Deck 2: Understanding Basic Economics

Question 1

Scarcity creates competition for resources,and forces trade-offs on the part of every participant in the economy.

Answer 1

True
Explanation:Scarcity has two powerful effects:It creates competition for resources, and it forces trade-offs on the part of every participant in the economy.

Question 2

Movement along the supply curve typically slopes upward.

Answer 2

True
Explanation:Movement along the supply curve typically slopes upward:As prices rise, the quantity that sellers are willing to supply also rises. Similarly, as prices decline, the quantity that sellers are willing to supply declines.

Question 3

The situation in which one supplier thoroughly dominates a market and essentially shuts out other competitors is called monopoly.

Answer 3

True
Explanation:The situation in which one supplier thoroughly dominates a market and essentially shuts out other competitors is called monopoly.

Question 4

Capitalism is a term used to describe the free-market system,one in which private parties own and operate the majority of businesses and where competition,supply,and demand determine which goods and services are produced.

Question 5

Capital is the collective intelligence of an organization.

Question 6

In practice,no economy is truly a free-market economy.

Question 7

A deep and prolonged recession can be considered as a depression.

Question 8

As social equality is a major goal of planned systems,private enterprise and the pursuit of private gain are encouraged.

Question 9

By taking an ownership of 60% in General Motors in 2009,the U.S.nationalized the automaker.

Question 10

Frictional unemployment is caused by economic fluctuations.

Question 11

Macroeconomics studies economic behavior among consumers,businesses,and industries that collectively determine the quantity of goods and services demanded and supplied at different prices.

Question 12

Capital includes land and minerals that a business needs in order to produce goods and services.

Question 13

Deflation is an economic condition in which prices fall steadily throughout the economy.

Question 14

Economics is the study of how a society uses its scarce resources to produce and distribute goods and services to its citizens.

Question 15

The demand curve will shift to the left if the price of substitute products increases.

Question 16

The point at which quantity of a good or service equals the quantity demanded is known as the equilibrium point.

Question 17

The supply curve of a firm will shift to the right if technology increases the firm's production costs.

Question 18

Deciding how much money to spend on new manufacturing equipment versus launching a new advertising campaign is described as opportunity cost.

Question 19

Demand refers to the quantities of a good or service that producers will provide on a particular date at various prices.

Question 20

Cyclical unemployment is caused by a mismatch between workers' skills and current employer needs.

Question 21

GDP considers who is responsible for the production; GNP considers where the production occurs.

Question 22

A ________ is an economic system in which individuals and companies are largely free to decide what products to produce,how to produce them,whom to sell them to,and at what price to sell them.

A) planned system
B) regulated economy
C) socialist economy
D) free-market system
E) communist economy

Question 23

In a country,the state owns all major productive resources from electricity to transportation.The country has very few opportunities for entrepreneurship and the economic classes are absent.The economy of this country is characterized by which of the following economic systems?

A) anarchism
B) communism
C) capitalism
D) socialism
E) mixed

Question 24

A business owner has to decide whether the company should purchase new manufacturing equipment,open a new retail store in another city,or invest in a major advertising campaign.The value of the most appealing alternative that the business owner did not choose is its ________.

A) break-even value
B) decisional value
C) opportunity cost
D) factor analysis determination
E) resource value

Question 25

A business owner has to decide whether the company should purchase new manufacturing equipment,open a new retail store in another city,or invest in a major advertising campaign.This decision to give up something to get something else is referred to as ________.

A) resource development analysis
B) an arbitrage
C) demand/supply determination
D) a trade-off
E) factor analysis

Question 26

________ is a concept that refers to the finite supply of resources.

A) Redundancy
B) Scarcity
C) Deficit
D) Stringency
E) Shortage

Question 27

Sales taxes are the government's largest single source of revenue.

Question 28

________ is the study of how a society uses its scarce resources to produce and distribute goods and services.

A) Anthropology
B) Economics
C) Proxemics
D) Entrepreneurship
E) Sociology

Question 29

Microeconomics is the study of ________.

A) the costs of production as a means of stimulating the economy and policies that raise capital and labour output by increasing the incentive to produce
B) economic and financial data of the country by the application of mathematics and statistics
C) the overall working of an economy in the society including its monetary and fiscal policies
D) economic behavior among consumers, businesses, and industries that collectively determine the quantity of goods and services demanded and supplied at different prices
E) a nation's economic issues, such as the effect of government policies and the ownership of factors of production

Question 30

________ is the spirit of innovation,the initiative,and the willingness to take the risks involved in creating and operating businesses.

A) Capitalization
B) Socialization
C) Merchandizing
D) Automation
E) Entrepreneurship

Question 31

Economic development zones,established by governments,offer a variety of financial incentives to businesses that meet specific job creation and local investment criteria.

Question 32

The economic system of the U.S.is such that individuals own and operate the majority of businesses with limited economic intervention by the government.This is characteristic of a ________ economy.

A) mixed
B) planned
C) capitalist
D) free-market
E) communist

Question 33

Which of the following refers to people and their individual talents and capacities?

A) natural resources
B) knowledge
C) capital investments
D) human resources
E) entrepreneurship

Question 34

Leading economic indicators suggest changes that may happen in the economy in the future.

Question 35

The study of a country's larger economic issues,such as how firms compete,the effect of government policies,and how an economy maintains and allocates its scarce resources,is known as ________.

A) capitalism
B) entrepreneurship
C) microeconomics
D) socialism
E) macroeconomics

Question 36

The money,computers,machines,tools,and buildings that a business needs in order to produce its good and services are called ________.

A) natural resources
B) human resources
C) capital
D) knowledge
E) entrepreneurship

Question 37

________ lies somewhere between capitalism and communism,with a fairly high degree of government planning and some government ownership of capital resources.

A) Totalitarianism
B) Liberalism
C) Authoritarianism
D) Socialism
E) Anarchism

Question 38

Monetary policy involves changes in the government's revenues and expenditures to stimulate a slow economy or dampen a growing economy that is in danger of overheating and causing inflation.

Question 39

Which of the following is characteristic of a country with a planned economic system?

A) The economy relies chiefly on market forces to allocate goods and resources and to determine prices.
B) The economic system combines private and state enterprises with limited intervention from the government.
C) The economy subscribes to capitalistic competition, where private parties own and operate the majority of businesses.
D) The economic system is primarily capitalistic but there is some degree of government ownership of the means of production.
E) The economy is largely controlled by the government and freedom of choice is limited in order to accomplish government goals.

Question 40

The economic system that allows individuals the least degree of economic freedom is ________.

A) socialism
B) communism
C) capitalism
D) authoritarianism
E) mixed capitalism

Question 41

Which of the following is true of the pricing in a market of monopolistic competition?

A) No single firm can grow large enough to influence prices across the market.
B) Firms that excel in one or more aspects can gain some control over pricing.
C) All firms have considerable control over pricing.
D) Suppliers have total control over the pricing of products.
E) Prices are set by government mandate.

Question 42

Movement along the supply curve typically slopes upward because ________.

A) the amount of government regulation in an industry rises with increase in demand
B) the quantity that the sellers are willing to supply rises with decrease in demand
C) the amount of government regulation in an industry rises with increase in price
D) the quantity that the sellers are willing to supply rises with increase in government regulation
E) the quantity that the sellers are willing to supply rises with increase in price

Question 43

In a country,the government owns many of the key industrial sectors,such as transportation,health care,and communications.Private ownership,however,is allowed in other industries.What type of economic system does this country have?

A) communism
B) capitalism
C) free-market economy
D) socialism
E) totalitarianism

Question 44

Demand curves typically slope downward.This implies that a(n)________.

A) decrease in price will increase the quantity demanded
B) decrease in price will decrease the quantity demanded
C) increase in price will increase the quantity demanded
D) decrease in price will have no effect on quantity demanded
E) increase in price will have no effect on quantity demanded

Question 45

Which of the following is a distinct characteristic of a pure monopolistic economy?

A) many small suppliers, with virtually identical products.
B) small number of suppliers with products, which can be distinguished in important ways
C) only one supplier, with monopoly granted by government mandate
D) only one supplier, with monopoly achieved by innovation and specialization
E) few suppliers, with products that can be distinguished but are similar enough to be replacements

Question 46

A(n)________ is a graph showing the relationship between the amount of product that buyers will purchase at various prices,all other factors being equal.

A) supply curve
B) inflation rate
C) demand curve
D) deflation rate
E) competitive balance

Question 47

Colonel's Burgers sells 2500 of its flagship burger,Colonel's Treat,each month at a price of $10 each.The customers are willing to buy 2500 Colonel's Treat burgers each month at the same price.Hence,the price of $10 per burger is the ________.

A) sunk cost
B) break-even price
C) equilibrium price
D) opportunity cost
E) incremental cost

Question 48

When the number of competitors in a market is quite small,a situation known as ________ is created.

A) monopoly
B) monopsony
C) oligopoly
D) monopolistic competition
E) pure competition

Question 49

Which of the following actions of the government indicates the privatization of an industry?

A) allowing private businesses to operate in an industry that was previously operated by the government
B) discouraging private business to operate in an industry that is critical for the growth of the economy
C) acquiring the market leader to gain control of the industry and its resources
D) imposing taxes on scarce raw materials to discourage unfair pricing by its suppliers
E) imposing regulations on multinational businesses to protect local businesses

Question 50

Which of the following is a characteristic feature of economic contraction?

A) decreased unemployment rates
B) decreased consumer spending
C) increased income
D) increased employment
E) increased demand

Question 51

The point at which the demand and supply curves intersect - the point at which the quantity demanded and supplied are equal - is called the ________.

A) equilibrium point
B) aggregation point
C) marginal point
D) break-even point
E) distribution point

Question 52

The ________ depicts the relationship between prices and quantities that sellers will offer for sale,regardless of demand.

A) demand curve
B) supply curve
C) equilibrium point
D) business cycle
E) competitive analysis

Question 53

________ refers to the quantities of a good or service that producers will provide on a particular date at various prices.

A) Necessity
B) Supply
C) Demand
D) Utility
E) Want

Question 54

________ refers to the amount of a good or service that customers will buy at a given time.

A) Demand
B) Utility
C) Equilibrium
D) Necessity
E) Want

Question 55

In 2008,the British government became the majority owner of the Royal Bank of Scotland,the second-largest bank in Britain,in an attempt to prevent the bank from collapsing.This is an example of ________.

A) privatization
B) anarchism
C) capitalism
D) nationalization
E) socialization

Question 56

Due to government mandate,only one company has the exclusive right to provide electricity in all the cities of Borgia.This is an example of a ________.

A) pure competition
B) pure monopoly
C) regulated monopoly
D) monopolistic competition
E) regulated monopsony

Question 57

The U.S.government's use of Blackwater Security Consulting,a military security company,to guard officials and military installations in Iraq is an example of ________.

A) privatization
B) nationalization
C) capitalization
D) socialization
E) communism

Question 58

There are 10 pizza restaurants in a city.Each restaurant claims to have the "best pizza in town" and advertises the ways in which its pizza is different and better than its competitors' pizzas.This is an example of a(n)________.

A) regulated monopoly
B) monopsony
C) regulated monopsonic competition
D) monopolistic competition
E) monopoly

Question 59

________ is a situation in which no single firm is large enough to influence prices and distort the workings of the free-market system.

A) Pure monopoly
B) Pure monopsony
C) Pure competition
D) Regulated monopoly
E) Stabilized monopoly

Question 60

If consumer demand for a product decreases,the demand curve ________.

A) moves downward
B) moves upward
C) moves to the right
D) moves to the left
E) remains stationary

Question 61

Which of the following is an example of deregulation?

A) lifting redundant restrictions on airline competition
B) banning the sale of tobacco to minors under the age of 18
C) lowering the speed limit on an interstate highway
D) approving a proposed merger between Google and Microsoft
E) establishing economic development zones to attract new businesses

Question 62

Retail sales,on the day after Thanksgiving,are usually a good indicator of overall retail sales for the Christmas season.This is an example of a ________ indicator.

A) leading
B) conversionary
C) lagging
D) current
E) latent

Question 63

________ taxes,levied on the earnings of individuals and businesses,are the government's largest single source of revenue.

A) Income
B) Property
C) Sales
D) Excise
E) Payroll

Question 64

In early December,it was reported that housing rates in October 2010 were at its 6-month low,which resulted in increased home purchases.This is an example of a ________.

A) leading indicator
B) conversionary indicator
C) lagging indicator
D) current indicator
E) latent indicator

Question 65

________ taxes,levied on retail purchases made by customers,are collected by retail businesses at the time of the sale and then forwarded to state governments.

A) Income
B) Property
C) Sales
D) Excise
E) Payroll

Question 66

________ taxes are levied on earnings of individuals to help fund Social Security,Medicare,and unemployment compensation.

A) Excise
B) Payroll
C) Sales
D) Income
E) Property

Question 67

________ unemployment is the natural movement of workers into and out of jobs,such as when a person quits one job without first lining up a new job.

A) Structural
B) Intrinsic
C) Frictional
D) Cyclical
E) Seasonal

Question 68

When demand for goods and services drops,businesses reduce production,thereby requiring fewer workers.The unemployment resulting because of this phenomenon is known as ________ unemployment.

A) intrinsic
B) cyclical
C) structural
D) seasonal
E) frictional

Question 69

________ policy involves changes in the government's revenues and expenditures to stimulate a slow economy or dampen a growing economy that is in danger of overheating and causing inflation.

A) Fiscal
B) Taxation
C) Cyclical
D) Antitrust
E) Monetary

Question 70

A deep and prolonged recession is known as a(n)________.

A) contraction
B) stagnation
C) deflation
D) immobilism
E) depression

Question 71

Workers in a country are unable to find jobs that match their qualifications and the employers are unable to find employees with the skills required to perform the job.This has led to ________ unemployment in this country.

A) frictional
B) seasonal
C) structural
D) cyclical
E) intrinsic

Question 72

________ policy involves adjusting the nation's money supply by increasing or decreasing interest rates.

A) Fiscal
B) Taxation
C) Cyclical
D) Antitrust
E) Monetary

Question 73

________ is defined as having two consecutive quarters of decline in the country's gross domestic product.

A) Deflation
B) Stagnation
C) Immobilism
D) Stagflation
E) Recession

Question 74

________ is a steady rise in the average prices of goods and services throughout the economy.

A) Recession
B) Depression
C) Deflation
D) Inflation
E) Arbitration

Question 75

________ laws limit what businesses can and cannot do to ensure that all competitors have an equal chance of succeeding.

A) Fiscal
B) Discrimination
C) Antitrust
D) Stabilization
E) Equilibrium

Question 76

Which of the following types of unemployment is common in industries with predictable increases and decreases in customer demand?

A) structural
B) frictional
C) intrinsic
D) seasonal
E) cyclical

Question 77

The Federal Trade Commission (FTC)is charged with which of the following duties?

A) overseeing communication by telephone, telegraph, radio, and television
B) regulating and overseeing carriers engaged in interstate transportation
C) enforcing laws and regulations to prevent distribution of harmful foods and drugs
D) protecting the national transportation infrastructure
E) enforcing laws regarding unfair business practices and deceptive advertising

Question 78

When a downward swing or recession is over,the economy enters into a period of ________.

A) recovery
B) depression
C) contraction
D) stagnation
E) immobilism

Question 79

________ taxes are implemented,in part,to help control potentially harmful practices,on selected items such as gasoline,tobacco,and liquor.

A) Income
B) Property
C) Sales
D) Excise
E) Payroll

Question 80

Inflation is a major concern for consumers,businesses,and government leaders because it ________.

A) is a precursor to recession
B) decreases the purchasing power of consumers
C) decreases the production costs
D) increases the demand for commodities
E) decreases the opportunity cost of holding cash balances