Economic Unit Review
Which of the following is a situation in which people are out of work and can't afford "extra" purchases:
Bad economy
Who answers the basic economic questions in a private enterprise economic system?
Businesses and individuals
Offering higher wages, employee-assistance programs, and benefits are responses to limited
Human resources
For each new product it offers, a business seeks
buyers
Which of the following determines whether consumers can purchase goods or services:
buying power
In a private enterprise economic system, consumers can choose from a variety of products as a result of
competition
When a rival's product on the market reduces sales of your company's product, your company is experiencing strategic risk caused by
competition
Which of the following economic resources is responsible for combining the other resources to produce goods and services:
Human resources
Which of the following occurs when the supply of individuals who are able and willing to work diminishes:
Human resources become limited
Marcy is ready to buy a new computer, and she has saved up enough money to buy the model she wants. Which of the following describes the quantity that Marcy is prepared to buy:
demand
Most businesses strive to supply goods and services in direct proportion to
demand
The price of complementary products has an effect on
demand
Burger King and McDonald's are examples of
direct competitors.
A popular product is said to be
in demand
Which of the following is an example of a business risk that cannot be covered by insurance:
increase in interest rates
Which activities are likely to increase a firm's profit?
increasing sales and decreasing expenses
If a consumer chooses to go to the movies rather than to a pizza parlor, then the movie theater and the pizza parlor are
indirect competitors
Private enterprise is based on the idea that everyone is better served when
individuals are free to set their own goals
Businesses must be careful about increasing the prices of their goods to increase profits because the result may be that they
lose sales to competitors
The goals of government are to protect the rights of individuals and businesses and to provide a stable environment, but the main goal of business is to
make a profit
Individuals put limits on their own economic freedom by
making personal economic choices.
Every society must develop a system for deciding how it will use its resources so that it can
meet peoples needs
When government sets safety standards for the workplace, it is attempting to
minimize risks to employees
The state of technology that exists in a society can limit
natural resources and capital goods
What category of business risk includes production problems and incompetent employees?
operational
One way in which government protects private property is to provide
patents or copyrights
One of the results of freedom in the marketplace is that
people can buy anything they can afford that can legally be sold
One of the reasons that has caused government's role in business to expand is that
people's attitudes have changed
Having well-planned buildings and providing effective employee training are ways that a business can __________ business risks.
prevent or control
Carefully selecting goods or services to sell is an example of handling business risks by __________ the risk.
preventing or controlling
Careful screening of credit customers is an example of handling business risks through
prevention
Contractual agreements such as guarantees, surety bonds, and leases are examples of business risks being handled through
prevention or control
An electronics store charges less for a new television than other electronics stores. The store is engaging in ________ competition.
price
A business that advertises a special sale as well as its delivery service is using a combination of ___________ competition.
price and nonprice
Alex owns a guitar, several books, and a telescope. Alex's possessions are examples of
private property
The basic role of the United States government is to
protect U.S. citizens
When a business keeps a risk because management is unaware of it, the business is __________ the risk.
retaining
People who go into business know that the business may not succeed. This possibility is referred to as business
risk
Besides motivation, what does profit provide business owners in particular?
satisfaction
Which of the following situations involves finding another source of a limited natural resource:
searching for oil on the ocean floor
Gross profit shows business owners the difference between what they've
spent and received
The quantity of a good or service that producers are able and willing to offer for sale at a specified price in a given period of time is
supply
One of the factors that directly limits the economic freedom of individuals in a private enterprise system is government
taxation
The two main sources of revenue used to pay the costs of government regulation are
taxes and borrowing.
One reason why the supply of certain products has been eliminated is because of
technology
One of the benefits of economic freedom is that it provides individuals with
the opportunity for success
The economic basis for the private enterprise economic system is
the profit motive
When producers use the best combination of resources, consumers are more likely to get goods and services that
they want
Each purchase strengthens the economy by encouraging Selected:
trade
Requiring a contractor to purchase a surety bond is an example of handling business risk by __________ the risk.
transferring
The act of reducing or removing risks by shifting the risk factor to another person or business is referred to as __________ risk.
transferring
To use resources wisely, business owners must reduce
waste
One of the freedoms provided to individuals by the private enterprise system is the freedom to choose
where they will work
Which of the following was one of government's original roles in business:
Acting as a referee
Which of the following statements about economic resources is true:
As natural and human resources become limited, capital goods become limited
Automation involves replacing human resources with
Capital goods
Which of the following economic resources helps people to be more productive:
Capital goods
Which of the following is one of the main principles of the private enterprise system:
Competition
Which of the following is a factor affecting a product's utility to the individual customer:
Consumer's age
Which of the following might cause supply of a good to decrease:
Government regulations
Which of the following regulatory agencies would be concerned with price fixing and unfair competitive practices:
Federal Trade Commission
The general classifications of business risks are
Hazard, Operational, Strategic, Financial
Which of the following is characteristic of a seller's market:
High prices
One of the ways that competition benefits customers is by encouraging businesses to
Improve their existing products
Which of the following statements best describes the way that the U.S. economic system functions:
Individuals and businesses are the primary decision makers, while the government is the regulator.
Which of the following is a public good that is provided by government:
Interstate highways
Which of the following statements regarding economic resources is true:
Natural resources, human resources, and capital goods are often referred to as factors of production.
Which of the following is a benefit of the freedom to own private property:
It encourages people to save and invest
Which of the following statements about perfect competition is correct:
It is used as a benchmark to compare real market structures against.
For which of the following do workers compete in a private enterprise system:
Jobs
What might businesses do if they expect prices to increase substantially in the future?
Keep products off the market
Which of the following is a positive effect of government regulation:
Legal protection
Which of the following government actions is most likely to stimulate the economy:
Lowering tax rates
What type of market structure is most commonly found in a private enterprise economy?
Monopolistic competition
Which of the following factors may influence supply:
Natural Disasters
One way that competition benefits business is by encouraging the creation of
New companies
Jeremy has $15,000 to spend on a new car. He found a car that cost $14,500, but he did not think the car was worth more than $12,000. The dealer told Jeremy that he has not been able to sell this model because other customers have expressed the same opinion as Jeremy. Does demand for this car exist?
No, because consumers are not willing to pay the price being asked for his car
The automobile industry, the pharmaceutical industry, and the oil industry are all examples of
Oligopolies
Which of the following is a disadvantage of private enterprise
Periods of unemployment
Which of the following situations involves finding an alternative resource to use in place of a nonrenewable natural resource:
Powering a motor vehicle with biodiesel instead of gasoline
Government uses some of the tax money it collects from individuals and businesses to support public welfare programs. What is the benefit of these welfare programs to businesses in a private enterprise economy?
Recipients don't have to work.
Financial loss from investing time and money to comply with accounting standards is an example of which strategic risk?
Regulatory and political issues
Which of the following pieces of legislation prevents monopolies from forming and hinders price fixing:
Sherman Antitrust Act
What motivates businesses to produce efficiently and sell effectively?
The hope of making a profit
Why are entrepreneurs important in a private enterprise system?
They encourage the development of new products
What is the purpose of government regulation of business activities that might cause air or water pollution?
To conserve the environment
Why does government set and collect taxes?
To help pay the expenses of government
Determine whether the following statement is true or false: Government has become an active participant in the world of business.
True; government produces goods and services
What is the government doing when it buys wheat to keep the price high enough for farmers to make a profit?
Using price supports
Which of the following is a direct benefit to consumers of the effects of competition
Wider product selection
Government provides protection to business owners' property through the use of
Zoning laws
Because of competition, people in our society enjoy
a higher standard of living compared to other countries
Demand for a good is more likely to be elastic when the good is
a luxury
Management decides to hold its annual meeting in one U.S. city rather than another because of crime in that city. This is an example of __________ the risk.
avoiding
Which of the following is a general benefit profit provides:
better wages
Profitable businesses often help improve their local communities by
contributing to charitable causes
The amount of money paid for raw materials and products sold is called
costs of goods
Government is involved in settling business disagreements through the use of
courts
One way that competition helps to build a prosperous society is by
creating new jobs
When employees are working faster or better, they are increasing their
efficiency
When less expensive substitutes for a product are readily available, then demand for that product is likely to be more
elastic
Which of the factors that affect profit are usually able to be controlled?
expenses and pricing
A hurricane that destroys a business is an example of a(n) __________ risk.
hazard
Even though gasoline prices increased 15 cents per gallon as the result of the new gas tax, Alice continued to buy gas so that she could make her 20-mile drive to work. This is an example of what type of demand?
inelastic
Resources that enable businesses to operate are also known as
inputs
Business owners are usually interested in net profit because they want to know what they can
keep
If no profit is generated for an extended period, a business must
lay off employees
A restaurant fails to meet government regulations, so it loses its __________ and is no longer allowed to do business.
license
When there is not enough of a resource available for everyone to have as much of it as desired, the resource is
limited
Maintenance, modifications, and use of alternative sources are responses to limited
noneconomic goods
Offering high quality, large assortments, and free shipping are examples of
nonprice competition
Which of the following describes inelastic demand:
not affected by price change
The money spent to run a business is called
operating expense
A union strike that stops production at a manufacturing plant is a(n) __________ risk.
operational
Businesses can protect themselves from the risk associated with lost shipments by
purchasing transportation insurance
In business terms, income is the money
received
Government can prevent unqualified persons from operating a business by
refusing to grant them a license.
Government tries to protect competition by
regulating monopolies
If a risk is small in terms of money, a business may decide to __________ the risk.
retain
Most businesses put their greatest competitive efforts into competing
with direct competitor