Quiz -- Chapter 2 -- Business 101

*Sales at W & B Jam Company have not increased this year. However, due to exceptionally good weather, the cost of fruit and natural sweeteners have fallen by 7.5%. No other cost have changed. How has this affected the company's productivity? a. Productivity has increased. b. Productivity has remained unchanged. c. It is not possible to tell how productivity has been affected. d. Productivity has decreased.

a. Productivity has increased.

In the context of economic systems, the two key phases of a business cycle are: a. contraction and expansion. b. recession and deflation. c. depression and retrieval. d. stagflation and hyperinflation.

a. contraction and expansion. - The two key phases of a business recycle are contraction and expansion. - Contraction is a period of economic downturn, marked by rising unemployment. - Expansion is a period of robust economic growth and high employment. (2-6: Evaluating Economic Performance: What's Working?).

Which of the following is one of the core purposes of the Fed? a. Investing in critical public assets. b. Influencing the size of money supply. c. Providing short term jobs. d. Regulating taxes.

b. Influencing the size of money supply. The core purpose of the Fed is to influence the size of the money supply—or the total amount of money within the overall economy (2-2: Managing the Economy through Fiscal and Monetary Policy).

__________ are market structures with one company as the supplier of a product because the nature of the product makes a single supplier more efficient than multiple competing ones. a. Oligopolies. b. Natural monopolies. c. Monopolistic competitions. d. Pure competitions.

b. Natural monopolies. Natural monopolies are market structures with one company as the supplier of a product because the nature of that product makes a single supplier more efficient than multiple, competing ones. Most natural monopolies are government sanctioned and regulated (2-3: Capitalism: The Free Market System).

The government in the town of Rodenham has granted exclusive rights to a few telecommunications companies to operate in specific geographic areas. The company have to provide their services in the areas allotted to its competitors. This system has been put in place because it would be inconvenient for each company to build its own infrastructure in all areas. The given scenario exemplifies: a. pure competition. b. a natural monopoly. c. monopolistic competition. d. an oligopoly.

b. a natural monopoly. The given scenario exemplifies a natural monopoly. A natural monopoly is a market structure with one company as the supplier of a product because the nature of that product makes a single supplier more efficient than multiple, competing ones. Most natural monopolies are sanctioned and regulated by the government (2-3: Capitalism: The Free Market System).

In the context of fundamental principles of a free market system, which of the following statements is true of a supply curve? a. It shows the relationship between supply and quantity from a buyer standpoint. b. For most goods and services, it forms a sinusoidal curve. c. It shows the relationship between price and quantity from a supplier standpoint. d. For most goods and services, it slopes downward as it moves to the right.

c. It shows the relationship between price and quantity from a supplier standpoint. The relationship between price and quantity from a supplier standpoint can be shown on a graph called the supply curve (2-3: Capitalism: The Free Market System).

__________ is a market structure with just a single producer completely dominating the industry. a. Oligopoly. b. Monopolistic competition. c. Monopoly. d. Pure competition.

c. Monopoly. Monopoly is a market structure with just a single producer completely dominating the industry, leaving no room for any significant competitors (2-3: Capitalism: The Free Market System).

The district of Dansas in Nerito, a European country, is a major producer of walnuts. All producers in the district sell package walnuts. The market structure is flexible enough for producers to enter and leave the market as and when they wish, but no single producer has control over the price of the product. Which of the following market structures exists in Dansas? a. Monopolistic competition. b. Monopoly. c. Pure competition. d. Oligopoly.

c. Pure competition. The market structure of pure competition exists in Dansas. Pure competition is a market structure with many competitors selling virtually identical products. Since customers can't (or won't) distinguish one product from another, no single producer has any control over the price (2-3: Capitalism: The Free Market System).

Identify a true statement about the debt ceiling. a. The decision to hike debt ceiling does not depend on the earlier borrowings by the federal government. b. Debt ceiling hikes are strictly decided by public voting. c. Voting on the debt ceiling happens separately from voting on taxes and spending. d. Debt ceiling hikes are extremely rare.

c. Voting on the debt ceiling happens separately from voting on taxes and spending. The debt ceiling is the maximum amount Congress lets the government borrow. In theory, this is meant to limit the amount that the government can borrow, but in practice, voting on the debt ceiling happens separately from voting on taxes and spending, so the debt ceiling ends up being mostly about whether or not the federal government can pay for debts that it has already incurred (2-2: Managing the Economy through Fiscal and Monetary Policy).

In a business cycle, the __________ is the transition period between contraction and expansion. a. recession. b. deflation. c. recovery. d. disinflation.

c. recovery. - Recovery is a period of rising economic growth and increasing employment following a contraction. - Business begin to expand. => Consumers start to regain confidence, and spending begins to rise (2-6: Evaluating Economic Performance: What's Working?).

If economic activity is too low, the Fed is likely to: a. increase the reserve amount. b. increase the Federal Funds rate. c. sell Treasury bills. d. lower the Federal Funds rate.

d. lower the Federal Funds rate.

The repayment of the debt in U.S federal government is likely to result in an increase in: a. the number of student loans. b. housing subsidies. c. the number of government jobs. d. taxes.

d. taxes. The U.S federal debt has grown bigger every year since 1957, and the pace of growth will likely increase further in the wake of the economic crisis. This matters to each taxpayer because as the government repays the debt— not to mention paying the skyrocketing interest to finance this debt—less and less money will be available for other uses; services may be eliminated (e.g. students loans, veterans' benefits, housing subsidies), or taxes will soar, or perhaps even both (2-2: Managing the Economy through Fiscal and Monetary Policy).

Macroeconomics involves in the study of: a. spatial changes in the population of a country. b. family incomes in a given region. c. the competitive aspects of identical products. d. the gross domestic product of a country.

d. the gross domestic product of a country. Macroeconomics is the study of a country's overall economic dynamics, such as the employment rate, the gross domestic product, and taxation policies (2-1: Economics: Navigating a Crisis).