Chapter 36 - Economic Foundations

What is the utility of a good?

The total usefulness it has for someone.

A free enterprise system is often referred to as:

A foreign system A socialist system None of the answers are corret - A free market system

Which of the following is the best explanation of a free market in the real world?

A market with limited government intervention

Which of the following best describes a free market?

A market without significant government intervention.

How should a government behave in a capitalist system?

By enacting laws to ensure there is a level playing field

Why would a perfectly competitive market be beneficial for consumers?

Because all market participants would have to compete on price.

Why does the market structure of the United States MOST resemble monopolistic competition?

Because entry into the market by a new business is relatively easy.

Why does internet piracy cause the supply curve to shift to the left?

Because it destroys demand for the product.

Why is rewarding risk-taking an advantage to capitalism?

Because it provides an incentive for innovation and economic growth

A free enterprise system has which of the following traits or characteristics:

Business owners are allowed to set their own prices Consumer spending and preferences drive business decisions - All of the answers are correct Ability for individuals to buy land and buildings with few restrictions Business owners can choose who they do business with

Which of the following is most often associated with a free enterprise system?

Capitalism

Which is NOT an example of a resource supplied by a household?

Cell phones

What model is used to demonstrate markets and the flow of goods between firms and households?

Circular Flow

How can utility change?

Circumstances can cause the utility gained by a specific action to change.

How does advertising impact the supply and demand curve?

Demand curve shifts to the right

Which of the following is another way of describing why it's best to not get upset over a sunk cost?

Don't cry over spilt milk.

Why is it often difficult to enter into a market that BEST resembles an oligopoly?

Due to the level of capital investment required.

Which of the following BEST describes the intersection between supply and demand?

Equilibrium

Which one of the following is NOT a characteristic of capitalism?

Extensive government planning

Who is normally the producer in a resource market?

Households

Which of the following allows us to cope with scarcity of resources?

Increased efficiency, or getting more outputs from the same inputs

One of the toy company's products is a baby item that simulates a car driving. It can be attached to a crib to help soothe babies to sleep. No other product like this is available. What type of demand would this product likely have?

Inelastic demand

You are overseeing the construction of buildings on an island. Why would you want to build high-rises?

Land is very scarce but air space is not.

What is a sunk cost?

Money that has been lost and cannot be regained.

Jennifer really enjoys watching hockey, but she doesn't have very much money. Which of the following will most likely maximize her utility?

Paying $20 for decent seats at a hockey game.

How does innovation impact the supply and demand curve?

The supply curve shifts to the right.

A free enterprise system:

Places few restrictions on businesses

What is the name of the market in which households buy goods from firms?

Product

Susie goes to XYZ Grocery store and walks around to look at all the items that she has available to her for purchase. What is Susie participating in?

Product Market

An example of a free enterprise system at work is:

Pursuing any career you have an interest in Opening a coffee shop -All of the answers are correct Starting an online business

Assume that you have two hours to spend at the mall. You can either visit the bookstore or enjoy a movie at the theater. The opportunity cost of watching a movie is equivalent to which of the following?

The time you could have spent visiting the bookstore.

You have an economics test tomorrow that you would like to pass. Which of the following activities has the greatest utility?

Studying economics

What determines the price of a good or service in a capitalistic economy?

Supply and demand

Which of the following gives an example of utility changing depending on the circumstances?

Take-out that is good enough for your friend may not make the impression you want on your date.

Assume that land can be used either for producing corn or producing beef. The opportunity cost of converting an acre from producing corn to raising cattle for beef is equal to which of the following?

The amount by which corn production decreases.

Josie decided to go to college full-time instead of working. Which of the following is the opportunity cost of going to college for Josie?

The income she would have earned by working.

During the time Mary spent studying macroeconomics, she could have instead either made brownies or played the piano. She thinks to herself that if she wasn't studying, then she would have made brownies. In this case, her opportunity cost of studying is equal to which of the following?

The value of making brownies, which is her next best alternative.

Which of the following best describes opportunity cost?

The value to you of the next best (alternative) action you could have taken.

Why does a monopoly-based system result in a negative business environment?

This type of market structure involves only one strong company that determines the market price.

If a butter manufacturer raises prices by 10% and the quantity of butter demanded by consumers falls 20%, this would be an example of _____.

elastic demand

When is it rational to throw money in the air with abandon?

if, for the owner of that money, that is the best use they can think of to bring them utility.

Bribery can be _____, but of course is illegal.

innovative

What is the price at which demand and supply are equal?

price equilibrium

A supply and demand chart or schedule is the _____

quantity of a product that will be offered to the market by a supplier or suppliers at various prices for a specified period.

A demand chart or schedule is the _____

quantity of a product that will be sold in the market at various prices for a specified period.