Exam 2: Understanding Economics and How It Affects Business

Economists study how people use resources to produce and distribute goods and services for consumption among competing groups and individuals.

Adam Smith believed the self-interest of businesspeople would lead them to create needed goods, services, and jobs.

Product differentiation is a key to success in monopolistic competition.

A major distinction between capitalism and socialism concerns the distribution of income.

Although mixed economies tend to improve economic conditions, moral values prevent communist nations such as China and Vietnam from progressing in this direction. Overall, economic progress continues to be very slow in these nations.

Resource development is the study of how to increase resources and to create the conditions that will make better use of those resources.

One of the greatest concerns associated with capitalism is that:

A collapse in Buldovia's banking system eventually led to companies unable to borrow money to run their businesses. Firms terminated employees. These circumstances cut into consumer's purchasing power, causing a severe decline in the prices of goods and services, better known as .

A basic right under capitalism is the right of businesses to receive government funding.

On average, what percentage of the GDP does the U.S. government collect through taxes?

A key to economic growth and development is to:

Most communist countries today are suffering from severe economic problems.

Chase is a recent college graduate with a new job as an engineering trainee for a large defense company. Now that he is making good wages, he hopes to start saving for his first house and also contribute toward the company retirement plan. As he looks over his monthly bills, Chase is concerned about ever getting ahead of the game. His food bill, car payment, and mounting gasoline payments keep him in the "just making ends meet" category. As his mind wonders back to the good ol' college days, he reflects on a time when gas and food seemed a lot more reasonable. Chase is experiencing the effects of:

Deflation means prices are declining.

Which of the following statements about productivity in the service sector of the U.S. economy is most accurate?

According to the invisible hand concept, the best way for a society to encourage the creation of jobs and the production of the products most wanted by consumers would be to:

Economist Adam Smith's important contribution was an inquiry as to why some nations are wealthy, while others remain poor.

Government spending on defense decreases the national deficit.

is a condition in which inflation is increasing, at a decreasing rate.

When prices are free to adjust over time, in the long run, the market price of a good tends to: