Chapter 2

studied byStudied by 1 Person
0.0(0)
Get a hint
hint
  1. America's business success is largely due to an economic and social climate that allows businesses to operate freely.

1/322

Tags & Description

Understanding business

Studying Progress

New cards
322
Still learning
0
Almost done
0
Mastered
0
322 Terms
New cards
  1. America's business success is largely due to an economic and social climate that allows businesses to operate freely.

True

New cards
New cards
  1. Global economics and politics have no significant influence on businesses in the United States.

False

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

False

New cards
New cards
  1. Economists study how people use resources to produce and distribute goods and services for consumption among competing groups and individuals.

True

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

True

New cards
New cards
  1. Microeconomics focuses on the decisions and behavior of people and organizations in particular markets.

True

New cards
New cards
  1. Resource development is concerned with finding the best way to utilize the fixed amount of resources a society has available.

False

New cards
New cards
  1. Resource development is the study of how to increase resources and to create the conditions that will make better use of those resources.

True

New cards
New cards
  1. Peace and prosperity will flourish if we can find the one best way to divide existing resources among nations.

False

New cards
New cards
  1. Thomas Malthus believed that overpopulation was a major cause of poverty.

True

New cards
New cards
  1. In developing nations of the world, population has leveled off and is not expected to increase dramatically in the future.

False

New cards
New cards
  1. Studies about the effects of population growth on the economy are part of macroeconomics.

True

New cards
New cards
  1. Economic progress can occur when business owners provide jobs and economic growth for their employees, their communities, and themselves.

True

New cards
New cards
  1. Economist Adam Smith's important contribution was an inquiry as to why some nations are wealthy, while others remain poor.

True

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

True

New cards
New cards
  1. The "invisible hand" in Adam Smith's theory turns self-directed gain into social and economic benefits for all.

True

New cards
New cards
  1. According to Adam Smith, the "invisible hand" refers to the government's effort to always keep a check on the wealth creation of individuals, so that no one business would control a market for a particular good or service.

False

New cards
New cards
  1. A contemporary economic challenge is creating profitable businesses by selling goods and services that contribute toward a healthier environment.

True

New cards
New cards
  1. An economist is examining how consumers in the automobile market have responded to recent price increases by car manufacturers. He is examining a microeconomic situation.

True

New cards
New cards
  1. Macroeconomics looks at long run economic problems while microeconomics examines short run economic problems.

False

New cards
New cards
  1. Thomas Malthus believed that people in most countries would never be able to achieve high standards of living unless the problems of overpopulation were addressed.

True

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

False

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

False

New cards
New cards
  1. The concept of the invisible hand begins with the assumption that the primary motivation of entrepreneurs is that they will prosper from their own hard work.

True

New cards
New cards
  1. 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.

False

New cards
New cards
  1. Large educated populations can contribute to an economy by offering knowledge and entrepreneurship.

True

New cards
New cards
  1. Adam Smith believed that incentives to seek personal gain would create wealth, but that the government must then step in to make sure that this wealth is equitably distributed.

False

New cards
New cards
  1. As indicated by the Making Ethical Decisions box, activities that lead to corruption can destroy free economic opportunities because they interfere with the right to freely compete.

True

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

False

New cards
New cards
  1. Capitalism is the foundation of the U.S. economic system.

True

New cards
New cards
  1. The most fundamental of all rights in capitalism is the right to private property.

True

New cards
New cards
  1. Under capitalism, the government prohibits people and businesses from competing with each other.

False

New cards
New cards
  1. A basic right under capitalism is the right of businesses to receive government funding.

False

New cards
New cards
  1. Free-market capitalism has made it more difficult for individuals to gain wealth.

False

New cards
New cards
  1. Due to the fundamental rights afforded to us by a free-market capitalistic system; persons are more willing to take calculated risks.

True

New cards
New cards
  1. A free-market economic system is one in which the market of buyers and sellers decides what is produced, how much is produced, and how it is distributed.

True

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

True

New cards
New cards
  1. Demand refers to the quantity of a good that consumers are willing and able to buy at different prices at a specific time.

True

New cards
New cards
  1. At the equilibrium price, the quantity consumers desire to buy equals the quantity sellers desire to sell.

True

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

False

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

False

New cards
New cards
  1. The point of intersection between the supply and demand curves is called the stress point.

False

New cards
New cards
  1. In the long run, the market price tends to adjust toward the equilibrium point.

True

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

False

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

False

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

False

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

True

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

False

New cards
New cards
  1. Product differentiation is a key to success in monopolistic competition.

True

New cards
New cards
  1. In the United States, laws prohibit the creation of most types of monopolies.

True

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

False

New cards
New cards
  1. The greed of businesspeople represents one of the greatest dangers to the operation of a free market system.

True

New cards
New cards
  1. 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.

True

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

False

New cards
New cards
  1. In a free market economic system, the lack of government control and regulation means that businesses find it easy to take advantage of customers by offering poor quality products at high prices.

False

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

False

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

True

New cards
New cards
  1. Monica notices that just a few big companies produce the vast majority of soft drinks. She would be correct in describing the soft drink industry as an oligopoly.

True

New cards
New cards
  1. 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.

False

New cards
New cards
  1. GLAMOR GAL is a popular cosmetics company. Although it is gaining in popularity among younger women, its promotional strategy continues to focus on the shadow-free finish that it produces on almost any skin type. Due to the fact that its industry faces monopolistic competition, the company knows that it must continue to differentiate itself from the competition.

True

New cards
New cards
  1. 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.

True

New cards
New cards
  1. Roland is a nation with an economic system that closely approximates pure capitalism. While Roland's economy is likely to generate a great deal of wealth, it may do a poor job of providing an acceptable level of income for the elderly or disabled.

True

New cards
New cards
  1. In the newspaper this morning, you read about the downfall of a multi-national entertainment business, and a report that the company's CEO enjoyed a 9% increase in his salary during the same year that the company's profits were down 35%. As you read further, you learn that the company's board of directors approved undeserved salary increases. Clearly, this is an example of how inequality and greed can infiltrate the free- market economic system.

True

New cards
New cards
  1. As you scan the national news online, you read about the BXY Utility Company's latest problems. The story describes an expansive retaining wall that collapsed during a flood last week, spewing toxic coal ash, burying homes, and causing a few fatalities. An editorial claims that the company will not be held accountable to the same standards as the asbestos companies of a few years back that paid severe fines and even went out of business due to their lack of attention to environmental clean-up. You agree with the writer because you recently studied about the various competitive markets and utility companies clearly fall under monopolistic competition.

False

New cards
New cards
  1. The PowerHouse Utility Company recently built a nuclear power plant in a southern state and started competing against BXY Utility Company that has served customers in that region for 65 years. Due to deregulation, consumers now have a choice among utility companies in this area. Although PowerHouse has made a sizeable capital investment, if it successfully grows market share, eventually prices for electricity may stabilize or fall.

True

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

False

New cards
New cards
  1. In socialist economies, the government owns some, if not most basic businesses such as telecommunications systems and utilities.

True

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

False

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

False

New cards
New cards
  1. Socialists believe that wealth should be more evenly distributed than what actually occurs in a free-market capitalistic system.

True

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

True

New cards
New cards
  1. Over the past decade, socialist economies have proven to be more successful at creating wealth and jobs than capitalist economies.

False

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

True

New cards
New cards

and How It Affects Business 74. Brain drain is the loss of the best and brightest people to other countries.

True

New cards
New cards
  1. High tax rates in socialist countries is a major reason these nations have experienced a brain drain.

True

New cards
New cards
  1. Incentive to own and operate businesses is high in nations whose governments are proponents of socialistic practices.

False

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

False

New cards
New cards
  1. Communism is an economic and political system in which the state makes almost all economic decisions and owns almost all the major factors of production.

True

New cards
New cards
  1. Most communist countries today are suffering from severe economic problems.

True

New cards
New cards
  1. A major distinction between capitalism and socialism concerns the distribution of income.

True

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

False

New cards
New cards
  1. Workers in nations who are strong proponents of communism work much harder and longer hours.

False

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

True

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

True

New cards