Economics Final Review

Japan has a 100% tariff on sports car imports from the United States. If a sports car costs $80,000.00 in the United States: a) How much would it cost in Japan? and b) Would this increase or decrease U.S. exports to Japan?

$160,000.00 ... decrease

Andrew values where he lives. He likes to make decisions about his job and his ability to acquire wealth. He also wants to be the one to decide what producers should produce and what he is able to purchase. In which type of economy does Andrew live?

Free enterprise

- Austrian Economist - Strong advocate of freer market capitalism - Author of "The Road of Serfdom" - Awarded the Nobel Prize in Economic Sciences in 1974 Which of the following economic philosophers is described above?

Friedrich Hayek

How do fluctuations to the international exchange rate of a nation's currency affect its balance of trade?

If a country's exchange rate increases, the country can import goods less expensively.

Which investment is considered the most secure in a retirement plan?

Individual retirement account

Which of the following is considered a benefit to purchasing insurance?

Insurance is available when an unexpected need for repair or services arises

How does international trade impact economic growth within a trading nation?

International trade shifts the production possibility curve of a trading nation outward by using resources more efficiently.

In order to qualify for a mortgage a loan officer will consider an applicant's net worth. Which of the following is subtracted from assets to determine net worth?

Liabilities

Which of the following is most characteristic of the U.S. free enterprise system?

Markets that respond to consumer demand

- Few sellers - Some control over price - High market entry barriers - Some product differentiation What type of market structure is described by the information in the box?

Oligopoly

Which of the following is not an annual cost of owning a home?

Paying for new furniture

Which of the following actions would improve a credit score?

Paying off all debts

Which of the following is a responsibility of a small business owner?

Paying payroll taxes

What is one way the U.S. economy can be adversely affected when interest rates are lowered?

Prices may inflate

Which characteristic of the U.S. free enterprise system creates the incentive to work, save, and invest?

Private property ownership

Recently, the government announced that it would discontinue the production of a particular military aircraft. How will this decision affect the circular flow model?

There will be a reduction in the income of households resulting in reduced purchasing power

Which of the following accounts for why countries specialize in particular trade products?

Unequal distribution of resources

Supporters of protectionism would argue that free trade adversely affects which group of people?

Workers

One of the benefits of the U.S. free enterprise system is the —

amount of choices for consumers

One effect of an increase in the amount of savings in an economy is —

an increase in financial resources for business investment

One of the benefits of home ownership includes —

building equity

The grocery store is which sector of the circular-flow model?

business

The economic system in the United States is referred to as free enterprise, free market, or —

capitalist

Economic systems that are characterized by government control of the economic decision making process are considered to be —

communist

One of the financial advantages of donating to charitable causes is that the donation can be —

considered a tax deduction

Investments with high rates of return are generally accompanied with —

high levels of risk

An important consideration to examine when deciding to declare personal bankruptcy is the —

impact it has on future credit options

One of the advantages corporations have that sole proprietorships do not is —

limited liability

With a given amount of resources, a country with a comparative advantage will produce a product with —

lower opportunity costs

One result of competition in a free enterprise system is —

lower prices for products

In recent years some cities have passed ordinances to restrict the size of houses being built on city lots. These types of regulations have been enacted in order to —

protect the property owners already living in the neighborhood

One of the primary functions of financial institutions in an economy is to —

provide access to capital for people and businesses

One potential risk from investing in the stock market is the loss of —

purchasing power

Scarcity is a basic economic problem because —

resources are limited

Loans that are obtained by offering an asset to guarantee repayment of the loan are considered —

secured loans

A first step to beginning a savings program would most likely be to —

set financial goals

One of the benefits of renting a home is that the cost of maintenance is —

the responsibility of the landlord

The market structure of pure competition is distinctive because —

there are no examples of this type of market structure

Which of the following retirement investment options is usually offered as a benefit of employment?

401(k)

Jenny wants to buy a computer and a new television before she leaves for college. She only has enough money to purchase the computer. Which of the following is the opportunity cost of purchasing the computer?

A new television

Which of the following economic systems in characterized by a lack of competition?

Command

Which of the following is a non-price determinant of demand?

Consumer preferences

The basic idea of choice presents which of the problems in economics?

Decisions produce costs.

Which of the following is a basic characteristic of all economic systems?

Distribution of goods and services

- One seller - Complete barriers to market entry - No product differentiation Which of the following is described by the characteristics listed in the box?

Monopoly

Which type of bank account is not insured?

Mutual fund

Which of the following actions could the United States take to increase exports of sports cars to Japan?

Negotiate to lower tariffs on sports cars

XYZ Corporation decided to expand their plant knowing that it would create pollution. XYZ alsoknew that it would take at least a year for the government regulators to realize the extent of the pollution. In that year's time, the corporation could make a lot of profit and they were willing to take the risk. XYZ, however, did not realize the extent to which the community would resent the pollution and boycott products made in the new plant. XYZ lost so much money that it almost went into bankruptcy. The outcome of the scenario above is an example of which of the following?

Non-price determinant of demand

Which method does a corporation primarily use to raise capital?

Selling shares

The Nifty Toy Company has decided to incorporate and sell stock in its corporation. Which of the following will this action accomplish?

Selling stock will raise money to help the corporation grow

Alyssa is planning to open a small tailoring business. Which of the following represents capital needed to start such a business?

Sewing machines

Veronica has been wearing a popular perfume for several years. Recently the price increased by $10, which she has not been able to afford on her modest salary. Many of her friends are in the same position. How will the price likely affect the quantity demanded and supplied?

Supply will increase, and demand will decrease.

In a supply and demand graph, what happens when a higher tax is placed on sales of cigarettes?

The demand curve shifts to the left.

On a supply and demand graph, supply will decrease and shift to the left when which of the following happens?

The number of firms leaving the industry increases.

What is one advantage to placing savings in a high-risk investment as oppose to putting savings in a low-risk investment?

The potential rate of return on investment is higher.

In a supply and demand graph, what likely happens if the cost of parts for automobile products decreases?

The supply curve for automobiles shifts to the right.

The Acme Lumber Company wants to build a new sawmill in a residential area within city limits. Which of the following government restrictions will Acme likely have to deal with when proposing to build in this area?

Zoning laws

A line of credit that allows a borrower to repeatedly use it within a certain monetary amount is considered to be —

open-ended credit

Paying rent instead of purchasing tickets to a concert is an example of —

opportunity cost

The most effective way to manage credit card debt is by —

paying off the balance each month