Deck 2: How Economic Issues Affect Business

Question 1

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

Answer 1

False

Question 2

Adam Smith believed that since businesspeople are motivated to improve their own prosperity,their actions are unlikely to benefit society as a whole.

Answer 2

False

Question 3

Adam Smith wrote The Wealth of Nations.

Answer 3

True

Question 4

Economist Sue Pligh is examining how consumers in the automobile market have responded to recent price increases by car manufacturers.Sue's efforts reflect the microeconomic perspective of economics.

Question 5

Resource development is the system that has lead to wealth creation in much of the world.

Question 6

Adam Smith felt that incentives to seek personal gain would insure the creation of wealth,but that the government must step in to make sure that this wealth was equitably distributed.

Question 7

The primary difference between macroeconomics and microeconomics is that macroeconomics looks at long run economic problems while microeconomics examines short run economic problems.

Question 8

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.

Question 9

Microeconomics focuses on the decisions and behaviour of people and organizations in particular markets.

Question 10

The "invisible hand" in Adam Smith's theory refers to the efforts of the government to control the operation of markets.

Question 11

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

Question 12

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

Question 13

Fatma is a citizen of a country that has an economic system that is primarily based on free market capitalism.Fatma is likely to have the freedom to buy and sell property.

Question 14

Adam Smith's theories focused on explaining the best way to divide the fixed resources we have available,rather than on how to create more wealth.

Question 15

In capitalist countries,the government decides what to produce and how the goods and services will be produced.

Question 16

Macroeconomics is the economic perspective that looks at the operation of a nation's economy as a whole.

Question 17

Economics is the study of how people use resources to produce goods and services and distribute them for consumption among various competing groups and individuals.

Question 18

Adam Smith believed that an economic system couldn't truly prosper unless people were taught to value the welfare of others above their own personal gain.

Question 19

The study of how society chooses to employ resources to produce goods and services and to distribute them for consumption among various competing groups and individuals is known as sociology.

Question 20

Adam Smith believed that the key to creating rising standards of living was to limit population growth.

Question 21

Countries that rely on a free market system often are plagued by persistent shortages or surpluses of goods and services.

Question 22

One of the drawbacks of free markets is the fact that competition in such markets undermines the ability of price to adjust to its equilibrium value in the long run.

Question 23

If a shortage exists in a market for a good,the price of that good will tend to fall.

Question 24

Prices are determined by sellers in a free market.

Question 25

In a free market system,decisions about what to produce and in what quantities are made by the market.

Question 26

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

Question 27

At the equilibrium point the quantity consumers desire to buy equals the quantity sellers desire to sell.

Question 28

Jill owns a bakery that specializes in cheesecakes.Until recently,Jill charged a price of $12 for each cheesecake.At this price,Jill's customers bought an average of 84 cheesecakes each week.For the last few weeks,she has reduced her price to $10.50 per cheesecake,and her customers have purchased an average of 96 cheesecakes each week.These results are consistent with the economic concept of demand.

Question 29

A basic right under capitalism is the right of business to receive funding provided by the government.

Question 30

If we graph the supply and demand curves for a product at a specific time,the point on the graph where the two curves intersect is called the stress point.

Question 31

In the long run,the actual market price tends to adjust toward the equilibrium price.

Question 32

Capitalism is the foundation of the Canadian economic system.

Question 33

Demand refers to the quantity of products that people are willing to buy at different prices at a specific time.

Question 34

In perfect competition,each firm produces a product that is clearly differentiated from the products of other firms in the same market.

Question 35

Market price is determined only by supply.

Question 36

Supporters of a free market would argue that because supply and demand interactions determine prices,there is no need for government involvement or planning.

Question 37

Price is the key factor that determines both quantity supplied and quantity demanded.

Question 38

Capitalism has had little success in encouraging the creation of wealth.

Question 39

Under the basic principle of supply,as the price goes down,manufacturers and suppliers of a product tend to supply less of the product to the market.

Question 40

If the quantity supplied in a market exceeds the quantity demanded,a shortage will exist.

Question 41

A monopoly occurs when there is a single seller for a product or service.

Question 42

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.

Question 43

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

Question 44

In socialist economies,the government owns some,if not most,basic businesses such as coal mines and utilities.

Question 45

A surplus currently exists in the market for Whatzits.In a free market system,the government must step in and buy any Whatzits that consumers do not buy in order to eliminate the surplus and establish equilibrium.

Question 46

The major benefit of socialism is that it creates strong incentives to work hard and take the risks associated with starting and operating a business.

Question 47

In free markets,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.

Question 48

The greed of businesspeople represents the greatest danger to the operation of a free market system.

Question 49

A strength of a free-market economic system is that it emphasizes the fair and humane treatment of the less fortunate in society.

Question 50

One drawback of socialism is that it may result in a reduction in the individual's incentive to work hard.

Question 51

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

Question 52

Legislation has ended the monopoly status of utilities in some areas.

Question 53

Socialists believe that the primary economic function of the government is to promote rapid economic growth.

Question 54

Product differentiation is a key to success in monopolistic competition.

Question 55

The top tax rate on personal income in most socialist economies is usually lower than the top tax rate on personal income in capitalist economies.

Question 56

Permany is a nation with an economic system that closely approximates pure capitalism.While Permany'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.

Question 57

Skeeden is a nation with an economic system that features free markets with private ownership of businesses.It still relies on those businesses to create most wealth.However,over time the government of Skeeden has developed some programs and policies designed to help the needy and reduce the level of income inequality.It pays for these programs by levying relatively high taxes on businesses and workers.These arrangements suggest that the economy of Skeeden is moving closer to the adoption of pure capitalism.

Question 58

History shows that free-market capitalism leads to a fair and equitable distribution of wealth.

Question 59

Harry Cutter is the owner of Harry's Hairy Business,one of a large number of barbershops that compete against each other in the city where Harry lives.Harry has tried to attract more customers by staying open longer hours than most barbershops,and by advertising heavily on local radio to convince people that he offers the best haircuts in town.Harry appears to be operating in an oligopolistic market.

Question 60

Over the past decade,socialist economies have proven to be more successful at innovation and inventions than capitalist economies.

Question 61

In the service sector of the economy,the influx of machinery such as computers increases output per worker,but does little to improve the quality of services.

Question 62

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

Question 63

Socialism and communism are both variations of a free-market economy.

Question 64

In a mixed economy,some allocation of resources is made by government,and some by the market.

Question 65

Countries that wish to avoid shortages and surpluses of goods should adopt a communist economic system.

Question 66

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

Question 67

Most countries throughout the world can be classified as either purely capitalist or purely socialist.

Question 68

In the small nation of Equalia,the government owns all of the key businesses.There are severe shortages of many key items,such as food.These features of Equalia's economy are consistent with a communist economic system.

Question 69

One of the benefits of communism is that it allows individuals a great deal of freedom to make their own economic decisions.

Question 70

Most communist countries today are suffering from severe economic problems.

Question 71

The Canadian economy is a service economy.

Question 72

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

Question 73

The higher productivity is,the higher the costs of production are likely to be.

Question 74

Any output produced by Canadian firms is included in the value of the Canadian GDP,even if the output was produced in a foreign country.

Question 75

Like most nations,Canada has a mixed economy.

Question 76

An important economic trend has been for free-market economies to move more toward socialism while command economies move more toward free markets.

Question 77

Communism is an economic system where the state makes almost all economic decisions.

Question 78

In recent years,government leaders in Canada have reached broad agreement on the need for the government to continue expanding its role in health care and the regulation of banks and airlines.

Question 79

The total value of a country's output of final goods and services in a given year is known as the nation's gross domestic product (GDP).

Question 80

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