BUS Ch. 2

Resource development is:

The study of how to increase the amount of available resources and create conditions that will make better use of these resources.

Adam Smith believed that countries would prosper if businesspeople were free to start and run their own businesses. Businesspeople would make a profit by providing the goods, services and ideas that others in the economy wanted, and they would hire others to help increase those profits, leading to social and economics benefits for many. This idea was called the __________.

invisible hand

In the boxed material "Making Ethical Decisions," the textbook describes corruption practices in developing nations. These practices include payoffs to government officials in order to get an edge on competing better in one’s industry. Which of the following statements best describes the ethical message explained in this box?

Ethics plays an important role in a capitalistic system and in the freedom to compete. Corruption can hinder economic growth.

________ is the name of a free-market economic system in which most of the factors of production and distribution – such as land, factories, railroads, and stores – are owned by individuals.

Capitalism

Which of the following is a basic right under capitalism?

The right to compete.

In a free market economic system, the mechanism of __________ is the key determinant used to signal to producers what to produce and how much to produce.

price

The quantity of a good or service that producers are willing to sell at different prices during a specific time period is known as the:

Supply of that product or service.

A simple supply curve shows that an increase in the price of a good will cause the quantity supplied to:

Increase

A typical demand curve shows that:

People tend to buy more of a good when its price decreases.

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:

Equilibrium price of the good.

If a shortage exists for a good in a free-market economy, the:

Price of the good will rise.

The markets for laundry detergents, soft drinks, and automobiles are dominated by just a few sellers. Economists would classify these markets as examples of:

Oligopolies

In most large cities there are a large number of bakeries. These bakeries produce similar, but not identical, products. Some bakeries claim to have the best cheesecakes in town, while others brag about their cookies or specialty breads. The bakery market in a large city is an example of:

Monopolistic competition.

The presence of competition in free markets:

Usually results in better quality and lower prices.

One of the greatest concerns associated with capitalism is that:

Some businesspeople may let greed guide their behavior.

Brain drain has occurred in many socialistic nations because:

Tax rates on well-respected professionals such as doctors, engineers tend to be very high.

Communism is an economic system in which:

The government makes almost all of the major economic decisions.

The total value of final goods and services produced within a nation’s borders in a given year is known as that nation’s:

gross domestic product

Efforts by the Federal Reserve Bank (the Fed) to control the money supply and interest rates are known as:

monetary policy

Fiscal policy involves increases or decreases in:

Government spending and taxes.

The "invisible hand" in Adam Smith’s theory turns self-directed gain into social and economic benefits for all.

True

Capitalism is the foundation of the U.S. economic system.

True

The main goal of resource development is to find ways to:

Increase the amount of resources and create conditions that will make better use of those resources.

The freedom of people to buy, sell, and use land, buildings, machinery, and inventions are basic capitalist rights under:

The right to own private property.

A free market is one in which decisions about what to produce and in what quantities are made by:

the market

A simple supply curve shows a relationship between the:

Price of a good and the quantity of that good sellers are willing to offer for sale at a specific point in time.

An oligopoly is a market that is characterized by:

A few large sellers who dominate the market.

When the market price of a good is below the equilibrium price, and all other determinants are unchanged:

the quantity demanded will exceed the quantity supplied.

When the market price of a good is above its equilibrium value, and all other determinants are unchanged:

A surplus will exist in the market.

A major premise of a socialist system is:

To reduce the inequality in the distribution of wealth.