Exam 2: Understanding How Economics Affects Business

Mini-Case Gig Abite is a bright,hard-working engineer who once owned a successful engineering consulting firm in his native country of Frinezia.Gig became discouraged by the high tax rates in Frinezia,so he immigrated to the United States eleven years ago.Soon after moving to the U.S. ,Gig again started his own business,which he named Giganeers Consulting.The company struggled at first,and almost went under midway through its second year.However,Gig never lost faith,the company survived,and it soon developed a growing reputation for quality work and dependable service.Giganeers began experiencing sustained growth early in its fourth year.In fact,Gig hired additional employees over the next few years to keep up with the increasing workload.His company,which started with only Gig and 2 other full time workers,now provides jobs for 43 full-time employees as well as many part time workers. Despite these past successes,some clouds are on the horizon.The company recently suffered its first drop in business since its very early years.Gig is convinced that the problem is not with his company,but rather due to a downturn in the U.S.economy.He heard a national broadcast last week reporting that the value of the total output of final goods and services in the U.S.declined over the last quarter.The news anchor went on to state that many economists believe that this downward trend is likely to continue for several more months.Gig is concerned that he will have to lay off some of his employees if the economy doesn't improve.He hopes that the government does something soon to put the economy back on track. -The broadcast cited forecasts that national output might continue to fall in the future.If total output shows decline for two consecutive quarters,economists would classify this as a _____________.

When the market price of a good is below the equilibrium price,and all other determinants are unchanged:

Several years ago,the nation of Florentina had a government-owned telecommunication system that lagged far behind other nations.In several of its rural areas,there was only one phone for an entire village of people.Government taxes collected for the purpose of maintaining the telephone system were very meager,so the notion of expanding service was almost impossible.The government of Florentina decided to sell the phone company to a private firm.The private firm expanded rapidly.It reported that even poor consumers were willing to pay for a private phone line.This government decision and subsequent sale was:

One drawback of socialism is that it may result in a reduction in the individual's incentive to work hard. Level of Learning 1: Knowledge of key terms

Sam is a recent college graduate with a lot of "firsts": First professional job,first new car,first apartment,and first time making all of his own financial decisions.As he works on his monthly budget,he can't help but wonder why he is barely "making ends meet." Each month,it takes his entire paycheck to pay his rent,his car payment,and buy food.Last month,he told his parents,"I'm sure I had more money when I was a starving student!" You recently learned about key economic indicators in your business class.You inform Sam that his problems are caused by severe deflation and lack of demand for products and services. Level of Learning 3: Application of principles

While scanning the movies section in your local online newspaper,you click on the business section by mistake.While you're there,you quickly scan a report that says government spending will again exceed tax revenues in the current year.This means that the:

Discuss the views of economist Adam Smith.How does the "invisible hand" philosophy suggested by Smith benefit society as a whole?

On its website,Papa John's Pizza compares itself to the competition with the following message: "better ingredients,better pizza".The company wants to achieve:

GDP figures do not include the value of illegal activities. Level of Learning 1: Knowledge of key terms

Which of the following people would tend to favor a communist economy?

An economist is examining how consumers in the automobile market have responded to recent price increases by car manufacturers.He is examining a microeconomic situation. Level of Learning 2: Understanding of concepts and principles

Countries that wish to avoid shortages and surpluses of goods should adopt a communist system. Level of Learning 2: Understanding of concepts and principles

Recently,Hugo Chavez,the Prime Minister of Venezuela announced that he is standing behind the concept of state owned utilities and public schools in his nation.Although not all industry is owned and managed by the government,his ideas would lead one to believe that he has a preference for socialism. Level of Learning 3: Application of principles

In the small nation of Equalia,the government owns several of the key businesses and provides a wide range of social services.The government places a great deal of emphasis on eliminating large disparities in people's incomes.These features of Equalia's economy are consistent with a socialist economic system. Level of Learning 3: Application of principles

The _________ is a statistic used to compute the pace of inflation or deflation.

Abby left her native land in Eastern Europe to become a nanny for a family in a western suburb of Chicago,Illinois.One of the benefits of her arrangement was that she could attend the community college near her family's residence.When she arrived at her new job,she experienced some immediate differences.Abby noted that public transportation in northern Illinois was limited and expensive,making it difficult to get to school.For a negligible fee,the government in her native country provided public transportation to everyone.The economic system in Abby's native country was more characteristic of ___________.

In a free market economic system,the lack of government control and regulation means that businesses find it easy to take advantage of customers by offering poor quality products at high prices. Level of Learning 2: Understanding of concepts and principles

Economists study how people use resources to produce and distribute goods and services for consumption among competing groups and individuals. Level of Learning 1: Knowledge of key terms

The "Thinking Green" box titled,"More Profits from the Green Revolution",describes the green revolution.The auto industry is participating in this revolution.Farmers are participating in this revolution.By promoting the fact that they sell "green" products,or that they utilize "green" techniques to produce the products and services that they sell,firms who fall under a _______________ type market may have opportunity to differentiate themselves from the competition.

____________ in the service sector has not shown the significant improvement that it has in the manufacturing sector.There are significant advances in the quality of service,but workers in this sector are unable to increase the number of persons served in a given time period.