Microeconomics Ch. 3 - prof maliki

In the United States, the government regulates business in its role as a "referee." Which of the following is not among the laws regulating the interaction between households and businesses?

Businesses are required to produce certain goods, called public goods, for the government.

Which of the following is not one of the three principal components of a socialist economy?

Entrepreneurs are encouraged by the profit motive, rather than government directive, to satisfy consumer wants in the most efficient manner possible Correct

Why is entrepreneurship a central part of any business?

Entrepreneurship is a central part to any business because business is dynamic; it involves meeting new problems constantly, recognizing needs, and meeting those needs in a timely fashion

Which of the following is not a characteristic of pure capitalism?

Government ownership of means of production

Which group has ultimate control over the U.S. economy?

Households Ultimately, households have control because households own businesses and elect governments.

Which of the following is an international financial institution concerned primarily with monetary issues and international financial arrangements?

International Monetary Fund

Which of the following is not an example of government's role as a referee?

Laws that require states and the federal government to balance their budgets

Which of the following is one of the macroeconomic goals established by the 1946 Employment Act?

Providing an economic environment conducive to growth

What are two organizations that countries can use to coordinate economic relations and reduce trade barriers?

The World Trade Organization (WTO) and the North American Free Trade Agreement (NAFTA

In a market economy, what is the central coordinating mechanism?

The price mechanism In a market economy, fluctuations in prices play a central role in coordinating individuals' wants. Price is the mechanism through which people's desires are coordinated and goods are rationed.

Government regulation of working conditions is an example of government as:

a referee Government as a referee is when government sets the rules between economic players. Regulating working conditions is an example.

If federal, state, and local governments were unable to raise any revenue, then government's role as:

both an actor and a referee would be eliminated.

Global corporations:

can provide many benefits to the countries in which they operate.

Which of the following countries is not a member of The Group of Seven?

china The Group of Seven is comprised of Japan, Germany, Britain, France, the United States, Canada, and Italy.

Which of the following is the best example of a demerit good?

cigarettes

When Coca Cola introduced a new, low-calorie version of Coca Cola called C2, despite a major marketing effort, sales of C2 were weak and many doubted that the product would last. Coke's experience with C2 illustrates the economic concept of:

consumer sovereignty. Producers can offer products, but consumers ultimately decide what gets produced.

Government is on the:

demand side of both factor markets and goods markets.

Using illegal drugs is an example of a

demerit good activity

When a government bans prostitution, it may do so because it considers prostitution to be a:

demerit good. Government sometimes will make decisions based on whether it is good or bad for society.

One advantage of a sole proprietorship over a partnership is:

direct control by the owner. Only with a sole proprietorship is there direct control by the owner. This is the advantage a sole proprietorship has over both a partnership and a corporation. Liability is unlimited with a sole proprietorship. One works alone and the ability to get funds is limited.

What are the two largest categories of state and local government expenditures?

education and health

Suppose that at the current price, consumers would like to purchase 10 million large-screen televisions and 15 million are available. When the market coordinates the demand and supply for large-screen televisions, the price of large-screen televisions will:

fall

t/f Membership in the Group of Seven consists of both developed and developing countries.

false

t/f Governments establish the laws that regulate the interaction between businesses and households but do not serve as actors in the economy themselves.

false Governments do referee the interaction between households and businesses in the economy, but they also serve as actors by redistributing income and purchasing goods and services.

t/f The L3C (low profit limited liability company) type of corporation, sometimes called a benefit corporation, ignores profit considerations and instead pursues only social goals.

false L3Cs take social objectives and profit into consideration when making decisions.

t/f Limited liability is a key advantage of partnerships and sole proprietorships over corporations.

false The liability of both sole proprietorships and partnerships is unlimited; this is not the case for corporations.

t/f When there are market externalities, the market allocation of resources will be optimal.

false When externalities arise, mutually beneficial transactions between buyers and sellers give rise to third party effects not accounted for by buyers or sellers. Because decision makers ignore these effects, there is no guarantee that their decisions will be in society's best interest.

Influenza vaccination is an example of a

good or an activity that involves a negative or positive externality

In socialism:

government planning, rather than the market, is relied upon to coordinate economic activity.

One advantage of a partnership over a corporation is:

greater accountability.

The tax revenues of federal, state, and local governments have different sources, in that the federal government relies primarily on:

income taxes; state and local governments rely to a greater extent on sales and property taxes. Individual income taxes comprise roughly 50 percent of federal government receipts while sales and other taxes comprise the largest portion of state and local government receipts.

The most important difference between domestic governments and international organizations is that:

international organizations are less effective since they have no means of forcing members to comply. Correct

Business decisions about what and how much to produce are based on what:

maximizes profits.

Eating fresh fruits and vegetables is an example of a

merit good or activity

A defining difference in what makes a firm a sole proprietorship, partnerships, or a corporation is the:

nature of ownership and accountability for each type of business.

When I benefit from my neighbors cleaning up their yard, I am experiencing a(n):

positive externality.

National defense is an example of a

public good

List the three major forms of business. What form is most common What form accounts for the largest proportion of sales

sole proprietorship, corp, partnership sole proprietorship corp

Certificates of ownership of a company are called:

stocks

t/f In a market economy, society relies on the self-interest of individuals to determine what, how, and for whom to produce.

true In a market economy, individuals decide how, what, and for whom to produce based on self-interest.

t/f Private property rights are essential to market economies.

true Market economies rely on market forces, which are dependent upon the existence of property rights.

Profit is:

what is left over from total revenue after all of the appropriate costs have been subtracted.

A public good is a good that:

when consumed by one individual, can still be consumed by others.

A primary goal of the International Monetary Fund (IMF) is to:

work out repayment plans for developing countries with large international debts.