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Exam 2: Understanding How Economics Affects Business

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Question 1

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The markets for laundry detergents,soft drinks,and automobiles are dominated by just a few sellers.Economists would classify these markets as examples of:

A) Monopolistic competition.
B) Perfect competition.
C) Oligopolies.
D) Monopolies.

E) C) and D)
F) A) and B)

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Question 2

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The nation of Florentina is in the midst of a serious economic downturn.The nation's GDP has declined steadily for over five years and is now at its lowest level in over fifty years.Florentina's unemployment rate is at an all time high and the nation's CPI is falling.Florentina's economic condition is referred to as a:

A) Period of stagflation.
B) Balance of trade deficit.
C) Depression.
D) Retraction.

E) A) and B)
F) A) and C)

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Question 3

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Adam Smith's research focused on determining the best way to distribute a fixed amount of resources,rather than on how to create more wealth. Level of Learning 2: Understanding of concepts and principles

Governments that were predominantly capitalistic are moving toward socialism,while governments that were predominantly socialistic are moving toward capitalism. Level of Learning 1: Knowledge of key terms

In socialist economies,the government owns some,if not most basic businesses such as telecommunications systems and utilities. Level of Learning 1: Knowledge of key terms

As you drive to school in the morning,you will probably flip through several radio stations before deciding to settle on one for the duration of the drive.For instance: you can listen to a "fair and balanced" talk show;an "intelligent talk" program;an interactive "call-in" talk show;a "right-wing" political talk show;a "self-improvement" talk show;and,even an "all sports" talk show.With so much monopolistic competition in radio programming,radio stations focus on offering you something just a little different. Level of Learning 3: Application of principles

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

GLAMOR GAL,a popular women's cosmetics company is gaining popularity among younger women.Differentiating itself from the sea of companies that compete for the same business,it focuses on products for sensitive,youthful skin.GLAMOR GAL clearly operates in an oligopolistic environment. Level of Learning 3: Application of principles

In 2010,the U.S.unemployment rate was at its lowest point in 10 years. Level of Learning 1: Knowledge of key terms

__________ is the study of how a society employs its limited resources to produce goods and services and how it distributes them among competing groups and individuals.

Fetna resides in a country where the economic system is primarily based on free market capitalism.Fetna is likely to have the freedom to buy and sell property. Level of Learning 2: Understanding of concepts and principles

Fiscal policy refers to the federal government's efforts to keep the economy stable by controlling the amount of money in circulation. Level of Learning 1: Knowledge of key terms

Communism is an economic system in which:

There are some restrictions on freedom of assembly and freedom of speech under a ____________ system.

The Federal Reserve Bank operates:

Nick wants to buy a new car,and is planning to borrow the money for his purchase from a bank.He read in the newspapers that the Federal Reserve is likely to implement policies in the next few weeks that are designed to stimulate the economy.Nick would probably get a lower interest rate on his car loan if he waits until after the FED implements its new policies. Level of Learning 3: Application of principles

The prime minister of the nation of Urbania has called for Urbania's legislature to enact new legislation designed to shift his country away from socialism toward a more capitalistic system.The Prime Minister acknowledges that such a radical change will entail some hardships,and that some citizens will be unhappy with the changes.The most likely source of dissatisfaction with a move toward capitalism is:

A key to economic growth and development is to:

Over the years,the government of Montivia has focused on implementing programs that promote equality.On the short-term,though,Montivia legislators are concerned about the very slow rate of growth that has plagued its national economy.In order to address this problem,the government is likely to:

Three important economic indicators of the United States are the unemployment rate,the price indices,and the: