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Exam 2: Understanding How Economics Affects Business

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Question 21

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Sarah owns a bakery that specializes in cupcakes.Until recently,she charged a price of $5 for each treat.At this price Sarah's customers bought an average of 384 cupcakes each week.For the last few weeks,she has reduced her price to $3.95 per cake,and her customers have purchased an average of 596 cupcakes each week.These results are consistent with the economic concept of demand.

A) True
B) False

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Question 22

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Fiscal policy involves the federal government's efforts to stabilize the economy by increasing or decreasing taxes and/or government spending.

A) True
B) False

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Question 23

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When the market price of a good is below the equilibrium price,and all other determinants are unchanged:

John complained to his buddy,Frank,that prices have increased a lot over the past year.Frank disagreed,saying that the prices of some goods have gone up a bit,but other prices have declined,noting that you can get some good buys on houses right now.Frank feels that the average price of consumer goods hasn't changed.Frank and John can refer to the __________ to learn how government economists currently view the price situation.

Yesterday,Casey received a cable company ad for bundled TV,telephone,and Internet service that cost appreciably more than what she is currently paying.At the same time,she received a notice from her utility company that summer rates would be increasing.Her school books are costing almost twice what they cost last year,and yesterday,gasoline cost her 30 cents more per gallon than it did last week.As she ponders the situation,she can't help but wonder how prices could be rising when so many people have lost their jobs and are cutting back on expenditures.She is certain that this situation characterizes her economics professor's description of stagflation.

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.

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.

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

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

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.

Explain the significance of "price" in a free-market economic system.

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

Which of the following would be a topic emphasized in a microeconomics class?

Larry and Moe are having an argument.Larry believes that over the past year,the economy is experiencing rapid inflation,while Moe says that the economy actually experienced disinflation during this period.The easiest way for Larry and Moe to settle their argument is to look at GDP figures for the past year.

Current measures of productivity in the service sector provide an accurate measure of changes in the quality of output.

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

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.

A prediction that GDP will increase significantly over the next six months is bad news for most businesspeople.

As the term "global" become "local",and as we see more opportunities to compete in the global market,

A typical demand curve shows that: