. One of the benefits of her new job is she can attend the community college near her family's home. However, when she arrived, she experienced the differences from a predominately socialist nation and a capitalist nation. Mariska noted that public transportation in California was limited and expensive, making it difficult to get to school. For a negligible fee, the government in her home country provided public transportation for everyone. Mariska's home country's economic system was more characteristic of socialism.

There's a large number of bakeries in the United States and each of these bakeries produces similar, but not identical, products. Some bakeries will claim to have the best cupcakes in town, while others will brag about other items like cookies or specialty breads. The bakery market is an example of

A monopoly occurs when there is a single seller for a product or service.

Sean received an ad for bundled television, phone, and Internet service that cost substantially more than he is currently paying. At the same time, he received a notice from his utility company that summer rates would be increasing. His textbooks are costing twice as much as they did last year, and yesterday, gas cost 30 cents more per gallon than it did last week. He can't help but marvel at how prices are rising when so many people have lost their jobs and are cutting back on expenditures. He is certain that this situation is an example of stagflation.

Resource development is concerned with finding the best way to utilize the fixed amount of resources a society has available.

A typical demand curve shows that

In capitalist countries, the government decides what to produce and how the goods and services will be produced.

Large educated populations can contribute to an economy by offering knowledge and entrepreneurship.