Q&A Hero

Q: (p. 39) ___________ exists when a large number of firms produce goods that are similar but are perceived by buyers as being different. A. Perfect competition B. Monopolistic competition C. Oligopoly D. A monopoly

Q: (p. 39) __________ is characterized by a large number of firms selling products that appear to be identical. A. Oligopoly B. Monopolistic competition C. Perfect competition D. Microeconomic competition

Q: (p. 39) __________ 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. A. Oligopoly B. Monopolistic competition C. Perfect competition D. Microeconomic competition

Q: (p. 38) If a shortage exists for a good in a free-market economy, the: A. price of the good will rise. B. price of the good will fall. C. government will order suppliers to increase the production of that good. D. government must establish a rationing system to make sure that the good is fairly distributed.

Q: (p. 38, figure 2.3) When prices are free to adjust over time, the market price of a good tends to: A. rise above the equilibrium price in the long run. B. equal the equilibrium price in the long run. C. fall below the equilibrium price in the long run. D. have no specific relationship to the equilibrium price.

Q: (p. 37-38, figure 2.2) When the supply curve and demand curve for a particular good are on a single graph, the point at which the two curves intersect identifies the: A. total profit earned by producers. B. total amount of labor that will be employed in that market. C. amount of time it takes to bring together the buyers and sellers of the good. D. equilibrium price of the good.

Q: (p. 37-38, figure 2.2) A typical demand curve shows that: A. as people earn more income, they buy more of a good. B. as supply increases, the amount purchased decreases. C. people tend to buy more of a good than they really want. D. people tend to buy more of a good when its price decreases.

Q: (p. 37) A(n) _____________ curve shows the relationship between the price of a good and the quantity of that good people are willing and able to buy in a given time period. A. demand B. supply C. utility D. Laffer

Q: (p. 37-38, figure 2.1) A typical supply curve shows a relationship between the: A. amount of labor a firm hires and the amount of output it can produce. B. amount of time required to produce a good and the relevant production costs. C. price of a good and the quantity sellers would be willing to offer for sale. D. amount of a good a firm produces and the total profit it earns.

Q: (p. 37-38, figure 2.1) A typical supply curve shows that an increase in the price of a good will cause the quantity supplied to: A. decrease. B. increase. C. remain constant. D. fluctuate randomly around its equilibrium value.

Q: (p. 37) The quantity of a good or service that manufacturers or owners are willing to sell at different prices during a specific time period is known as the: A. supply of that product. B. demand for that product. C. elasticity of that product. D. utility of that product.

Q: (p. 36) In a free market __________ tells producers how much to produce. A. the market curve B. the government C. price D. quantity

Q: (p. 36) A free market is one in which decisions about what to produce and in what quantities are made by: A. the government B. the community C. the market D. the Congress

Q: (p. 35) The freedom of people to buy, sell, and use land, buildings, machinery, and inventions are basic capitalist rights under: A. the right to private property. B. freedom of expression. C. freedom of choice. D. freedom of competition.

Q: (p. 36) The freedom of people to decide where they want to work and live, and what they want to buy or sell are basic capitalist rights under: A. eminent domain. B. freedom of expression. C. freedom of choice. D. freedom of competition.

Q: (p. 36) Which of the following is a basic right under capitalism? A. freedom of collusion. B. freedom from taxation. C. the right to vote. D. the right to compete.

Q: (p. 35) In capitalism, most decisions about what goods and services to produce are made by: A. a variety of government agencies. B. businesspeople. C. a central planning board that consists of consumers, business executives, and employees. D. majority rule, with everyone receiving an equal vote.

Q: (p. 35) The foundation of the U.S. economic system is: A. capitalism. B. based on the ideas of Thomas Malthus. C. described in detail in the U.S. Constitution. D. based on the saying, "from each according to ability, to each according to need."

Q: (p. 35) Under capitalism: A. most of the means of production and distribution are privately owned and operated for profit. B. the primary function of the government is to distribute wealth more evenly. C. utilities, health care, education, and other services are controlled by the government. D. markets operate to carry out the decisions made by central planners.

Q: (p. 35) _________ is the popular name for a free-market economy in which business people make most of the decisions about what products to produce, how many workers to hire, and what prices to charge for goods and services. A. Socialism B. Capitalism C. Communism D. Marginalism

Q: (p. 32) According to the invisible hand concept, the best way for the government to encourage the creation of jobs and the production of the products most wanted by consumers would be to: A. take over the operation of all firms in major industries, such as telecommunications, transportation, and energy, and operate these firms as nonprofit organizations. B. allow private ownership of businesses, but make use of extensive regulation to force businesses to behave in a socially desirable way. C. allow entrepreneurs a great deal of personal freedom to follow their own self-interest. D. impose high taxes on individuals, and use the revenue to subsidize businesses to encourage them to produce the maximum rate of output.

Q: (p. 32-34; Making Ethical Decisions box) In the boxed material "Making Ethical Decisions," the results of Hurricane Katrina were discussed. Adam Smith would suggest that the reason that businesses like Wal-Mart helped the disaster victims was: A. it was the ethical thing to do. B. it was in Wal-Mart's best interest to help the victims. C. the U.S. government paid Wal-Mart to help the victims. D. it was a way to decrease Wal-Mart's productivity.

Q: (p. 32) For many years, Congressman Reggie Lader has called for more government regulation of business. "After all," the Congressman said recently, "businesspeople are out to make a profit, not to create jobs or serve their customers. The government must pass more laws to require businesses to take the interests of consumers and workers into account." From these comments, it is clear that Congressman Lader: A. agrees with the ideas of Thomas Malthus. B. does not accept the philosophy behind Adam Smith's invisible hand. C. is unaware of the fact that most businesses in the United States are actually owned by the government. D. does not realize that government regulation is already the main determinant of business decisions in capitalist economies.

Q: (p. 32) Fourteen years ago, Murray noticed that a lot of people who bought personal computers really did not know much about how to use them and frequently suffered system crashes and other aggravations. He decided he could earn a nice profit by starting a consulting business to help other people overcome their computer woes. Although the business struggled at first, it has been quite successful for the last five years. Murray has many satisfied customers, and the business has grown to the point he now employs several workers. Murray's experience is an example of: A. socialism at work. B. the principle of comparative advantage. C. the invisible hand. D. the multiplier principle.

Q: (p. 32) Which of the following statements would a follower of Adam Smith be most likely to make? A. The federal government should use its ability to spend and tax to guide the decisions of businesses and consumers. B. Market economies are flawed because they put too much emphasis on economic growth and not enough on environmental problems. C. Overpopulation is the main danger confronting modern economies. D. If people are given the freedom to follow their own interests, they will end up promoting economic growth that benefits society as a whole.

Q: (p. 31) Clara Richards considers herself to be a follower of Thomas Malthus. Which of the following statements would Clara be most likely to make? A. The key to economic growth is to keep taxes and government regulations to a minimum. B. Command economies are more likely to encourage economic growth than market economies. C. Allowing people to follow their self-interest is the best way to generate economic growth and prosperity. D. Society will not be able to sustain economic progress unless it accepts the need to limit population growth.

Q: (p. 31) Sue Flay is a gifted cook. She is about to open her own business, a restaurant in which she will be the head chef. Sue is willing to work long hours because she believes that her culinary talents and hard work will allow her business to succeed and earn her a great deal of money. Sue's efforts appear most consistent with the economic theory developed by: A. Thomas Malthus. B. Karl Marx. C. Adam Smith. D. David Riccardo.

Q: (p. 32) Adam Smith believed that countries would prosper if businesspeople were free to start and run their own businesses, because businesspeople would make a profit by providing the goods, services and ideas that others in the economy wanted. This was called the: A. kinked demand theory. B. invisible hand. C. spending multiplier. D. demand accelerator.

Q: (p. 33) How is it that people working in their own self-interest produce goods, services, and wealth for others? A. They take advantage of the labor force by paying very low wages. B. In order to earn money, people must sell some of what they produce to others. C. Entrepreneurs naturally want to help others. D. The government pays entrepreneurs in the U.S. to produce goods, services, and wealth for others.

Q: (p. 31) Economics was known as the "Dismal Science" because: A. in the late 1700s and early 1800s it was believed there would soon be too many people and not enough food and other resources. B. it was a very complex area of study based on mathematics. C. the world population was actually growing slower than expected in the 1700s. D. there were too many old people and not enough young people to care for them.

Q: (p. 31) Thomas Malthus was pessimistic about the ability of societies to achieve high standards of living for most of their citizens because he believed that: A. the government had a natural tendency to run deficits that would eventually bankrupt the country. B. population growth would result in shortages of food and resources. C. owners of businesses would deliberately exploit their employees in an attempt to earn greater profits, and this would ultimately lead to a worker's revolt. D. high tax rates would eventually undermine people's incentives to work hard and create wealth.

Q: (p. 31) The main goal of resource development is to find ways to: A. increase the amount of resources and create conditions that will make better use of those resources. B. allocate existing resources more efficiently among competing uses. C. find the right balance between policies that promote economic growth and policies designed to promote other goals such as a fair distribution of income. D. promote the central planning of resource utilization so that resources can be allocated to the uses that will benefit society the most.

Q: (p. 31) Which of the following would be a topic emphasized in a microeconomics class? A. How a nation's GDP is computed. B. The reason's why the unemployment rate for the economy is rising or falling. C. How market conditions determine the price of a specific product. D. How the government can use fiscal and monetary policies to stabilize the economy.

Q: (p. 31) Which of the following would be a topic emphasized in a macroeconomics course? A. Factors that determine how fast a nation's economy is growing. B. How a firm decides the price it will charge for one of its products. C. How a consumer chooses which goods to buy. D. The determinants of the wage rate for a certain type of labor.

Q: (p. 30) Which of the following is a reason South America is relatively poor and there is less money available for entrepreneurial ventures? A. There is a lack of freedom to start businesses available in the South American economic systems. B. The currencies of South America are not tradable on the world market. C. South Americans are not born entrepreneurs. D. South Americans operate businesses in free markets.

Q: (p. 32) _________ is considered by some to be the father of modern economics. A. John Maynard Keynes B. Adam Smith C. Thomas Carlyle D. Thomas Malthus

Q: (p. 32) A key to economic growth and development is to: A. locate more deposits of gold and other precious metals. B. emphasize a fair and equitable distribution of income. C. provide people with better education. D. allow government planning to guide the allocation of resources.

Q: (p. 31) Neo-Malthusians believe that the solution to poverty is: A. increasing the world population. B. increasing taxes on the rich and increasing social programs. C. birth control. D. educating poor people.

Q: (p. 31) Thomas Malthus believed that a major problem that would limit economic progress was: A. depletion of gold reserves. B. overpopulation. C. the tendency of governments to levy high tax rates. D. the inability of workers in developed nations to compete against cheap foreign labor.

Q: (p. 31) The study of how to increase the amount of available resources and create conditions that will make better use of these resources is known as: A. human resource management B. microeconomics C. econology D. resource development

Q: (p. 31) Resource development is: A. the study of how society chooses to employ resources to produce goods and services and distribute them for consumption among various competing groups and individuals. B. the study of how to increase the amount of available resources and create conditions that will make better use of these resources. C. the part of economics that looks at the operation of a nation's economy as a whole. D. the part of economics that looks at particular markets.

Q: (p. 31) ____________ looks at the behavior of individual people and organizations in specific markets. A. Macroeconomics B. Finite economics C. Microeconomics D. Nanoeconomics

Q: (p. 31) ___________ studies the operation of a nation's economy as a whole. A. Microeconomics B. Socioeconomics C. Econometrics D. Macroeconomics

Q: (p. 31) __________ is the study of how to employ resources to produce goods and services and distribute them among competing groups and individuals. A. Economics B. Capitalism C. Marketing D. Socialism

Q: (p. 31) Economics is the study of how: A. to invest wisely in the stock market. B. to employ resources to produce goods and services and distribute them among competing groups and individuals. C. sophisticated statistical techniques can be used to make predictions about the evolution of society over the long run. D. people govern themselves in a democratic society.

Q: (p. 51) Larry wants to buy a new car, and is planning to borrow the money for his purchase from a bank. He has just 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, which is currently in a recession. Larry would probably get a lower interest rate on his car loan if he waits until after the Fed implements its new policies.

Q: (p. 51) The Fed is concerned that the economy is growing too rapidly. Given these concerns, it is likely to pursue policies to restrict the supply of money and raise interest rates.

Q: (p. 51) In order to restrict spending by businesses and households, the Fed would take measures designed to lower interest rates.

Q: (p. 50) Senator Spendital has just made a speech deploring the continuous deficits in the federal budget. He is proposing an increase in tax rates to raise more revenue for the government and thus gradually reduce the size of the national debt over a period of several years. The strategy Senator Spendital is proposing is a common type of monetary policy.

Q: (p. 50) The best way to avoid national budget deficits is increase our exports and decrease our imports.

Q: (p. 50) Dr. John Maynard is a professor of economics at a prominent university. Dr. Maynard has recently urged policy makers in our national government to cut taxes and increase government spending in order to pull the economy out of its current downturn. The policy measures called for by the professor are examples of fiscal policy.

Q: (p. 51) One of the major ways the Fed influences economic conditions is through its control of interest rates.

Q: (p. 51) Monetary policy is directly under the control of the U.S. Department of the Treasury.

Q: (p. 51) Monetary policy involves the management of the money supply and interest rates by the Federal Reserve System.

Q: (p. 50) When all types of taxes are taken into account, some of the highest earning citizens in the United States face a tax rate that can exceed 50 percent.

Q: (p. 50) Our national debt is now less than $200 billion.

Q: (p. 50) The size of the national debt increases when the federal government runs a deficit.

Q: (p. 50) The national deficit is the difference between our nation's exports and its imports.

Q: (p. 50) When the government attempts to stabilize the economy by changing taxes or government expenditures, it is using fiscal policy.

Q: (p. 50) The U.S. national debt currently exceeds $28,000 for each man, woman and child in the United States.

Q: (p. 50) Fiscal policy involves the federal government's efforts to stabilize the economy by increasing or decreasing taxes and/or government spending.

Q: (p. 50) Fiscal policy refers to the federal government's efforts to keep the economy stable by controlling the amount of money in circulation.

Q: (p. 47, figure 2.6) Robin just graduated from college and is seeking her first job. She received a degree in engineering at a prestigious university and graduated with honors. Robin has several leads and has heard that the market for engineers is very strong, so she is convinced that she should locate a good job in the near future. Robin's current situation is an example of structural unemployment.

Q: (p. 49) The nation of Woland has seen its GDP decline severely for four years in a row, with no relief in sight. Unemployment has risen to record levels, and businesses are failing faster than at any time in the past century. The economy of Woland is experiencing a depression.

Q: (p. 47) The government of Nexico has made progress in its efforts to bring Nexico's rapid inflation under control. Although prices are still rising, the rate of increase has slowed considerably. This suggests that Nexico currently is experiencing disinflation.

Q: (p. 49) Maureen is the office manager of a service company. She has recently spent a lot of money installing new computers and office equipment that will be used by the workers in her office as they provide services to clients. If Maureen's company is like most service companies, she will probably see a big jump in the productivity figures reported for workers in her office.

Q: (p. 46) Larry and Moe are having an argument. Larry believes that over the last 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.

Q: (p. 48) A problem with the CPI is that it measures the price changes of only food and clothing, while ignoring what happens to the prices of such important items as medical care and interest rates.

Q: (p. 48) Although changes in the CPI provide interesting insights into the overall performance of the economy, these changes have little practical impact on the lives of ordinary people.

Q: (p. 46) Danny was laid off from his job five months ago. At first, he looked for a new job every day. For the last six weeks, however, Danny has become so depressed that he has not made an effort to find a job. According to the criteria used by the government, Danny is a civilian whose unemployment would be included in computing the unemployment rate.

Q: (p. 46) A prediction that GDP will increase significantly over the next six months is bad news for most businesspeople.

Q: (p. 49) Depressions are usually accompanied by severe inflation.

Q: (p. 49) A depression is a severe recession that is often accompanied by deflation.

Q: (p. 49) An economy is said to be in a recession if GDP declines for two or more consecutive quarters.

Q: (p. 49) Current measures of productivity in the service sector provide an accurate measure of changes in the quality of output.

Q: (p. 49) In the service sector of the economy, the influx of machinery such as computers increases output per worker, but does little to improve the quality of services.

Q: (p. 48) As productivity increases, the cost of producing goods and services is likely to fall.

Q: (p. 48) An increase in productivity means that a worker is now able to produce more goods and services in the same amount of time.

Q: (p. 48) The higher productivity is, the higher the costs of production are likely to be.

Q: (p. 48) The main reason U.S. workers are well paid is because they are very productive.