BUSN-1003 Quiz 3

As a consumer advocate, you will be appearing before the federal government regulatory commission concerning the attempt by the TelcomCo. telephone company to acquire its only rival, CommCo. What will you propose to the commission? A: A monopoly structure that limits consumer choices for goods and services that are available should be opposed. B: The importance of leaving production in private hands must be ensured to allow for private enterprise to flourish. C: Both communications companies should be forced into a partnership so that the principles of a mixed economy can endure. D: The government should not interfere in the acquisition attempts by TelcomCo. because the company has every right to makes its own decisions.

A monopoly structure that limits consumer choices for goods and services that are available should be opposed.

The De Beers Diamond Co. plead guilty to price-fixing in 2004. Since then, the De Beers monopoly has dissolved, but they continue to control a majority of the diamond mines in South Africa. Which is the most effective scenario for a company to compete with De Beers? A: A new competitor would need a thorough understanding of the available supply within the market and use of demand processes, in order to create an oligopoly. B: A new competitor would have to control the structure of the diamond industry, in order to create an easier competitive market. C: A new competitor would need to enter the diamond market by creating synthetic stones that can be sold as a lower quality and better value, in order to compete. D: A new competitor would need to determine the ease and cost of doing business within the monopoly, in order to overcome the hands-off attitude of control and profit.

A new competitor would need a thorough understanding of the available supply within the market and use of demand processes, in order to create an oligopoly.

You are an economist, and you are tracking supply and demand in the onion market. At the end of a quarter, you notice that the supply curve shifted dramatically to the left, sending the price of onions up. Which of the following would you consider as possible explanations for this shift? Select all that apply. A : A drought swept large parts of the United States. B : The prices of fertilizer have been rising. C : Taxes on farmers have been decreasing. D : The price of water has been decreasing. E : Customers have begun showing a strong preference for onions. F : The prices of shallots and leeks have been falling.

A: a drought swept large parts of the United States B: the pricers of fertilizer have been rising.

TimeWarner Cable Co. has made attempts to buy and takeover Comcast regions across the United States. Consumers who want to purchase cable services would have to purchase these services from TimeWarner. As a consumer advocate, you must prepare a statement to give to the regulatory commission. What will you propose? A: As a voice for the people, you are against a monopoly structure that limits consumer choices for goods and services that are available. B: As an advocate for private enterprise, you recognize the importance of leaving production in private hands. C: As an activist for a mixed economy, you support TimeWarner and Comcast sharing a region that serves your community. D: As a supporter of pure competition, you accept a hands-off attitude toward controlling business ownership.

As a voice for the people, you are against a monopoly structure that limits consumer choices for goods and services that are available.

Why is the government more likely to allocate funds to construction projects than research projects during a period of recession? A: During a recession, the government must allocate funds to projects that will have an immediate positive impact on the economy. Construction projects create employment in the immediate term and, therefore, create this impact. B: During a recession, the public is less interested in educational advances than they are in infrastructure improvement. In order to maintain favorable public opinion, the government opts to fund construction projects. C: During the recession, the Federal Reserve dictates how the government allocates available funds. The Fed's board of governors prefers more conservative types of investments—like construction projects—because they more reliably offer a return. D: During a recession, the cost of construction materials drops but the cost of research equipment remains the same. As a result, construction projects are much more affordable for the government and are more likely to be funded.

During a recession, the government must allocate funds to projects that will have an immediate positive impact on the economy. Construction projects create employment in the immediate term and, therefore, create this impact.

Despite high annual profits each year over the past decade, the SnowBlower Co. experiences a sudden decline in sales immediately following the end of winter. As a business consultant, what would you suggest for the company to stabilize its business environment? A: Expand its inventory to include lawnmowers and other summer garden tools to help balance the seasonal nature of the company, and ensure sales stay constant year-round. B: Shut down temporarily for three months following the winter in order to conserve capital and maximize its profit for the rest of the year. C: Expand operations to capitalize on its winter sales success. This will allow the company to better weather the sales downturn following winter. D: Reduce its brick and mortar operations and focus solely on online sales; this will allow the company to have the same success with greater profit.

Expand its inventory to include lawnmowers and other summer garden tools to help balance the seasonal nature of the company, and ensure sales stay constant year-round.

The country's economy has been booming for ten years. Production is up, unemployment is down, and there is money flowing into the economy. Federal tax revenues are high. Which of the following should be a priority for the federal government? A: Increasing spending on medical research to further scientific progress. B: Increasing spending on federal highway repair to stimulate the construction industry. C: Decreasing the amount of taxes charged to individuals to free up consumer money. D: Increasing spending on federally-subsidized projects like dams and levees.

Increasing spending on medical research to further scientific progress.

Which of the following is an example of supply? A: Marta is at the grocery store. In the produce department, 16 watermelons are in the bin, each priced at $1.00. Ten crates of peaches are on sale for $2.00 per crate. B: Croppers' Market has watermelons priced at $1.00. By the end of the day, 10 customers have each purchased one watermelon. C: In one day, Croppers' Market sold 10 watermelons at $1.00 each. The next day, the price was lowered to 50 cents per melon and 30 watermelons were sold. D: In one day, Croppers' Market sold 10 watermelons at $1.00 each. The next day, the price per melon increased to $1.50 and two melons were sold.

Marta is at the grocery store. In the produce department, 16 watermelons are in the bin, each priced at $1.00. Ten crates of peaches are on sale for $2.00 per crate.

U.S. government bonds, bills, and notes are often used as a basis for pricing private loans. If you were an entrepreneur looking to secure a loan to start a new business, would it benefit you for the government to pay down the national debt and issue fewer bonds, bills, and notes? Why or why not? A: No, it would not benefit you. The fewer bonds, bills, and notes issued, the higher interest rates they command. This means the rates based on them will also be higher. B: No, it would not benefit you. As national debt goes down, the government asks the Fed to raise the interest rates, which means a higher interest rate on your loan. C: Yes, it would benefit you. With fewer government bonds, bills, and notes available, more money will be available for business loans and they will be easier to secure. D: Yes, it would benefit you. If the national debt is lower, taxes charged to businesses are lower, which means you would not need to secure as large of a loan.

No, it would not benefit you. The fewer bonds, bills, and notes issued, the higher interest rates they command. This means the rates based on them will also be higher.

The city government created a budget of $50 million for the coming year. Last year, the city only took in $45 million in taxes, and revenues are projected to remain the same for this year. The mayor is refusing to approve the budget until it has been balanced. The course of action that would best help the city achieve a balanced budget is to A: re-evaluate the budget and identify areas that can be cut back until the $5 million dollar difference is reconciled. B: issue $5 million dollars in bonds to make up the difference between the budget and estimated revenues. C: apply for a federal grant to cover the $5 million dollar deficit that would be created by the proposed budget. D: increase the city's tax rate at a level that will enable the government to bring in an extra $5 million.

Re-evaluate the budget and identify areas that can be cut back until the $5 million dollar difference is reconciled.

The city government created a budget of $27 million for the coming year. Last year, the city only took in $23 million in taxes, and it is estimated that revenues will remain unchanged this year. The mayor insists the budget will not be approved until it has been balanced. Which of the following courses of action would best help the city achieve a balanced budget? A: Re-evaluate the budget and identify areas that can be cutback until the $4 million dollar difference is reconciled. B: Issue $4 million dollars in bonds to make up the difference between the budget and estimated revenues. C: Apply for a federal grant to cover the $4 million dollar deficit that would be created by the proposed budget. D: Increase the city's tax rate at a level that will enable the government to bring in an extra $4 million.

Re-evaluate the budget and identify areas that can be cutback until the $4 million dollar difference is reconciled.

Suppose you are the chairman of the Federal Reserve. You are concerned about an increase in risky consumer investments and would like to make a recommendation to the board of governors to help curb these investments. Which of the following recommendations can you make that would help accomplish this goal? A: Requiring a higher percentage of checking and savings accounts be deposited with the reserve by commercial banks. B: Decreasing the interest rates charged to commercial banks on money borrowed from the reserve. C: Placing a freeze on all investments outside of Treasury bills, Treasury notes, and Treasury bonds. D: Charging penalty fees on all investments that are considered riskier than government issued debt.

Requiring a higher percentage of checking and savings accounts be deposited with the reserve by commercial banks.

The chairman of the Federal Reserve recommends that the board of governors of the Fed require a higher percentage of checking and savings accounts be deposited with the reserve by commercial banks. Which of the following situations is she most likely trying to address? Why? A: Risky consumer investments have increased, and requiring a higher percentage of checking and savings accounts be deposited with the reserve will help curb these investments. B: Unstable business ventures have become common, and requiring a higher percentage of checking and savings accounts be deposited with the reserve will help curtail these businesses. C: The national debt has grown, and requiring a higher percentage of checking and savings accounts be deposited with the reserve will reduce the debt. D: Overseas manufacturing has eclipsed domestic business, and requiring a higher percentage of checking and savings accounts be deposited with the reserve will strengthen domestic business.

Risky consumer investments have increased, and requiring a higher percentage of checking and savings accounts be deposited with the reserve will help curb these investments.

Susanne worked in a factory cutting fabric patterns for clothing. When the factory updated their technology to include cutting machines, Susanne lost her job. What is the best way for Susanne to overcome her unemployment situation? A: Susanne will need to seek training and/or education to build her skill sets and stay current with the job market to avoid becoming structurally unemployed. B: Susanne can join the cyclical contraction in the workforce, and she will be eligible for job training and benefits available to the unemployed. C: Susanne will be able to replace her job with seasonal opportunities that are available; this will prevent her from becoming underemployed in the job market. D: Susanne can join a pool of potential workers that had the same experience of being replaced by technology; by doing this, she will have a better chance of returning to the workforce.

Susanne will need to seek training and/or education to build her skill sets and stay current with the job market to avoid becoming structurally unemployed.

As an economist at a financial advisement firm, you are tasked with writing reports on market outlooks. Currently, manufacturing sectors are down, inventory is low, and retail sales are at an all-time low. What would you write in your future outlook report for the coming months? A: The Gross Domestic Product will be used to concentrate on ways to stimulate production, while the CPI will provide an indicator of consumer purchases. B: This trend suggests a depression for the near future, and food and other basic necessities will become scarce as government officials will look for ways to increase employment levels. C: A stronger economy for the future will be created as a result of deflation, enabling shoppers to pay less for the goods and services that were once more expensive. D: Sudden growth will occur, followed by a deep depression due to lack of investment in the manufacturing sector brought on by low sales and revenue generation.

The Gross Domestic Product will be used to concentrate on ways to stimulate production, while the CPI will provide an indicator of consumer purchases.

If a nation's gross domestic product rises significantly year after year and a large portion of the citizens gain in income and savings, what will be the impact on the demand for luxury items, such as pearl necklaces? A: The demand curve will shift to the right because buyers' incomes increase, making the purchase of luxury items more likely. B: The demand curve will shift to the left because customer preferences decrease, making the purchase of luxury items less likely. C: The demand curve will shift to the left because the number of buyers decreases, lowering the sale of luxury items. D: The demand curve will shift to the right because the prices of complementary goods increase, which will increase the sale of luxury items.

The demand curve will shift to the right because buyers' incomes increase, making the purchase of luxury items more likely.

The U.S. Department of Labor conducts monthly surveys to determine the unemployment level. In May, a representative from the U.S. Bureau of Labor calls Katherine Jenkins and asks if she is unemployed. Katherine tells the caller she does not have a job and has not looked for one for six weeks. Katherine is counted as not in the labor force but is not counted as unemployed. When the May unemployment numbers are released, a member of Congress says they are inaccurate and asks for the "real level of unemployment." What do you think the Congressman means by this? A: The official unemployment statistics are lower than the true level of unemployment. B: The official unemployment statistics are higher than the true level of unemployment. C: The official unemployment statistics do not count frictional unemployment. D: The official unemployment statistics do not count cyclical unemployment.

The official unemployment statics are lower than the true level of unemployment.

An import tax is levied on automatic transmissions for automobiles. What is likely to happen to the price of the automobiles? A: The price of automobiles will increase because the increase in the price of transmissions decreases supply, decreasing quantity demanded. B: The price of automobiles will increase because the increase in the price of transmissions increases supply, increasing quantity demanded. C: The price of automobiles will decrease because the increase in the price of transmissions decreases supply, decreasing quantity demanded. D: The price of automobiles will decrease because the increase in the price of transmissions increases supply, increasing quantity demanded.

The price of automobiles will increase because the increase in the price of transmissions decreases supply, decreasing quantity demanded.

Raymond Faust is an avid stock trader. He currently has 20 stocks that he would like to trade. Over the past eight months, he has noticed that stock prices have been continually declining, but they have been fairly stable for the past two weeks. Based on the phases of a business cycle, formulate a plan for Raymond's stock trading. A: The stabilization of stock prices may indicate that a recession is ending and a recovery may be coming, so Raymond should wait to sell his stocks. B: The stabilization of stock prices is a temporary phase before stock prices plummet, so Raymond should sell his stocks now before he loses more money. You got it wrong' C: The declining stock prices over eight months indicate that a depression is coming, so Robert should liquidate all of his assets as soon as possible. D: Because stock prices are low, Robert should invest as much money as possible in the stock market regardless of whether stock prices start rising or continue to decline.

The stabilization of stock prices may indicate that a recession is ending and a recovery may be coming, so Raymond should wait to sell his stocks.

Prospectors in South Africa stumble upon a huge supply of rhodium, a rare and valuable industrial mineral. New mining companies spring up rapidly to exploit this resource. What is likely to happen to the supply curve for rhodium as production from this new source comes into the market? A: The supply curve will shift to the right because the number of suppliers increased. B: The supply curve will shift to the right because the cost of inputs decreased. C: The supply curve will shift to the left because the cost of inputs increased. D: The supply curve will shift to the left because the number of suppliers decreased.

The supply curve will shift to the right because the number of suppliers increased.

Everyone in a neighborhood has their yard mowed every Thursday by a professional lawncare company. When the price of lawncare rises from $10 to $40 for each week, which of the following economic actions are the homeowners, as a group, most likely to take? A: They will mow their own lawns instead of using the professional service. B: They will seek out substitute goods like watering cans and garden shears. C: They will seek out complementary services like fertilizing and landscaping. D: They will curtail their spending on luxuries like vacations

They will mow their own lawns instead of using the professional service.

Travis has been watching the national news coverage regarding the recent stock market activity, and he is concerned about his finances. Analysts are blaming recent changes in government policies. What is the best action Travis can take to avoid financial problems? A: Travis should continue to stay informed on macroeconomic issues before using this information to make micro economic decisions regarding his finances. B: Travis should begin purchasing the goods he needs for future consumption before the prices begin to skyrocket. C: Travis should identify products that are in high demand before purchasing the products that are necessities at this time. D: Travis should remain optimistic regarding his finances before changes in public policy create additional changes in the economy.

Travis should continue to stay informed on macroeconomics issues before using this information to make micro economic decisions regarding his finances.

A mega corporation of big box grocery stores wants to invest and open new stores in a market that was originally strictly communist. Because the market is trending toward becoming a mixed economy, which would be MOST advantageous for this corporation? A: Whether the government gives small and large businesses more latitude in making decisions about what they sell and buy. B: The state still significantly controls pricing and regulates which products can be offered for sale. C: The government has no labor law restrictions, which means employees have few rights. D: The government only allows small companies to operate privately.

Whether the government gives small and large businesses more latitude in making decisions about what they sell and buy.

The federal government relies on three primary sources of funds: taxes, fees, and borrowing. What would happen if the government were to stop using fees and borrowing as funding sources? A: Without fees and borrowing, tax rates would have to increase. Increased taxes result in lower consumer spending. Lower consumer spending slows the economy. Overall, the economy would not benefit. B: Without fees and borrowing, programs would have to be cut from the budget. Many of these would be economic programs. A loss of economic programs damages the economy. Overall, the economy would not benefit. C: Doing away with borrowing erases the national debt. Without the national debt, inflation decreases. Decreased inflation results in increased consumer spending. Increased spending causes the economy to boom. Overall, the economy would benefit. D: Without fees and borrowing, the budget is easier to balance. A balanced budget means no budget deficit. No budget deficit means no national debt. No national debt means the government has more money to devote to economic programs. Overall, the economy would benefit.

Without fees and borrowing, tax rates would have to increase. Increased taxes result in lower consumer spending. Lower consumer spending slows the economy.

On a snowy day in February, the snowplow company in town is willing to plow driveways for $15 each. Homeowners are willing to pay $15 each to have their driveways plowed. This is an example of A: equilibrium price. B: change in demand. C: movement along the supply curve. D: movement along the demand curve

equilibrium price

As the owner of Modern Dress, you have an overstock of last year's fashions. In order to increase demand for these items, what will you propose to your staff? A: Lower the prices for the fashion items to stimulate consumer spending and sales. B: Raise the prices for the fashion items to increase demand for the clothes. C: Enter into an exchange with suppliers to generate revenues and profits. D: Choose from a variety of the fashions to determine which ones you will donate to charity.

lower the prices for the fashion items to stimulate consumer spending and sales.

Despite high sales last season, several furniture styles remain overstocked at a local furniture store. As the sales manager, what suggestion should you make to staff so that these items can be sold quickly, and why? A: Lower the prices for the overstocked pieces of furniture to promote consumer spending and increase sales. B: Raise the prices for the overstocked pieces of furniture to increase demand and interest in them. C: To generate revenues and profits, sell the entire lot of overstocked furniture to a bargain warehouse. D: Offer them for free to customers who make large purchases to clean up space for new furniture models.

lower the prices for the overstocked pieces of furniture to promote consumer spending and increase sales.

Country X has a mixed economy in which the healthcare, communications, and transportation industries are publicly owned. Recently, the national economists have become concerned because the GDP is shrinking every year, and foreign investment in the nation's private industries has been dropping. Which of the following might the government consider as a solution, and why? A: Privatization of a government-owned industry, because privatization can raise funds and bolster the national economy. B: Close regulation of the country's monopolies, because regulation can rein in prohibitively high prices that depress GDP. C: Socialization of the country's remaining private industries, because socialization allows the government to monitor economic activity closely. D: Conversion of the country's monopolies into oligopolies, because oligopolies allow price competition to become more fluid.

privatization of a government-owned industry, because privatization can raise funds and bolster the national economy.

Over the course of the last few years, people have come to view smart phones less as luxuries and more as necessities, the prices of smart phones have gone down, and the number of buyers has increased. How would you explain the change these factors will produce in the demand curve for smart phone cases? A: The curve will move to the right. B: The curve will move to the left. C: The curve will not move, and the price will not change. D: The curve will not move, and the price will rise.

the curve will move to the right.

Congress imposes an import tax on rice. What is likely to happen to the supply curve for U.S.-made rice cakes? Why? A: The supply curve will shift to the left because the price of the input increased. B: The supply curve will shift to the left because the number of suppliers decreased. C: The supply curve will shift to the right because the cost of technology decreased. D: The supply curve will shift to the right because the number of suppliers increased

the supply curve will shift to the left because the price of the input increased.