Exam 2: Understanding Economics and How It Affects Business

________ exists when the entire supply of a good is controlled by a single seller.

________ is the market situation in which there are many sellers in a market and no seller is large enough to dictate the price of a product.

Which of the following is a basic right under capitalism?

In the long run, the market price tends to adjust toward the equilibrium point.

The prime minister of Equalia has called for the nation's legislators to enact new legislation designed to shift the country away from socialism toward a more capitalistic system. The prime minister acknowledges that some citizens will be unhappy with the radical changes. The most likely source of dissatisfaction with a move toward capitalism is

The measurement of total sales volume at all stages of production is called the gross domestic product (GDP).

A major premise of a socialist system is

Forlornistan is a country in the midst of a serious economic downturn. Forlornistan's GDP has declined steadily for over three years and is now at its lowest level in over sixty years. Forlornistan's unemployment rate is at an all-time high and the nation's CPI is falling. Forlornistan's economic condition is referred to as a

When the supply curve and demand curve for a particular good are shown together on a single graph, the point at which the two curves intersect identifies the

________ unemployment results when the demand for labor varies during the year.

When the government runs a continual budget deficit, it increases the

Cashland's banking system recently crashed. This eventually led to companies being unable to borrow money to run their businesses and employees needed to be terminated. These circumstances cut into consumer's purchasing power, causing a severe decline in the prices of goods and services, better known as ________.

According to Adam Smith, the "invisible hand" refers to the government's effort to always keep a check on the wealth creation of individuals, so that no one business could control a market for a particular good or service.

________ looks at the behavior of individual people and organizations in specific markets.

Deflation means prices are declining and is an indication that economic conditions are deteriorating.

If the government wants to jump-start the economy resulting in more consumer spending, it will raise taxes.

Mini-Case Cooper Collins is a bright, hard-working engineer who once owned a successful engineering consulting firm in his native country of Evensplitia. Cooper was discouraged by the high tax rates in Evensplitia, so he immigrated to the United States seven years ago. Soon after moving to the U.S., Cooper again tried his hand at entrepreneurship and opened Coop's Consulting. The company struggled at first, and almost went bankrupt midway through its second year. However, Cooper never lost faith, the company survived, and eventually developed a great reputation in the community. Coop's Consulting began experiencing sustained growth early in its fourth year. In fact, Cooper hired additional employees to keep up with the increasing workload. His company, which started with only Cooper and two other full-time workers, now provides jobs for 43 full-time employees as well as many part-time workers and interns. Despite these past successes, business ownership is not without complications. The company suffered its first drop in business since its very early years. Cooper is convinced that the problem is not with his company, but rather due to a downturn in the U.S. economy. He heard a national broadcast last week reporting that the value of the total output of final goods and services in the U.S. declined over the last quarter. The anchor went on to state that many economists believe that this downward trend is likely to continue for several more months. Cooper is concerned that he will have to lay off some of his employees if the economy doesn't improve. He hopes that the government does something soon to put the economy back on track. -Besides a slowdown in the general economy, Coop's Consulting faces threats of competition from several other companies that provide engineering consulting services. In order to gain more business, Cooper tries to convince potential clients that his company offers better service than the competition. He has advertised heavily in professional magazines, often quoting some of his highly satisfied clients. The market Coop's Consulting operates in is an example of

One of the drawbacks of free markets is the fact that competition in such markets undermines the ability of price to adjust to its equilibrium value in the long run.

Productivity of workers in the U.S. is helped by the use of better machinery.

The four basic types of unemployment are frictional, structural, seasonal, and