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ECO 254-1

The point at which the supply curve and the demand curve intersect is the market price.
true
Inflation results in increased purchasing power for the consumer.
false
If productivity increases, prices charged to consumers will tend to increase as well.
false
One of the four elements that are necessary for private enterprise to be carried out is reasonable prices
false
Product differentiation is common in a market characterized by monopolistic competition
true
In typical modern oligopolies, the large capital investment necessary to enter the market discourages new competitors
true
Natural monopolies exist partly because duplication of effort and resources would be wasteful in some cases
true
What is the process for converting government enterprises into individually owned firms known as?

A)profit maximization
B)privatization
C)production allocation
D) entrepreneurship
E)demand assessment

B)privatization
What is the point at which the supply curve and the demand curve intersect on a graph?

a. decision point
b. surplus price
c. parity point
d. perfect price
e. equilibrium price

e. equilibrium price
Which term refers to the pattern of short-term ups and downs in an economy?

A)aggregate output
B)balance of payments
C)standard of living
D)business cycle
E)demand and supply schedule

D)business cycle
What is the economic condition characterized by widespread increased prices without increased purchasing power?

A)inflation
B)recession
C)deflation
D)expansion
E)unemployment

A)inflation
What marks the key difference between economic systems?

A) the way they manage the factors of production
B)the way rules and regulations are legislated
C)the way basic necessities are determined
D)the way they transport goods within their borders
E)the way workers are relocated to different regions

A) the way they manage the factors of production
In perfect competition, which of the following conditions must prevail?

A)It is relatively difficult to enter the industry.
B)All firms must adhere to cost and pricing standards.
C)All firms in a given industry must be small.
D)The number of firms in the industry must be limited.
E)A single firm is able to influence the price of its product.

C)All firms in a given industry must be small.
How does monopolistic competition differ from perfect competition?

A) In a market characterized by monopolistic competition, individual firms have some control over price.
B) In a perfectly competitive market, the size of the firms must be large.
C) It is easier for sellers to enter a market or industry characterized by monopolistic competition.
D) There are more sellers in a market characterized by monopolistic competition.
E) In a perfectly competitive market, products are more dissimilar.

A) In a market characterized by monopolistic competition, individual firms have some control over price.
Which of the following is characterized by having few sellers, similar prices among sellers, and difficult market entry?

A)oligopoly
B)state socialism
C)monopolistic competition
D)pure competition
E)monopoly

A)oligopoly
In an oligopoly, when one firm reduces its prices, how do other sellers react?

A) Other firms reduce their prices also, usually quite quickly.
B) There is a combined response from other firms to stabilize prices.
C) Other firms are not usually aware that price has changed.
D) Other firms may reduce their prices, but usually gradually.
E) There is no reaction from other firms to change their prices.

A) Other firms reduce their prices also, usually quite quickly.
Some ethical and unethical behaviors fall into gray areas while others are widely agreed upon.
true
Accepting and offering bribes is a normal part of doing business in some parts of the world
true
A business’s social responsibility to investors includes following proper accounting procedures
true
A whistle-blower is an outsider who reports publicly on the wrongdoings of companies
false
Which of the following should be the first step in assessing ethical behavior in a certain situation?

A) Collect facts related to the situation.
B) Seek the advice of managers.
C)Gather a range of opinions on the effectiveness of the policy.
D)Make a judgment based on the outcome of the activity.
E)Consider appropriate moral values.

A) Collect facts related to the situation.
What term refers to the way in which a business tries to balance its commitments to groups and individuals in its social environment?

A)socialization
B)social responsibility
C)business ethics
D) corporatization
E)stakeholder consciousness

B)social responsibility
What does the Sarbanes-Oxley Act of 2002 require a chief financial officer to do?

A) prevent insider trading
B) oversee the implementation of ethical standards
C)guarantee the accuracy of financial reporting
D)hire a forensic accountant
E)engage in strategic management

C)guarantee the accuracy of financial reporting
Which of the following is the best description of organizational stakeholders?

A)government regulators
B)the officers and key employees of an organization
C)individuals and businesses that own stock in a company
D)competitors
E)individuals and groups that are directly affected by the practices of a company

E)individuals and groups that are directly affected by the practices of a company
What is it called when two or more firms agree to collaborate on wrongful acts?

A)business as usual
B)collusion
C)consumerism
D)brokering
E)monopolizing

B)collusion
Most businesses in the United States are large businesses with more than 500 employees
false
Manufacturing is overwhelmingly handled by big business
true
A limited liability corporation is a hybrid of a publicly held corporation and a partnership
true
Low start-up costs and tax benefits are advantages of sole proprietorships
true
Corporations enjoy significant tax benefits when compared to sole proprietorships or partnerships.
false
What is the name of the document in which an entrepreneur summarizes his or her business strategy for a proposed new venture?

A) director’s guideline
B)success chart
C)financial blueprint
D)balance sheet
E)business plan

E)business plan
What is the most important source of money for new business start-ups?

A)personal resources
B) venture capital
C)the SBA
D)banks
E)government grants

A)personal resources
In which business sector are cooperatives still important?

A)agriculture
B)health care
C)manufacturing
D)public utilities
E)automotive

A)agriculture
The U.S. Department of Commerce considers a business “small” if it has fewer than how many employees?

A)100
B)500
C)1,500
D)50
E)10

B)500
What is the major drawback of accepting venture capital?

A)sharing company control
B)having to write a proposal
C) facing a short repayment period
D)having to pay high interest rates
E)limiting expansion

A)sharing company control
Which of the following legal forms of business is owned and usually operated by a person who is responsible for its debts?

A)sole proprietorship
B)cartel
C)limited partnership
D)corporation
E)general partnership

A)sole proprietorship
What is a major drawback of sole proprietorships?

A)limited funding
B)work flexibility
C)unlimited liability
D)structured hours
E)low start-up costs

C)unlimited liability
What is the most important advantage of general partnerships?

A)the ability to grow with the addition of new talent and money
B)the ease of implementing an effective control system
C)the increased role of luck
D)the need for minority partners
E)the unlimited liability of the partnership

A)the ability to grow with the addition of new talent and money
What do both sole proprietorships and partnerships lack?

A)adaptable processes
B)legal standing
C)shared vision
D)trust
E)continuity

E)continuity
What type of company has stock that is widely held and available for sale to the general public?

A)private corporation
B)professional corporation
C)limited liability corporation
D)public corporation
E)general partnership

D)public corporation
Free market economies often establish some system of quotas and/or tariffs.
true
Globalization refers to the process by which countries around the world are becoming more self-sufficient.
false
The single largest trading partner of the United States is China.
false
If 1 euro = $1.35 on June 4 and $1.40 on June 5, the value of the dollar has risen.
false
What are products that are created domestically and transported for sale abroad?

A)imports
B)dumped goods
C)buy backs
D)exports
E)domestic goods

D)exports
Which of the following is a government payment to help a domestic business compete with foreign firms?

A)export rebate
B)protectionist tariff
C)subsidy
D)import buy-back
E)revenue tariff

C)subsidy
Which of the following best describes a positive trade balance?

A)the economic condition in which a country’s exports exceed its imports
B)the economic condition in which a country’s inflow of money exceeds its outflow
C)the economic condition in which a country’s imports exceed its exports
D)the economic condition in which a country’s natural resources exceed its human resources
E)the economic condition in which a country’s outflow of money exceeds its inflow

A)the economic condition in which a country’s exports exceed its imports
National competitive advantage derives from four conditions, one of which is factor conditions. What do factor conditions include?

A)product quality, productivity, and profits
B)government quotas and subsidies
C)strategies, structures, and rivalries
D)labor, capital, entrepreneurs, and physical resources
E)customers, suppliers, and labor

D)labor, capital, entrepreneurs, and physical resources
The U.S. government forbids the importation of cigars from Cuba. What is this practice called?

A)business practice law
B)embargo
C)subsidy
D)local content law
E)tariff

B)embargo
Which of the following types of firms design, produce, and manufacture products in many nations?

A)international firms
B)domestic firms
C)importing firms
D)multinational firms
E)exporting firms

D)multinational firms

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