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Exam 2: Understanding How Economics Affects Business

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Question 31

Multiple Choice

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Which of the following statements about productivity in the service sector of the U.S.economy is most accurate?

A) Productivity in the service sector has increased much more rapidly than productivity in the manufacturing sector.
B) Improving productivity in the service sector is much less important than improving productivity in the manufacturing sector,because the service sector does not really produce anything.
C) Productivity in the service sector is easier to measure than productivity in agriculture.
D) Measures of productivity in the service sector do a poor job of taking quality improvements into account.

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

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Question 32

True/False

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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. Level of Learning 3: Application of principles

A) True
B) False

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Question 33

Multiple Choice

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Under a capitalistic system,decisions such as what goods and services to produce,what to charge,and how much to import or export are made by:

Communist values are disappearing because:

In the United States,laws prohibit the creation of most types of monopolies. Level of Learning 1: Knowledge of key terms

If consumers see a measurable increase in the price of coffee,they are likely to change their consumption to less expensive tea.These substitutions would show-up in the ____________.

Chase is a recent college graduate with a new job as an engineering trainee for a large defense company.Now that he is making good wages,he hopes to start saving for his first house and also contribute toward the company retirement plan.As he looks over his monthly bills,Chase is concerned about ever getting ahead of the game.His food bill,car payment,and mounting gasoline payments keep him in the "just making ends meet" category.As his mind wanders back to the good old college days,he reflects on a time when gas and food seemed a lot more reasonable.Chase is experiencing the effects of:

Economists refer to a market in which a few sellers dominate the supply side as monopolistic competition. Level of Learning 1: Knowledge of key terms

Most communist countries today are suffering from severe economic problems. Level of Learning 1: Knowledge of key terms

In capitalist countries,the government decides what to produce and how the goods and services will be produced. Level of Learning 1: Knowledge of key terms

Microeconomics focuses on the decisions and behavior of people and organizations in particular markets. Level of Learning 1: Knowledge of key terms

____________ refers to the efforts of the federal government to keep the economy stable by increasing or decreasing taxes and/or government spending.

Monetary policy is directly under the control of the U.S.Department of the Treasury. Level of Learning 1: Knowledge of key terms

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

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. Level of Learning 3: Application of principles

__________ is the market situation in which there are many sellers in a market and no seller is large enough to dictate the price of a product.

Current measures of productivity in the service sector provide an accurate measure of changes in the quality of output. Level of Learning 1: Knowledge of key terms

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. Level of Learning 3: Application of principles

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. Level of Learning 3: Application of principles

The freedom of people to buy,sell,and use land,buildings,machinery,and inventions are basic capitalist rights under: