Understanding Economic Systems and Business.docx

Understanding Economic Systems and Business TRUE/FALSE 1. A business is an organization that strives for a profit by providing goods and services desired by its customers. ANS: T REF: P. 4 | The Nature of Business 2. The major difference between a good and a service is how the producer uses the factors of production to create each. ANS: F The major difference is tangibility REF: P. 4 | The Nature of Business 3. Not-for-profit organizations have the same goals as for-profit organizations. ANS: F Not-for-profit organizations exist to achieve some goal other than profit. REF: P. 5 | The Nature of Business 4. Factors of production are common to all productive activities, regardless of the economic system. ANS: T REF: P. 5 | The Nature of Business 5. Labor, as a factor of production, relates only to the production of manufactured goods; services are not included. ANS: F Labor is the economic contribution of the people. REF: P. 5 | The Nature of Business 6. As a factor of production, capital includes money. ANS: F Capital is all the inputs used to produce goods and services and get them to the customer. REF: P. 5 | The Nature of Business 7. People who combine natural resources, labor, and capital in a profitable venture are called entrepreneurs. ANS: T REF: P. 5 | The Nature of Business 8. Many people consider knowledge to be a fifth factor of production. ANS: T REF: P. 6 | The Nature of Business 9. Business owners and managers have a great deal of control over the internal environment of business, which covers the day-to-day business decisions. ANS: T REF: P. 6 | Understanding the Business Environment 10. Some global corporations are large enough to create major changes in the external environment. ANS: F No one business is large enough or powerful enough to create major changes in the external environment. REF: P. 7 | Understanding the Business Environment 11. Demography is the study of how people use their free time, how people integrate their hobbies and their vocations, and how people make their purchase decisions. ANS: F Demography is the study of people's vital statistics. REF: P. 8 | Demographic Factors 12. The term Generation X refers to people born between 1964 and 1977. ANS: T REF: P. 8 | Demographic Factors 13. Baby boomers are Americans that are retiring or near-retirement age. ANS: T Baby boomers are Americans that are retiring or near-retirement age. Most are vital contributors to the U.S.'s economy. REF: P. 8 | Demographic Factors 14. Social factors influence the products people buy, the prices they pay, the effectiveness of specific promotions, and how, where, and when people expect to purchase products. ANS: T REF: P. 8 | Social Factors 15. Economics is the study of a society's financial institutions. ANS: F Economics is the study of how a society uses scarce resources to produce and distribute goods and services. REF: P. 9 | How Business and Economics Work 16. When Raoul Welsh is evaluating the construction industry in terms of interest rates, employment cycles, and the rate of new home building nationwide, he is looking at microeconomics. ANS: F Microeconomics focuses on individual parts of the economy. REF: P. 9 | Microeconomics and Macroeconomics 17. It takes four consecutive quarters of decline in the GDP for economists to consider the economy to be in a recession. ANS: F A decline in GDP that lasts for at least two consecutive quarters is generally accepted definition of a recession. REF: P. 14 | Striving for Economic Growth 18. Full employment means about 95 percent of the work force is employed. ANS: T REF: P. 14 | Keeping People on the Job 19. Tyron Lewis has recently quit his job in the administrative offices at the nearby hospital and is currently seeking a retail management position. He would be described as structurally unemployed. ANS: F Lewis is frictionally unemployed. REF: P. 15 | Types of Unemployment 20. Freida Bida lost her job as a result of a recession and would be described as experiencing cyclical unemployment. ANS: T REF: P. 15 | Types of Unemployment 21. Belinda Asher works in a vegetable processing plant and is out of work about six months a year due to the periodic harvest times. She can be described as seasonally unemployed. ANS: T REF: P. 15 | Types of Unemployment 22. The situation in which the average prices of all products are rising is called inflation. ANS: T REF: P. 16 | Keeping Prices Steady 23. An increase in the price of crude oil could trigger cost-push inflation. ANS: T REF: P. 17 | Types of Inflation 24. Monetary policy deals with tax revenues and expenditures at the national level. ANS: F Monetary policy controls the amount of money in circulation. REF: P. 17 | Monetary Policy 25. The Federal Reserve System can print money and raise taxes. ANS: F The Federal Reserve is the central banking unit of the U.S. REF: P. 17 | Monetary Policy 26. When Congress passes a law to lower individual tax rates, it is creating fiscal policy. ANS: T REF: P. 18 | Fiscal Policy 27. The national debt is the accumulation of deficits that have occurred in the past as a result of government expenditures exceeding tax revenues. ANS: T REF: P. 18 | Fiscal Policy 28. The higher the price of a good or service, the greater the quantity demanded. ANS: F Typically, the higher the price, the lower demand is. REF: P. 20 | Microeconomics: Zeroing on Business and Consumers 29. The higher the price of a good or service, the greater the amount a producer is willing to supply. ANS: T REF: P. 20 | Microeconomics: Zeroing on Business and Consumers 30. At the equilibrium point, quantity demanded equals quantity supplied. ANS: T REF: P. 21 | Microeconomics: Zeroing on Business and Consumers 31. A farmer's market where sixty farmers come weekly to sell the produce they grow in their gardens is an example of monopolistic competition. ANS: F This would be an example of pure competition. REF: P. 25 | Competing in a Free Market 32. No true examples of a pure monopoly exist today. ANS: F Public utilities are examples of pure monopolies. REF: P. 25 | Competing in a Free Market 33. Monopolistic competition is a market structure in which entry is easy. ANS: T REF: P. 25 | Competing in a Free Market 34. Legal challenges arising from laws designed to control anticompetitive behavior occur in monopolistic competition. ANS: F These challenges arise in oligopolies. REF: P. 25 | Competing in a Free Market 35. A strategic alliance is a cooperative agreement between business firms. ANS: T REF: P. 29 | Trends in Economics and Competition MULTIPLE CHOICE 1. Which of the following is an example of a business? a. Jack & Jill, a specialty clothing store for young children b. Wal-Mart c. Ford Motor Company d. Lawson & Tyler law offices e. all of the above ANS: E A business is an organization that strives for a profit by providing goods and services desired by customers. REF: P. 4 | The Nature of Business 2. Which of the following is the best example of a service? a. the pleasure you derive from seeing a good play b. the license tags you purchased for your car c. the hamburger you bought for lunch d. the gallon of milk you purchased at the convenience store e. the grill on which you cook steak ANS: A A service is an intangible offering of a business. REF: P. 4 | The Nature of Business 3. Which of the following is the best example of a good? a. the physical examination you received from your doctor b. the birthday candles you purchased to go on your sister's birthday cake c. the airplane flight you took to attend a funeral d. the driving lessons you took e. the life guarding class you took last summer ANS: B Goods are tangible items manufactured by businesses. REF: P. 4 | The Nature of Business 4. Which of the following businesses provides its customers with a service? a. a pecan grower b. a wheat farmer c. a mattress manufacturer d. a used book store e. a law office ANS: E A service is an intangible offering of a business. REF: P. 4 | The Nature of Business 5. Which of the following businesses provides its customers with a good? a. hotel b. hair salon c. accounting firm d. movie theater e. bicycle manufacturer ANS: E Goods are tangible items manufactured by businesses. REF: P. 4 | The Nature of Business 6. Which of the following is NOT an example of a good that would be sold in a department store? a. wedding dress b. white linen table clothes c. the advice of a wedding planner d. silk flower bouquets e. book on wedding etiquette ANS: C REF: P. 4 | The Nature of Business 7. What is the primary difference between a good and a service? a. A good costs more to produce than a service. b. A service is tangible, and a good is intangible. c. A good is tangible, and a service is intangible. d. A good costs more to market than a service e. The development costs for a service is higher than for a product. ANS: C REF: P. 4 | The Nature of Business 8. The ____ of any country is measured by the output of goods and services people can buy with the money they have. a. standard of living b. consumer productivity c. input per person d. quality of life e. total consumption rate ANS: A REF: P. 4 | The Nature of Business 9. Which of the following countries has a high standard of living? a. Malaysia b. the United States c. Guatemala d. Nigeria e. Bolivia ANS: B REF: P. 4 | The Nature of Business 10. The standard of living in any country is: a. measured by subtracting the supply of goods and services from the demand for goods and services b. determined by the money left over after all expenses are paid c. the general level of human happiness based on such things as life expectancy, educational standards, health, sanitation, and leisure time d. measured by the output of goods and services people can buy with the money they have e. higher for less developed countries like Angola, Bangladesh, and Ceylon than it is for the U.S. ANS: D REF: P. 4 | The Nature of Business 11. The standard of living is low in Honduras. This means: a. it has a positive balance of trade b. it has higher wages than the U.S. c. its citizens cannot afford to buy much d. it has a negative balance of trade e. it attracts risk-aversive entrepreneurs ANS: C REF: P. 4 | The Nature of Business 12. The quality of life is: a. measured by subtracting the supply of goods and services from the demand for goods and services b. determined by the money left over after all expenses are paid c. the general level of human happiness based on such things as life expectancy, educational standards, health, sanitation, and leisure time d. measured by the output of goods and services people can buy with the money they have e. higher for less developed countries like Angola, Bangladesh, and Ceylon than it is for the U.S. ANS: C REF: P. 4 | The Nature of Business 13. ____ is the amount of money remaining from a firm's sales revenue after it deducts production costs, interest costs, and taxes. a. Profit b. A dividend c. Working capital d. Net sales e. Retained earnings ANS: A REF: P. 4 | The Nature of Business 14. Hudson Kling mows yards during the summer. Which of the following is an example of revenue for Kling? a. a tire repair kit and extra air filters for the lawn mower b. a trip to the lawn mower repair shop to get his machines blade sharpened c. the new pair of shoes he had to buy because he accidentally ran over a pair with his mower d. the $10 tip Mrs. Pierre gave him for doing such a fine job of mowing her yard e. the gas can he had to buy so his mower wouldn't run out of gas while he mowed Mr. Johnson's five-yard pasture ANS: D REF: P. 4 | The Nature of Business 15. Iris Souza started the summer with $30. She took $10 and made signs for her dog walking service. She posted the signs all over her neighborhood. She used the other $20 to buy a stout leash and a pooper-scooper. At the end of the summer, after buying herself a new pair of shoes for $50 (she had worn her other shoes out walking dogs), she had $125 left. What was Souza's profit for her summer job? a. $30 b. $80 c. $125 d. $175 e. $205 ANS: C REF: P. 4 | The Nature of Business 16. Iris Souza started the summer with $30. She took $10 and made signs for her dog walking service. She posted the signs all over her neighborhood. She used the other $20 to buy a stout leash and a pooper-scooper. At the end of the summer, after buying herself a new pair of shoes for $50 (she had worn her other shoes out walking dogs), she had $125 left. Calculate Souza's costs for her summer job? a. $30 b. $50 c. $80 d. $125 e. $175 ANS: C Her costs equal the initial $30 investment, plus the $50 for the shoes. REF: P. 4 | The Nature of Business 17. Rudy and Ritchie Ling ran a camp this summer for children in their neighborhood. Rudy spent $135 on supplies and earned $250 before expenses. Ritchie spent $140 on supplies and made $210 before expenses. What is the combined revenue for the two brothers? a. $75 b. $170 c. $290 d. $415 e. $460 ANS: E Revenues equal $210 plus $250. REF: P. 4 | The Nature of Business 18. Curtiss Anaya is planning to sell kites on the beach this summer to pay for next year's school expenses. ____ refers to the potential that Curtiss will lose money and waste his time and end up at the end of the summer with not enough money to cover his expenses. a. Profit b. Risk c. Revenue d. Opportunity e. Cost ANS: B Profit is the money he will earn after all expenses are paid. REF: P. 4 | The Nature of Business 19. ____ is the money a company earns from providing services or selling goods to customers. a. Profit b. Opportunity c. Gross margin d. Revenue e. Amortization ANS: D REF: P. 4 | The Nature of Business 20. Which of the following is the BEST example of a not-for-profit business? a. the American Cancer Society b. McDonald's c. Kellogg's d. FedEx delivery service e. Hightower Construction Company ANS: A A not-for-profit business exists to achieve some goal other than profit. REF: P. 5 | The Nature of Business 21. Inputs, such as natural resources, labor, capital, and entrepreneurship, are known as: a. elemental factors b. factors of production c. creative factors d. building blocks e. elements of construction ANS: B REF: P. 5 | The Nature of Business 22. As one of the factors of production, natural resources includes all of the following EXCEPT: a. farmland b. coal c. water d. oil deposits e. machinery ANS: E Natural resources are commodities that are useful inputs in their natural state. REF: P. 5 | The Nature of Business 23. As one of the factors of production, capital includes all of the following EXCEPT: a. tools b. machinery c. equipment d. money e. delivery trucks ANS: D Capital is the input used to produce goods and services and get them to customers. REF: P. 5 | The Nature of Business 24. Labor, as a factor of production, refers to: a. all workers in business b. rent and wages c. full employment d. tools and wages e. only hourly wage earners ANS: A REF: P. 5 | The Nature of Business 25. Which of the following is NOT an example of a factor of production? a. entrepreneurship b. capital c. competition d. natural resources e. labor ANS: C Factors of production are inputs used to create goods and services. REF: P. 5 | The Nature of Business 26. Which of the following is an example of a factor of production? a. economy of scale b. competition c. free market d. labor e. mass production ANS: D Factors of production are inputs used to create goods and services. REF: P. 5 | The Nature of Business 27. Thom Nielssen owns 500 acres of woodland. His forest is an example of which factor of production? a. capital b. natural resources c. entrepreneurship d. labor e. expense ANS: B Natural resources are commodities that are useful inputs in their natural state. REF: P. 5 | The Nature of Business 28. The new employee that Dunn Photographic Services hired is an example of which factor of production? a. natural resources b. capital c. wages d. interest e. labor ANS: E REF: P. 5 | The Nature of Business 29. ____ combine the inputs in the production of goods and services for what are intended to be profitable ventures. a. Privateers b. Marketers c. Economists d. Cooperators e. Entrepreneurs ANS: E REF: P. 5 | The Nature of Business 30. Corrine Attlee has always enjoyed cooking more than doing anything else. Atlee has decided to quit her job as a college professor and invest her life savings in starting a restaurant. Attlee is an example of a(n): a. production worker b. sales manager c. entrepreneur d. monetary manager e. fiscal manager ANS: C Entrepreneurs are people who combine the inputs of natural resources, labor, and capital to produce goods or services. REF: P. 5 | The Nature of Business 31. The fifth factor of production identified by many managers and academicians is: a. nanotechnology b. productivity c. quality d. social responsibility e. knowledge ANS: E REF: P. 6 | The Nature of Business 32. ____ are workers who create, distribute, and apply knowledge. a. Data managers b. Knowledge workers c. Information analysts d. Data prospectors e. Information conduits ANS: B REF: P. 6 | The Nature of Business 33. Which of the following is an example of a demographic variable? a. a person's attitude toward premarital sex b. a person's love of reading c. a person's value system d. a person's age e. all of the above ANS: D REF: P. 8 | Demographic Factors 34. Demography is the study of: a. people's vital statistics b. people's attitudes, interests, and values c. emerging technology d. social trends e. global competition ANS: A REF: P. 8 | Demographic Factors 35. Members of Generation Y: a. represent the first generation of latchkey children b. are more likely to be unemployed or underemployed than any other previous generation c. cherish convenience and cling to their youth d. were born between 1946 and 1964 e. are not accurately described by any of the above ANS: E REF: P. 8 | Demographic Factors 36. Those people designated by demographics as ____ are defined as Americans born between about 1977 and 1997. a. baby boomers b. Generation X c. latchkey kids d. Generation Y e. tweens ANS: D REF: P. 8 | Demographic Factors 37. Which of the following statements about those people designated by demographics as Generation Y is true? a. Generation Y controls 50 percent of all consumer spending. b. Generation Y members tend to be more tolerant of multiculturalism than their parents. c. Generation Y members spend more than any other demographic group on personal services. d. The typical Generation Y member is at the stage in life where he or she has made a career choice and has started his or her family. e. None of the above statements about Generation Y is true. ANS: B REF: P. 8 | Demographic Factors 38. Members of Generation X: a. were born between 1946 and 1964 b. represent the first generation of latchkey children c. have fueled the growing demand for home delivery d. are driving the educational software industry e. are over the age of 50 ANS: B REF: P. 8 | Demographic Factors 39. Which of the following statements about those people designated by demographics as Generation X is true? a. Generation X members are naïve consumers. b. Generation X controls 50 percent of all consumer spending. c. The children of Generation X are the first latchkey kids. d. Generation X members are savvy and cynical consumers. e. All of the above statements about Generation X are true. ANS: D REF: P. 8 | Demographic Factors 40. Which of the following statements about baby boomers is true? a. The baby boomer market is divided into two groups--Generation X and Generation Y. b. Baby boomers represent the first generation of latchkey children. c. Baby boomers like convenience and are willing to pay for services. d. Baby boomers tend to be very savvy and very cynical consumers. e. The typical baby boomer is at the stage in life where he or she has made a career choice and has started his or her family. ANS: C REF: P. 8 | Demographic Factors 41. Which of the following demographic groups would most likely contain empty nesters? a. Younger Boomers b. Generation X c. Hispanic-Americans d. Generation Y e. Older Boomers ANS: E REF: P. 8 | Demographic Factors 42. How has diversity impacted the marketing and customization of products? a. The buying power of Asian Americans is declining. b. There are no significant differences in the various segments of the Hispanic population. c. The United States will never be a multicultural society. d. Along with their numbers, the buying power of minorities is growing. e. The size of the Hispanic market is declining. ANS: D REF: P. 8 | Demographic Factors 43. Which of the following is probably the MOST difficult environmental factor for owners and managers to forecast, influence, or integrate into business plans? a. demographic change b. social change c. global competition d. emerging technology e. evolving economic systems ANS: B REF: P. 9 | The Social Environment 44. Individual ownership of property is a key element in: a. socialism b. capitalism c. communism d. a command economy e. utopianism ANS: B REF: P. 11 | Capitalism 45. An economic system based on competition in the marketplace and private ownership of the factors of production is known as: a. capitalism b. utopianism c. socialism d. democratic economy e. privatization ANS: A REF: P. 11 | Capitalism 46. A key element in capitalism is: a. a low standard of living b. individual ownership of property c. government ownership of property d. government control of market e. continued growth ANS: B See Exhibit 1.2. REF: P. 10 | Capitalism 47. An economic system based on complete freedom of trade and little, if any, government control is known as: a. capitalism b. utopianism c. socialism d. democratic economy e. privatization ANS: A See Exhibit 1.2. REF: P. 10 | Capitalism 48. The main incentive in capitalism is: a. high wages b. profit c. low taxation d. reasonable interest rates e. a shorter work week ANS: B REF: P. 11 | Capitalism 49. All of the following are characteristics unique to the capitalistic or private enterprise system EXCEPT: a. profits b. free choices c. economies of scale d. ownership of property e. competition ANS: C REF: P. 11 | Capitalism 50. In a ____, the factors of production are owned collectively rather than individually, and no incentives to work harder or to produce quality products are provided. a. private enterprise b. communist economic system c. mixed economy d. socialistic e. capitalistic ANS: B See Exhibit 1.2. REF: P. 10 | Communism 51. The ____ system emphasizes a classless society. a. private enterprise b. socialist economic c. revolutionary enterprise d. social capitalist e. communist ANS: E REF: P. 11 | Communism 52. With a communist economy system,: a. there is complete freedom of trade b. consumers can expect a mixed economic reaction c. there are strong incentives for workers d. basic industries such as railroads and utilities are owned by government, while other industries are owned by the private sector e. none of the above is true ANS: E REF: P. 11 | Communism 53. In terms of economic trends, the complete opposite to communism is: a. a command economy b. socialism c. revolutionary enterprise d. capitalism e. public enterprise ANS: D REF: P. 11 | Communism 54. The economic system under which basic industries are operated by the government or owned by the private sector under strong government control is called: a. capitalism b. socialism c. communism d. public enterprise e. laissez faire ANS: B REF: P. 11 | Socialism 55. The government of Cuba owns or controls all of the basic industries in their economy. Cuba operates in which type of economic system? a. socialism b. communism c. laissez faire d. capitalism e. monopolism ANS: B REF: P. 11 | Communism 56. Which of the following statements about a socialist economic system is true? a. The government owns or controls the major industries. b. The government owns no major industries. c. Private individuals own and control the major industries. d. Private individuals own all companies and industries. e. Major industries are internationally-owned. ANS: A REF: P. 11 | Socialism 57. The key element in socialism is: a. competition b. private property c. full employment d. governmental control e. freedom of choice ANS: D REF: P. 11 | Socialism 58. In Canada, the government owns the communications, transportation, and utilities industries, while most other activity is carried on by private enterprise. Canada is an example of: a. private enterprise b. communism c. private governmentalism d. a mixed economy e. social capitalism ANS: D REF: P. 12 | Mixed Economic Systems 59. Because the government owns the factors of production in public lands, postal service, and some water resources, Great Britain is considered a(n): a. mixed economy b. quasi-public economy c. socialistic economy d. semi-socialistic economy e. unified-socialistic economy ANS: A See Exhibit 1.2. REF: P. 10 | Mixed Economic Systems 60. A "mixed economy" is an economic system that: a. combines socialism and communism b. combines private and government ownership of the factors of production c. is owned collectively by the people d. emphasizes government-controlled monopolies e. relies on a combination of oligopoly and monopoly ANS: B REF: P. 12 | Mixed Economic Systems 61. In a mixed economy, the government is involved in the economic system through: a. the management of nonprofit organizations b. ownership of media c. its determination of standard of living scales d. taxing, spending, and welfare activities e. none of the above ANS: D REF: P. 12 | Mixed Economic Systems 62. Successful owners and managers must continually study which of the following elements of the environment to remain successful? a. demographic change b. social change c. evolving economic systems d. emerging technology e. all of the above ANS: E REF: P. 12 | Understanding the Business Environment 63. An understanding the external business environment requires marketers to be aware of: a. their customers' wants and needs b. how employees are interacting with customers c. how employees are interacting with other employees d. changes in the law which impact how business is conducted e. how managers interrelate with employees ANS: D REF: P. 13 | Understanding the Business Environment 64. Which of the following words best describes the business environment? a. tangible b. static c. dynamic d. fixed e. stagnant ANS: C REF: P. 13 | Understanding the Business Environment 65. Inflation and interest rates are most closely associated with ____ within the external business environment. a. cultural factors b. economic forces c. competitive trends d. technological trends e. managerial downsizing ANS: B REF: P. 14 | Economic Forces 66. Laws passed by the U.S. Congress concerning how U.S. businesses trade with Cuba would be an example of ____ factors that influence the business environment. a. social and cultural b. demographic c. economic d. competitive e. political and legal ANS: E REF: P. 8 | Political and Legal Influences 67. The most basic measure of economic growth is the: a. consumer price index b. gross domestic product c. producer price index d. total of all goods and services produced e. combined producer and consumer price indices ANS: B REF: P. 14 | Macroeconomics: The Big Picture 68. If you were told the output of goods and services produced in Tajikistan, a former Soviet Republic had increased by eight percent in 2006, you would correctly refer to this increase as: a. growth standardization b. economic growth c. nationalized growth d. an example of recessionary growth e. output maximization ANS: B Economic growth is defined as an increase in a nation's output of goods and services. REF: P. 14 | Macroeconomics: The Big Picture 69. The GDP of Poland in 2006 was approximately $512 billion. This $512 billion represents: a. how much money Polish households spent in 2006 b. the estimated growth of discretionary profit in Poland for 2006 c. the actual growth of discretionary profit in Poland in 2006 d. the total value of all final goods and services produced in Poland during 2006 e. the taxable portion of the materials produced by the production sector of the nation in 2006 ANS: D GDP stands for the gross domestic product. REF: P. 14 | Macroeconomics: The Big Picture 70. Imagine that you were reading an international marketing text in which you learned that the GDP for a nation that was a member of the former Soviet Union was $1.56 billion. A few pages later in the same text, the book states that that nation's real GDP was $800,000. From reading this information, you would know that: a. this former member of the Soviet Union had a high rate of inflation b. the various methods used to calculate GDP do not produce the same results c. GDP is an approximation of the actual total value and is never precise d. the second GDP measurement reflected only the value of the products produced in the nation and did not include the value of services e. the former member of the Soviet Union was experiencing a recession ANS: A With inflation, the average of all prices of goods and services rises. REF: P. 14 | Macroeconomics: The Big Picture 71. When determining the GDP in 2006 for Chile, the economists adjusted the current market prices by 3.1 percent to correct for inflated values. This adjusted GDP is called the nation's ____ GDP. a. interpreted b. real c. frictional d. cyclical e. non-inflated ANS: B With inflation, the average of all prices of goods and services rises. REF: P. 14 | Macroeconomics: The Big Picture 72. The ____ GDP takes inflation into account and uses adjusted market prices. a. frictional b. real c. adjusted d. cyclical e. re-evaluated ANS: B REF: P. 14 | Macroeconomics: The Big Picture 73. Patterns of expansion and contraction in aggregate economic activity, as measured by GDP, are called: a. business standards b. business cycles c. cyclical adjustments d. economic yields e. standards of business deviation ANS: B REF: P. 14 | Macroeconomics: The Big Picture 74. A decline in real GDP that lasts for two consecutive quarters is called a(n): a. economic downsizing b. depression c. recession d. resource divestment e. economic regression ANS: C REF: P. 14 | Macroeconomics: The Big Picture 75. As soon as any nation has experienced two consecutive quarterly declines of its gross domestic product, that nation will be in a(n): a. recession b. depression c. regression d. adjustment period e. economic downsizing ANS: A REF: P. 14 | Macroeconomics: The Big Picture 76. The government does not consider full employment to mean 100 percent of its citizens are employed because: a. some people are preparing for later employment by attending school b. some people choose to stay home to raise children rather than have a job outside the home c. some people are temporarily unemployed while they wait to start new jobs d. some people are not working because jobs are limited, and competition for jobs is intense. e. all of the above conditions can and do exist ANS: E REF: P. 15 | Macroeconomics: The Big Picture 77. In 2005, more than two-thirds of population of Haiti were not working, but were actively seeking employment. This 66.67 percent represents the nation's: a. inflationary unemployment b. recessionary unemployment c. position on the international unemployment scale d. employment of scale e. unemployment rate ANS: E The unemployment rate is the percentage of the total labor force that is actually looking for work but is not actually working. REF: P. 15 | Macroeconomics: The Big Picture 78. The unemployment rate is the percentage of the total work force that is not working but is: a. drawing unemployment checks b. physically and mentally able to work c. actively looking for work d. on vacation e. laid off, terminated, or downsized due to some economic activity outside of their control ANS: C REF: P. 15 | Macroeconomics: The Big Picture 79. Which of the following is NOT a form of unemployment? a. frictional unemployment b. seasonal unemployment c. fiscal unemployment d. cyclical unemployment e. structural unemployment ANS: C REF: P. 15 | Macroeconomics: The Big Picture 80. Avery Lutz quit his landscaping job in Florida and has moved to British Colombia, where he is actively seeking employment in the real estate industry. This is an example of ____ unemployment. a. structural b. fiscal c. frictional d. predictable e. seasonal ANS: C Frictional unemployment is short-term employment that is not related to the business cycle. REF: P. 15 | Macroeconomics: The Big Picture 81. Jarvis Washington recently quit his job as a veterinarian's assistant and is now trying to find a job with another veterinarian. This is an example of ____ unemployment. a. structural b. regulated c. fiscal d. expected e. frictional ANS: E Frictional unemployment is short-term employment that is not related to the business cycle. REF: P. 15 | Macroeconomics: The Big Picture 82. For the past ten years, Lou Lopez has been a welder for Ford Motor Company. This morning her boss informed her a robot would replace her. Lopez's unemployment is an example of ____ unemployment. a. frictional b. cyclical c. mechanical d. structural e. operational ANS: D Structural unemployment is caused by a mismatch between the available jobs and the skills of the available workers. REF: P. 16 | Macroeconomics: The Big Picture 83. Forty-five percent of the labor force in Armenia is involved in the agricultural sector, but the economic growth in the nation comes from industry and tourism. What type of unemployment would such a mismatch of ability and job requirements cause? a. frictional b. predictable c. mechanical d. structural e. operational ANS: D Structural unemployment is caused by a mismatch between the available jobs and the skills of the available workers. REF: P. 16 | Macroeconomics: The Big Picture 84. Structural unemployment is unemployment that results from: a. the changing structure of an industry b. the restructuring of an organization c. the change in business cycles d. the change in seasonal needs e. people moving to new geographical areas ANS: A REF: P. 16 | Macroeconomics: The Big Picture 85. The laborers displaced due to assembly line automation at the textile plant may not have the skills needed to operate the computerized machines that replaced them. This is an example of ____ unemployment. a. cyclical b. frictional c. structural d. operational e. fiscal ANS: C Structural unemployment is caused by a mismatch between the available jobs and the skills of the available workers. REF: P. 16 | Macroeconomics: The Big Picture 86. In 2008 Michigan had the highest unemployment rate in the country as the automobile manufacturing industry responded to an economic downturn throughout the nation. The workers in the automobile industry were experiencing ____ unemployment. a. seasonal b. structural c. cyclical d. frictional e. operational ANS: C When the economy is in a recession, many companies must lay off workers, which causes cyclical unemployment. REF: P. 16 | Macroeconomics: The Big Picture 87. When the economy is in a recession, many companies must lay off workers, which causes ____ unemployment. a. structural b. cultural c. cyclical d. frictional e. operational ANS: C REF: P. 16 | Macroeconomics: The Big Picture 88. Martha Maguire recently was laid off from her telemarketing job for a large catalog retailer. Each January, Maguire is laid off as soon as the Christmas season is over. She will be hired back sometime during the summer. In terms of unemployment, Maguire is a good example of ____ unemployment. a. structural b. seasonal c. tactical d. frictional e. operational ANS: B Seasonal unemployment occurs during specific seasons in certain industries. REF: P. 16 | Macroeconomics: The Big Picture 89. On the island of Martha's Vineyard, jobs are plentiful during the summer months, but difficult to find in September once the tourist season ends and many restaurants and inns close. What kind of unemployment do people who work in the island's restaurants experience annually? a. structural b. seasonal c. geographical d. operational e. tactical ANS: B Seasonal unemployment occurs during specific seasons in certain industries. REF: P. 16 | Macroeconomics: The Big Picture 90. The situation in which the average prices of all products is rising is called: a. deflation b. inflation c. upsizing d. purchase power acceleration e. rejuvenation ANS: B REF: P. 16 | Keeping Prices Steady 91. The two types of inflation are: a. demand-pull and supply-push b. recessionary and recovery c. cost-pull and supply-push d. demand-pull and cost-push e. demand push and supply-pull ANS: D REF: P. 16 | Types of Inflation 92. ____ inflation is inflation that occurs when the demand for goods and services is greater than the supply. a. Supply-side b. Demand-push c. Demand-side d. Cost-push e. Demand-pull ANS: E REF: P. 16 | Types of Inflation 93. ____ inflation is triggered by increases in production costs which increase the costs of final goods and services. a. Supply-side b. Demand-push c. Demand-side d. Cost-push e. Demand-pull ANS: D REF: P. 16 | Types of Inflation 94. The inflation rate in Algeria in 2005 was 1.9 percent. This means that Algerians in 2005: a. saw their purchasing power increase slightly from what it was in 2004 b. saw a decline in gross domestic profit (GDP) c. saw their purchasing power decrease slightly from what it was in 2004 d. experienced demand-push inflation e. saw an economy recovery ANS: C REF: P. 16 | Types of Inflation 95. One of the reasons for the growing inflation rate in Argentina is due to increases in production costs of goods and services which occurred as a result of a decline in a suitable labor force. This would be an example of ____ inflation. a. cost-push b. demand-push c. supply-side d. cost-pull e. demand-pull ANS: A REF: P. 16 | Types of Inflation 96. The average price of construction materials increased by 8.1 percent in 2005. The head of the Home Builders Association said it was due totally to increases in lumber, metal, and labor costs. The 8.1 percent increase is probably an example of: a. deflation b. price gouging c. poor resource utility d. inflation e. resource munificence ANS: D Inflation is the situation in which the average of all prices of goods and services rises. REF: P. 16 | Keeping Prices Steady 97. Last year, a mother in a small African nation could buy a pound of flour for the U.S. equivalent of $1.30. Six months ago, an identical pound of flour costs $3.40. Today she would need $5.60 to buy that pound of flour. This example of the general upward movement of prices is called: a. inflation b. deflation c. discretionary pricing d. supply-side pricing e. profit maximization pricing ANS: A REF: P. 16 | Keeping Prices Steady 98. When the price of gasoline rises by 40 percent, but your salary remains the same, it is an example of a decline in your: a. standard of living b. purchasing power c. GDP index d. cost of living index e. gross economic income ANS: B Purchasing power is the value of what money can buy. REF: P. 16 | Keeping Prices Steady 99. The ____ represents the prices of a market basket of goods and services as measured monthly by the Department of Labor. a. inflation rate b. producer price index (PPI) c. wholesale cost index (WCI) d. consumer price index (CPI) e. GDP index ANS: D REF: P. 17 | Types of Inflation 100. Which of the following is NOT a component of the consumer price index? a. gas purchased by commuters b. pizzas ordered delivered to a birthday party c. entry fees to state and national parks d. tickets to baseball and football games e. lumber used in the construction industry ANS: E The CPI measures the price of a market basket of goods and services purchased by typical urban consumers. REF: P. 17 | How Inflation is Measured 101. The ____ measures prices paid by producers and wholesalers for commodities, including raw materials and finished products. a. wholesale cost index b. GDP index c. purchasing power index d. raw material price index e. producer price index ANS: E REF: P. 17 | How Inflation is Measured 102. ____ refers to a government's programs for controlling the amount of money in circulation. a. Macroeconomics b. Monetary policy c. Microeconomics d. Fiscal policy e. Economic control ANS: B REF: P. 17 | Achieving Macroeconomic Goals 103. The ____ controls the amount of money its circulation. a. Federal Reserve System b. Savings and Loan Association c. U.S. Congress d. U.S. Treasury Department e. FDIC ANS: A REF: P. 17 | Achieving Macroeconomic Goals 104. The Federal Reserve System can do all of the following EXCEPT: a. sell government securities b. raise interest rates c. tighten money supply d. lower taxes e. print money ANS: D REF: P. 17 | Achieving Macroeconomic Goals 105. The implementation of a contractionary policy by the Federal Reserve would result in: a. lower interest rates b. increased economic growth c. lower unemployment d. increased spending e. lower inflation ANS: E REF: P. 17 | Achieving Macroeconomic Goals 106. When the Federal Reserve implements a ____, it tightens the money supply by selling government securities or raising interest rates. a. shrinkage policy b. contractionary policy c. fiscal reduction strategy d. retrenchment strategy e. policy of downsizing ANS: B REF: P. 17 | Achieving Macroeconomic Goals 107. When the Federal Reserve implements a(n) ____, it increases the growth of the money supply. a. retrenchment strategy b. fiscal reengineering c. expansionary policy d. policy of fiscal augmentation e. market growth strategy ANS: C REF: P. 17 | Achieving Macroeconomic Goals 108. The implementation of an expansionary policy by the Federal Reserve would result in: a. lower interest rates b. decreased economic growth c. higher unemployment d. lower inflation e. decreased spending ANS: A REF: P. 17 | Achieving Macroeconomic Goals 109. When the government changes taxes on consumers and businesses, it is dealing with ____ policy. a. fiscal b. monetary c. inflationary d. recessionary e. expansionary ANS: A REF: P. 18 | Achieving Macroeconomic Goals 110. Fiscal policy is concerned with: a. credit and spending b. taxation and spending c. investments and insurance d. credit and banking e. banking and insurance ANS: B REF: P. 18 | Achieving Macroeconomic Goals 111. When the government decides to cut military spending, it is implementing a(n) ____ policy. a. microeconomic b. operational c. monetary d. fiscal e. expansionary ANS: D REF: P. 18 | Achieving Macroeconomic Goals 112. A(n)____ occurs if a country's total expenditures are higher than the revenues received from the taxes it gathers. a. national surplus b. federal budget deficit c. annual expenditure surplus d. national priority deficit e. expenditure-tax gap ANS: B REF: P. 19 | Achieving Macroeconomic Goals 113. In 2005, the government of Bangladesh spent $8.59 billion on government programs, and had revenues of $5.993 billion. This indicates that Bangladesh like the United States had a: a. expansionary policy b. low GDP c. high CPI d. low PPI e. budget deficit ANS: E REF: P. 19 | Achieving Macroeconomic Goals 114. ____ is the situation that occurs when government spending replaces spending by the private sector. a. Deficit spending b. Demarketing c. Public-sector inflation d. Crowding out e. Fiscal flushing ANS: D REF: P. 19 | Achieving Macroeconomic Goals 115. The Department of Natural Resources spent money to promote the use of national parks as perfect sites for a summer vacation causing motels, campgrounds and other tourist attractions in the private sector to become less attractive to consumers.  Consequently consumers spent more money on trips to the national parks and less money in the private sector for their vacations resulting in ____.  a. deficit spending b. demarketing c. public-sector inflation d. crowding out e. fiscal flushing ANS: D Crowding out is the situation that occurs when government spending replaces spending by the private sector. REF: P. 19 | Achieving Macroeconomic Goals 116. The national debt is the: a. amount of money owed each year by the taxpayers b. cumulative total of past national deficits c. cumulative total owed to U.S. by foreign countries d. total amount owed by corporations e. deficit a country creates by importing more than it exports ANS: B REF: P. 19 | Achieving Macroeconomic Goals 117. The purchase of savings bonds by individuals allows the U.S. government to: a. make sure that the burden of the national debt is spread more equitably b. concentrate on microeconomics strategy c. eliminate crowding out d. balance supply and demand e. create a perfect competition ANS: A REF: P. 19 | Achieving Macroeconomic Goals 118. Which of the following statements about the interaction of demand and supply is true? a. At prices above equilibrium, suppliers produce less than consumers are willing to buy. b. A surplus of product pushes prices upward. c. At prices below equilibrium, demand exceeds supply. d. Government intervention is usually needed to achieve market equilibrium. e. A shortage pushes prices downward. ANS: C REF: P. 19 | Microeconomics: Zeroing on Business and Consumers 119. ____ is the quantity of a good or service that people are willing to buy at various prices. a. Demand b. Supply c. Market potential d. Market share e. Capacity ANS: A REF: P. 20 | Microeconomics: Zeroing on Business and Consumers 120. The slope of the demand curve is: a. downward and to the right b. upward and to the right c. downward and to the left d. downward and to the right e. horizontal ANS: A REF: P. 20 | Microeconomics: Zeroing on Business and Consumers 121. The quantity of a product or service that businesses will make available at various prices is called: a. market potential b. demand curve c. supply curve d. capacity e. market share ANS: C REF: P. 20 | Microeconomics: Zeroing on Business and Consumers 122. The slope of the supply curve is: a. downward and to the right b. upward and to the right c. downward and to the left d. downward and to the right e. horizontal ANS: B REF: P. 21 | Microeconomics: Zeroing on Business and Consumers 123. When demand and supply meet, the price of the product or service is established. This is the point of: a. price intersection b. monetary value c. interaction d. equilibrium e. price stabilization ANS: D REF: P. 22 | Microeconomics: Zeroing on Business and Consumers 124. Market equilibrium is: a. the point at which a nation reaches full employment b. the time period used to determine the Consumer Price Index (CPI) c. the point at which quantity supplied equals quantity demanded d. defined as the moment when profit is created e. the point at which revenues equal expenses ANS: C REF: P. 22 | Microeconomics: Zeroing on Business and Consumers 125. Which of the following statements about demand and supply curves is true? a. The demand curve will shift to the right if buyers' incomes increase. b. The demand curve will shift to the left if the number of buyers decreases. c. The supply curve will shift to the right if the number of suppliers increases. d. The supply curve will shift to the left if taxes are decreased. e. All of the above statements about supply and demand curves are true. ANS: E REF: P. 22 | Microeconomics: Zeroing on Business and Consumers 126. Which of the following factors would most likely result in a dramatic change in demand? a. cheaper production technology b. a expectations about future prices c. the multiplier effect d. the 80/20 principle e. a change in the price of raw materials used in the production process ANS: B REF: P. 22 | Microeconomics: Zeroing on Business and Consumers 127. Which of the following factors would most likely result in a shift in the demand curve? a. an increase in the number of suppliers to manufacturers b. the principle of reciprocity c. prices of substitute products d. automation of manufacturing processes e. the multiplier effect ANS: C REF: P. 22 | Microeconomics: Zeroing on Business and Consumers 128. Which of the following factors would most likely result in a dramatic change in supply? a. the iceberg effect b. the laddering of resources c. a change in consumer fashion d. expectations about prices of consumer products e. a change in the price of raw materials used in the production process ANS: E REF: P. 22 | Microeconomics: Zeroing on Business and Consumers 129. Which of the following factors would most likely result in a shift in the supply curve? a. countertrading b. the principle of cause/effect c. the multiplier effect d. an increase in the price of raw materials used in the production process e. a change in what consumers consider to be fashionable ANS: D REF: P. 23 | Microeconomics: Zeroing on Business and Consumers 130. Which one characteristic most clearly defines a market structure? a. the type of product sold b. the market share c. how the company is organized d. the emphasis the company places on quality e. the number of suppliers in a market ANS: E REF: P. 24 | Competing in a Free Market 131. Which of the following is a characteristic of pure competition? a. a large number of small firms b. all the firms in the market sell similar products c. entry into and exit from the market is easy d. buyers and sellers in the market are well-informed about the product e. all of the above ANS: E REF: P. 24 | Competing in a Free Market 132. In perfect competition, there is: a. only one producer b. a large number of buyers and few sellers c. no relationship between supply and demand d. a large number of sellers producing nearly identical products e. a large number of buyers who demand low prices ANS: D REF: P. 25 | Competing in a Free Market 133. There are a large number of small firms that provide entertainment for children's birthday parties. There is little difference between one company's inflatable slide and another company's. Clowns and magicians do similar tricks. Both the sellers and the parents buying the entertainment are well informed as to price and sources although sometimes it is difficult to hire the same entertainer two years in a row because the business is so easy to open and close. What type of market structure do local party entertainers depict? a. perfect competition b. monopolistic competition c. imperfect competition d. a pure monopoly e. an oligopoly ANS: A REF: P. 25 | Competing in a Free Market 134. For most agricultural products, farmers produce homogeneous products, sell them to a common market, and generally cannot affect prices greatly. This is an example of which kind of market structure? a. perfect competition b. monopolistic competition c. imperfect competition d. a pure monopoly e. an oligopoly ANS: A REF: P. 25 | Competing in a Free Market 135. When a single firm accounts for 100 percent of industry sales, it is an example of: a. an oligopoly b. a pure monopoly c. monopolistic competition d. imperfect competition e. monopolistic socialism ANS: B REF: P. 25 | Competing in a Free Market 136. In 1993, Purdue Pharmaceuticals of Stamford, Conn. applied for the first in a series of patents on Oxycontin, a painkiller. The U.S. Patent and Trademark Office (PTO) granted those patents based on the manufacturer's contention that the drug contained a novel innovation: It had been engineered so that only a very small dose was required for the drug to be effective for 90 percent of patients. Seven years later, a generic drug maker, Endo Pharmaceuticals, applied to the FDA for permission to sell its own, lower-priced version of Oxycontin. Purdue's patents acted as a(n) ____ and prevented Endo from entering the market. a. inflationary tool b. purchasing power equalizer c. oligopolistic tool d. market contractionary tool e. barrier to entry ANS: E REF: P. 25 | Competing in a Free Market 137. In 1993, Purdue Pharmaceuticals of Stamford, Conn. applied for the first in a series of patents on Oxycontin, a painkiller. The U.S. Patent and Trademark Office (PTO) granted those patents based on the manufacturer's contention that the drug contained a novel innovation: It had been engineered so that only a very small dose was required for the drug to be effective for 90 percent of patients. As a result of the patent Purdue was the only company that could sell Oxycontin. Thus, Purdue became an example of which of the following market structures? a. an oligopoly b. utilitarianism c. an oligopolistic monopoly d. a pure monopoly e. monopolistic competition ANS: D REF: P. 25 | Competing in a Free Market 138. PGE supplies all of the electricity to Portland, Oregon. PGE is an example of: a. an oligopoly b. utilitarianism c. an oligopolistic monopoly d. a pure monopoly e. monopolistic competition ANS: D REF: P. 25 | Competing in a Free Market 139. A market in which there are a large number of firms that differentiate their products is called: a. perfect competition b. oligopolistic competition c. monopolistic competition d. an oligopoly e. an imperfect monopoly ANS: C REF: P. 25 | Competing in a Free Market 140. In a large metropolitan market, it is relatively easy to set up a law office. The ease of entry explains why you will find hundreds of lawyers listed in the New York City phone book. Each lawyer is a close substitute for another but with slight differences. Which of the following market structures best describes the one in which lawyers operate? a. pure competition b. perfect monopoly c. monopolistic competition d. oligopoly e. none of the above ANS: C REF: P. 25 | Competing in a Free Market 141. Think about all the restaurants that are located near your campus. You have probably noted some new ones appearing, and others closing because of lack of business. What type of competition exists in the restaurant business? a. perfect competition b. oligopolistic competition c. monopolistic competition d. an oligopoly e. an imperfect monopoly ANS: C REF: P. 25 | Competing in a Free Market 142. An industry in which a few firms produce most or all of the output of a product and in which large amounts of capital are needed is called a(n): a. perfect competition b. imperfect competition c. monopoly d. monopolistic competition e. oligopoly ANS: E REF: P. 25 | Competing in a Free Market 143. In 1947, the largest brewer in the U.S., Schlitz, had a 4.57 percent share of the domestic market. (Anheuser-Busch was number four in those days). The top ten brewers, including the number one brewer, had 29.29 percent of the domestic market. Over 70 percent of the domestic market was controlled by "all other" brewers. By the year 2005 the largest brewer was Anheuser-Busch, with a 56 percent share of the domestic market. The top four brewers held 94 percent share of the domestic market in 2005. Thus, the brewing industry in the U.S. became a(n) ____ market structure. a. perfect competition b. imperfect competition c. oligopoly d. monopoly e. monopolistic competition ANS: C REF: P. 25 | Competing in a Free Market 144. In the middle of the desert in Arizona, there are five service stations competing for all the business that exists in this isolated location. When one service station lowers its price on gas, all must follow suit. These service stations are operating in a(n) ____ market structure. a. perfect competition b. imperfect competition c. oligopoly d. monopoly e. monopolistic competition ANS: C REF: P. 25 | Competing in a Free Market 145. Within the music industry, four companies (UMG, Sony-BMG, EMI, and Warner) control 90 percent of the music you hear. The music industry operates in a(n) ____ market structure. a. perfect competition b. imperfect competition c. monopoly d. monopolistic competition e. oligopoly ANS: E REF: P. 25 | Competing in a Free Market 146. Which of the following statements about oligopolies is true? a. Market entry into an oligopoly is easy. b. In an oligopoly, there are many firms selling identical products. c. Capital requirements are minimal for entering an oligopolistic market. d. In an oligopoly, three or four firms usually dominate the marketplace. e. Antitrust cases are rare in oligopolies. ANS: D REF: P. 25 | Competing in a Free Market 147. In a(n) ____, a few sellers can exert substantial control over prices. a. oligopoly b. perfect monopoly c. pure monopoly d. monopolistic competition e. competitive monopoly ANS: A REF: P. 25 | Competing in a Free Market 148. Today companies are focusing on ____, which involves building, maintaining, and enhancing interactions with customers and other parties so as to develop long-term satisfaction through mutually beneficial partnerships. a. customer maximization b. profit maximization c. relationship management d. a developing strategic alliance e. product satisfaction ANS: C REF: P. 29 | Trends in Economics and Competition 149. Office Depot has instituted the Office Depot Advantage, a program in which a customer who spends a minimum of $200 up to $299 in a three-month period can receive a $20 reward good for the purchase of additional Office Depot merchandise. Customers who spend between $300 and $499 receive a $30 reward and those who spend more than $500 quarterly receive a $50 reward. The goal of this ____ program is to encourage customers to consolidate their office product purchases at Office Depot. a. customer maximization b. profit maximization c. relationship management d. a developing strategic alliance e. product satisfaction ANS: C REF: P. 29 | Trends in Economics and Competition 150. Which of the following statements about strategic alliances is true? a. Strategic alliances are commonly found in markets where there is a pure competition market structure. b. Strategic alliances are not associated with any form of relationship management. c. Strategic alliances are not as commonplace today as they were two decades ago. d. A company that is interested in maintaining, but not improving, its product and service quality is most likely to enter a strategic alliance. e. A strategic alliance is sometimes called a strategic partnership. ANS: E REF: P. 29 | Trends in Economics and Competition 151. Archer Daniels Midland Co. (ADM) has joined with Baron Spices and Seasonings to market spices, seasonings and herbs to the foodservice industry. ADM will provide the raw materials, and Baron will act as the distributor and use its already existing relationships with participants in the food service industry to make a success of this: a. strategic alliance b. transactional partnership c. economic merger d. economic partnership e. exchange relationship ANS: A REF: P. 29 | Trends in Economics and Competition 152. A strategic alliance is sometimes called a(n): a. strategic partnership b. transactional partnership c. economic merger d. economic partnership e. exchange relationship ANS: A REF: P. 29 | Trends in Economics and Competition COMPLETION 1. ____________________ are intangible offerings of business like hair cuts, medical examinations, tutoring, and legal advice. ANS: Services REF: P. 4 | The Nature of Business 2. ____________________ is the potential to lose time and money or otherwise not be able to accomplish an organization's goals. ANS: Risk REF: P. 4 | The Nature of Business 3. ____________________ are the inputs (resources) that are common to productive activity in all economic systems. ANS: Factors of production REF: P. 4 | The Nature of Business 4. ____________________ include everything that is useful as a productive input in its natural state, such as land, forests, mineral and oil deposits, and water. ANS: Natural resources REF: P. 5 | The Nature of Business 5. ____________________ are people who combines the inputs of natural resources, labor, and capital to produce goods and services with the intention of making a profit ANS: Entrepreneurs REF: P. 5 | The Nature of Business 6. ____________________ is the study of people's vital statistics, such as their age, race and ethnicity, and their location. ANS: Demography REF: P. 5 | Understanding the Business Environment 7. The term ____________________ is used to describe all Americans who were born between 1977 and 1997. ANS: Generation Y REF: P. 8 | Understanding the Business Environment 8. As a demographic, ____________________ represent 27 percent of the U.S. population and 42 percent of all U.S. households. ANS: baby boomers REF: P. 8 | Understanding the Business Environment 9. ____________________ is the economic system in which all factors of production are privately owned and the market operates based on supply and demand. ANS: Capitalism (or The private enterprise system) Capitalism The private enterprise system REF: P. 11 | How Business and Economics Work 10. ____________________ is the complete opposite of capitalism. ANS: Communism REF: P. 11 | How Business and Economics Work 11. Canada's government owns the communications, transportation, and utilities industries; most other activities are carried on by private enterprises. Canada is considered a(n) ____________________ economy. ANS: mixed REF: P. 12 | How Business and Economics Work 12. ____________________ is the total market value of all goods and services produced within a country on an annual basis. ANS: Gross domestic product (GDP) Gross domestic product GDP REF: P. 12 | Macroeconomics: The Big Picture 13. A(n) ____________________ is defined as a decline in GDP that lasts for six months. ANS: recession REF: P. 14 | Macroeconomics: The Big Picture 14. When you graduate from college and start looking for a job, you will experience ____________________ unemployment. ANS: frictional REF: P. 18 | Macroeconomics: The Big Picture 15. George LaDuc is the manager of a nonprofit agency that provides transportation for parents of children with life-threatening diseases. Each year the prices of necessities such as groceries, housing, and electricity continue to rise, but LaDuc's salary stays the same. LaDuc's ____________________ is being eroded by his stagnant salary and increasing prices. ANS: purchasing power REF: P. 16 | Keeping Prices Steady 16. ____________________ is the general upward movement of prices from year to year. ANS: Inflation REF: P. 16 | Keeping Prices Steady 17. The ____________________ is the total monetary value of all goods and services produced within a nation annually. ANS: gross domestic product (GDP) gross domestic product GDP REF: P. 16 | Keeping Prices Steady 18. ____________________ policy refers to a government's program for controlling the amount of money in circulation. ANS: Monetary REF: P. 17 | Achieving Macroeconomic Goals 19. The ____________________ is the central banking system in the United States that controls our monetary policy. ANS: Federal Reserve System (Fed) Federal Reserve System Fed REF: P. 17 | Achieving Macroeconomic Goals 20. ____________________ policy refers to a government's program of taxation and spending. ANS: Fiscal REF: P. 17 | Achieving Macroeconomic Goals 21. The ____________________ curve slopes downward and to the right. ANS: demand REF: P. 20 | Microeconomics: Zeroing on Business and Consumers 22. The point at which quantity demanded equals quantity supplied is called the point of ____________________. ANS: equilibrium REF: P. 22 | Microeconomics: Zeroing on Business and Consumers 23. A(n) ____________________ is a market structure in which a single firm accounts for all industry sales and in which there are barriers to entry. ANS: pure monopoly REF: P. 22 | Competing in a Free Market 24. In a(n) ____________________ market structure, many firms are in the market, the firms in the market sell similar but not identical products, and the market is relatively easy to enter. ANS: monopolistic competition REF: P. 25 | Competing in a Free Market 25. A(n) ____________________ is a cooperative agreement between business firms. ANS: strategic alliance (strategic partnership) strategic alliance strategic partnership REF: P. 29 | Trends in Economics and Competition SHORT ANSWER 1. What is the primary difference between goods and services? ANS: Goods are tangible. Services are intangible. REF: P. 4 | The Nature of Business 2. How is the standard of living for a country like Panama measured? ANS: The same method is used for measuring the standard of living in all countries. It is measured by the output of goods and services that people can buy with the money they have. REF: P. 4 | The Nature of Business 3. What exactly is a researcher studying who looks at people's general level of human happiness based on such things as life expectancies, educational standards, health, sanitation, and leisure time? ANS: quality of life REF: P. 4 | The Nature of Business 4. The craftsperson was made $135 for the ornate birdhouse she made. Her costs for producing the birdhouse were $100. What is her profit? ANS: $35 REF: P. 4 | The Nature of Business 5. List the four traditional factors of production. ANS: natural resources, labor, capital, and entrepreneurship REF: P. 5 | The Nature of Business 6. What is another name for capitalism? ANS: the private enterprise system REF: P. 11 | How Business and Economics Work 7. What kind of an economic system is characterized by government ownership of virtually all resources and economic decision making by central-government planning? ANS: communism REF: P. 11 | How Business and Economics Work 8. What kind of economic system exists in the United States? ANS: mixed economy REF: P. 12 | How Business and Economics Work 9. List the four types of unemployment. ANS: frictional, structural, cyclical, and seasonal REF: P. 15 | Macroeconomics: The Big Picture 10. List the two types of inflation. ANS: demand-pull and cost-push REF: P. 16 | Keeping Prices Steady 11. Which federal government department is responsible for publishing the consumer price index (CPI)? ANS: the Department of Labor REF: P. 17 | Keeping Prices Steady 12. Which government agency controls how much money is in circulation at any given time? ANS: the Federal Reserve System (the Fed) REF: P. 17 | Achieving Macroeconomic Goals 13. What is the major source of revenue for the United States government? ANS: taxes REF: P. 17 | Achieving Macroeconomic Goals 14. What is the term used to describe what is happening when the government spends more on public transportation, and as a result, individuals spend less on private transportation? ANS: crowding out REF: P. 18 | Achieving Macroeconomic Goals 15. What is the term used to describe the point at which customers' demands for a product equals the amount made available by the producer? ANS: the equilibrium point REF: P. 18 | Microeconomics: Zeroing on Business and Consumers 16. List the four types of market structures. ANS: pure monopoly, perfect/pure competition, monopolistic competition, and oligopoly REF: P. 24 | Competing in a Free Market 17. Which market structure is an ideal and does not really exist? ANS: perfect or pure competition REF: P. 24 | Competing in a Free Market 18. There are only very few national cereal manufacturers. The equipment to manufacture cereal is expensive and available shelf space in supermarkets limits the number of producers. In which market structure do cereal manufacturers operate? ANS: oligopoly REF: P. 25 | Competing in a Free Market 19. What kind of interaction is a pet groomer using when it sends birthday cards to the pets she cares for? ANS: relationship management REF: P. 29 | Trends in Economics and Competition 20. What is another name for a strategic alliance? ANS: strategic partnership REF: P. 29 | Trends in Economics and Competition