Unit 2 Quiz

Corporations, as a separate legal entity, are subject to corporate taxes. Additionally, the stockholders in corporations are subjected to income taxes on the sale of stocks and income from dividends. This peculiar tax situation that corporations face is called

"double taxation."

Which of these is TRUE of substitute products?

A decrease in the price for one will usually result in a decrease in demand for the other; Substitute products are competitive products, they satisfy the same need.

What is an unintended consequence when government sets a price control on rental apartments?

Because prices are set below market clearing price, suppliers will rent fewer apartments causing a housing shortage.

In the Resource (Factor) Market, who demands the factors of production?

Businesses / Firms and Government

What is an economic principle that describes a consumer's desire and willingness to pay a price for a specific good or service?

Demand

How might firms engage in price competition?

Firms might advertise that they offer the lowest price on selected merchandise.

Which statement about the circular flow model is CORRECT?

Households earn income from the factor market and businesses earn revenue from the product market; Additionally, households spend money in product markets, and businesses can supply product markets with goods and services.

A sign stating "bitcoin accepted here" would be an example of which function of money

Medium of Exchange; The image says "Bitcoin Accepted Here". This shows that Bitcoin is representative of being a medium of exchange. In order to be a medium of exchange, a proposed currency must be accepted.

Which statement BEST describes a benefit of natural monopolies, like utilities?

Natural monopolies can provide services in areas not served by other firms.

How do supply and demand influence market price?

The market clearing price is where quantity demanded is equal to quantity supplied

"The 4th of July is here and Grocery Mart is having a sale on All Beef Hot Dogs! The regular price for a package of All Beef Hot Dogs is $5, but the sale price is $2.50!!" What outcome for hot dogs and hot dog buns is most likely based on the information above?

The quantity demanded of hot dogs increases, and the demand for hot dog buns increases.Because hot dogs decreased in price, the law of demand says that the quantity demanded for hot dogs will increase. We have to assume that the price of hot dog buns did not change, as it does not indicate that in the question. But hot dog buns are a complimentary good for hot dogs, so if the quantity demanded increases for hot dogs, people will buy more hot dog buns (at all prices). Therefore, the demand for hot dog buns will increase.

Pips Burrito Company, started by Mr. Pips, began as just a single man operating out of a small stand by the side of the road, but over the years it grew. Now, 50 years later, the company is listed on the NYSE, something Mr. Pips might have never imagined possible.The fact that Pips Burrito company lives on well past the original entrepreneur best characterizes which feature of corporations?

Unlimited Life

If the supply of computer engineers increases at the same time that the demand for these workers decreases, what would be the MOST LIKELY effect on wages for these workers?

Wages would decline as the competition for jobs increases.

Which scenario most accurately illustrates the concept of "unlimited liability"?

Willie has independently owned and operated Willie's Car Wash since 1999, but the business has been struggling for the past 5 years. Willie has been borrowing money to keep the business afloat, but his business revenue continues to shrink while his debts are growing too large to manage. Next week, Willie is going to have to shut down the car wash for good.

Demand for a product is measured not only by consumer desire for a product, but also by

ability and willingness to buy the product.

A decrease in the price of a particular product will result in

an increase in the quantity demanded of that product.

Sally and Wally have a great business idea. They have some money to invest and hope to find more people interested in investing. They are worried about the legal aspects and the liability. The BEST business form for them is MOST LIKELY a

corporation.

Johnny has invested in 10 shares of a big name electronics company. Each share is worth $150.28, and the company pays Johnny $2.13 for each share that he owns. With his 10 shares he earns $21.30 per year. What is this type of earning called?

dividend income

During Halloween, candy makers accurately anticipate the increased demand for candy for all of the parties and Trick-or-Treat. Manufacturers work hard to make sure the supply of candy and the demand for candy increase the same amount.As a result of Halloween and the careful planning of manufacturers of candy, the price of candy _____ and the quantity of candy _____.

does not change; increases

Resource markets are LEAST LIKELY to sell

goods and services; Businesses use the inputs from the resource market to produce goods and services to sell on the product market.

Which market(s) has no competition

monopoly

Columbia Tires and Pacific Tires together control 75% of the tire market in the country. This is an example of what type of market structure?

oligopoly

Worldwide, Coca-Cola and PepsiCola dominate the soft-drink market, selling significantly more beverage products than any other producers. This domination by only two producers is BEST described as a(n)

oligopoly.

Heather is seeking to start a business. She is concerned with having enough money to start the business, even after taking a loan from the bank. She is willing to take on partners but she still wants to have control over most aspects of the company. Which form of business organization would be best to set up?

partnership

Which type of business organization has the advantage of specialization, but the disadvantage of unlimited liability?

partnership

For which market model is there a very large number of firms (offering the same goods for sale), which helps to lower costs and prices?

perfect competition

The market demand curve for a firm operating under perfect competition is

perfectly horizontal.

On a supply and demand graph, if the demand curve shifts to the left, what would be the resulting effect on equilibrium price and quantity?

price will fall and quantity will fall

If the government decided to subsidize the production of bobble-head dolls

the supply curve will shift to the right;A government subsidy will reduce production costs

In the labor market, the supply curve represents

the supply of workers, and the demand curve is the demand for their labor.