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Exam 2: Understanding Economics and How It Affects Business

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Question 121

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Under capitalism:

A) Most of the means of production and distribution are privately owned and operated for profit.
B) The primary function of the government is to distribute wealth more evenly.
C) Utilities, health care, education, and other important services are operated by the government.
D) Markets operate to carry out the decisions made by central planners.

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

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Question 122

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One of the benefits of a free market is that:

A) Businesses provide customers with quality products at fair prices.
B) Businesses all make the same amount of profit.
C) Businesses do better with more government regulation.
D) The government dictates the number of competitors there are in each industry.

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

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Question 123

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A major benefit of socialism is the:

exists when a large number of firms produce goods that are similar but are perceived by buyers as being different.

Macroeconomics looks at long run economic problems while microeconomics examines short run economic problems.

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.

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

Your professor showed you an Internet video of the chair of the Federal Reserve Bank speaking to the American public. The message he is conveying indicates 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 greed of businesspeople represents one of the greatest dangers to the operation of a free market system.

In command economies, the government plays a major role in deciding which goods are produced and who will get them.

The Federal Reserve Board is responsible for controlling the money supply.

Economic progress can occur when business owners provide jobs and economic growth for their employees, their communities, and themselves.

Both socialism and communism are variations of:

In the United States, laws prohibit the creation of most types of monopolies.

The "invisible hand" in Adam Smith's theory turns self-directed gain into social and economic benefits for all.

The nation of Florentina is in the midst of a serious economic downturn. The nation's GDP has declined steadily for over five years and is now at its lowest level in over fifty years. Florentina's unemployment rate is at an all time high and the nation's CPI is falling. Florentina's economic condition is referred to as a:

The markets for laundry detergents, soft drinks, and automobiles are dominated by just a few sellers. Economists would classify these markets as examples of:

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

Under a capitalistic system, decisions such as what goods and services to produce, what to charge, and how much to import or export are made by: