Exam 2: Understanding Economics and How It Affects Business

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

The nation of Winstone's economic system closely approximates pure capitalism. While Winstone's economy is likely to generate a great deal of wealth, it may do a poor job of providing an acceptable level of income for the elderly or disabled.

As productivity increases, the cost of producing goods and services is likely to fall.

Patrick just landed a job working for an up and coming online gaming company in Palo Alto, California. In a lot of ways, this is his dream job come true-the chance to work for a company that makes gaming software and live in California at the same time. As his plane lands at San Jose International, he pictures a snazzy apartment with a palm tree right outside the front door. A few hours later, as he meets a property manager of a large apartment complex, his heart sinks. The price of apartments is outrageous! Back at the hotel, he checks the Bureau of Labor Statistics site to try to get a better picture of why the cost of housing is so high in this region of the country. Which factors may be causing the rise in the price of housing?

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