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Exam 2: How Economic Issues Affect Business

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Question 81

Multiple Choice

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One of the most significant problems faced by communist economies is:

A) a great inequality in the distribution of wealth and income.
B) severe inflationary pressures due to rapid economic growth.
C) too little government regulation of economic activity.
D) persistent shortages of basic goods such as food and clothing.

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

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Question 82

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Prices are determined by sellers in a free market.

A) True
B) False

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Question 83

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An economy is said to be in a recession if GDP declines for two or more consecutive quarters.

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

In recent years,countries with communist economic systems have:

In capitalism,the government prohibits people and businesses from competing with each other.

_________ is the popular name for a free-market economy in which business people make most of the decisions about what products to produce,how many workers to hire,and what prices to charge for goods and services.

Some communist countries have not allowed their citizens to practice certain religions or change jobs.

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

Sue is a gifted cook.She is about to open her own business,a restaurant in which she will be the head chef.Sue is willing to work long hours because she believes that her culinary talents and hard work will allow her business to succeed and earn her a great deal of money.Sue's efforts appear most consistent with the economic theory developed by:

Communism is an economic system in which:

Explain what the business cycle is.

Product differentiation is a key to success in monopolistic competition.

Adam Smith the author of The Wealth of Nations,said that all companies would function best with more government involvement.

Monica notices that just a few big companies produce the vast majority of soft drinks.She would be correct in describing the soft drink industry as an oligopoly.

Workers in socialist countries often get longer vacations and more social benefits than workers in free market economies.

A problem with the CPI is that it measures the price changes of only food and clothing,while ignoring what happens to the prices of such important items as shelter and transportation.

The concept of the invisible hand is based on the assumption that the primary motivation of entrepreneurs is to enjoy the financial rewards of their hard work.

Canada has a mixed economy,like most other countries in the world.Explain what the term mixed economy means & what the benefits are.

Disinflation refers to a situation in which the overall level of prices in an economy is steadily falling.