Principles of Economics - D089 TESTS

Principles of Economics - D089 TESTS

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70 terms Tracie_Neville8 Preview WGU - 263 term Ma Which type of economy is characterized by a government that plans and controls all economic activity?Command Correct! A command economy is a centralized economic system in which all economic decisions are made by the nation's government.What is an example of a normative economic statement? Marginal tax rates should be lowered on high-income individuals.Correct! A marginal tax rate is the amount of money an individual pays in taxes on each additional dollar earned. This statement uses the word "should", which makes it a value judgment or opinion and a normative statement.Which characteristic is associated with natural resources from a business perspective?They exist without human effort.Correct! Natural resources are found in nature without any human effort.How can the available supply of natural resources be increased?Discovering new ways to extract resources Correct! The discovery of different ways to extract natural resources can make them more available.A ski resort sells tickets online at $70 per ticket. The resort is not selling many tickets, so it offers a two-for-one opportunity. Which economic principle is being used?People respond to incentives.Correct! The incentive of a sale or coupon changed the cost from $70 to $35, making the ski trip more affordable and desirable. This incentive is what likely changed buyers' behaviors.What are the characteristics of the production possibility frontier graph?Trade-offs in choices and downward sloping Correct! The graph of the production possibility frontier reflects trade-offs in choices and is downward sloping.How is scarcity represented on the production possibility frontier?By there being attainable and unattainable points Correct! The production possibility frontier depicts the impact of scarcity by providing a clear mark between the set of attainable and unattainable points.

The government imposes new safety regulations on the production of gas stoves. What will happen in the market for gas stoves?Supply decreases.Correct! New government regulations on producers will make it more expensive to produce gas stoves and will decrease supply.The price of steel has increased by 5%, which leads to an increase in quantity supplied by 8%. Which outcome can be concluded from the demand and supply of steel?The supply of steel is elastic.Correct! Because the quantity supplied increased by more than 5%, it is reasonable to conclude that the supply of steel is elastic.An individual wants to sell a car that frequently requires costly repairs. Although the car performs worse and requires more repairs than similar products, the seller hopes to get a price equal to better performing cars since the buyers will not know about the problems. Why is this seller able to charge a price equal to other sellers?Asymmetric information Correct! The seller has more information relevant to the transaction about the car than the buyer does.Which market failure is overcome by a money-back guarantee strategy using mail-order catalogs?Imperfect information Correct! A money-back guarantee helps instill confidence in the buyer about the quality of the product by refunding purchase price if the buyer is dissatisfied.Why do high labor-cost countries typically have more capital than low labor-cost countries?Firms choose technology that requires more capital than labor to offset higher labor costs.Correct! Firms minimize costs by choosing a mix of inputs according to their relative cost. Firms operating in high labor cost countries will use more capital than firms operating in low labor cost countries.A bakery operates in an industry with many competitors and easy entry and exit. The firms in the industry are price takers. What is the price elasticity of demand for the bakery's bread?Perfectly elastic Correct! In a perfectly competitive market, the price elasticity of demand is infinite A firm is operating in an environment with other firms who differentiate their products with advertisements. The firm finds that its long-run economic profits equal zero. Which market environment is this firm operating in?Monopolistic competition Correct! Consumers view products of firms in a monopolistic competitive market environment as close substitutes with some differentiation between competitors' products. This enables them to have some market power, but not enough to prevent driving long-run economic profit to zero.The market share of the top four firms was measured, and the concentration ratio score indicated that a proposed merger would draw the attention of anti-trust authorities.Which concentration ratio score was calculated?58% Correct! A concentration ratio score of more than 50% would be considered especially high and would draw the attention of antitrust authorities.Who is included in the labor force participation rate? Employed persons plus those who are unemployed and actively seeking a job Correct! The labor force participation rate is the fraction of people who are either employed or active job seekers.Which element is included in the calculation for government spending as a component of gross domestic product (GDP)?New highway construction Correct! Building a new highway is considered a good or service expenditure for the calculation of GDP.Nominal wages increase across the country. How does this change the short-run aggregate supply (SRAS) curve?The curve shifts to the left.Correct! An increase in the cost of labor will cause the curve to shift to the left since labor is a key input for other products.

A new immigration policy has increased the number of skilled immigrants who can legally come to the country, and this increases the economy's productivity.How will the long-run aggregate supply (LRAS) curve respond to this situation?Shifts to the right Correct! Increase in productivity shifts the LRAS curve to the right.A country's interest rates have fallen. How will this change affect the equilibrium?The new equilibrium occurs at a higher price and higher GDP.Correct! If interest rates fall, the aggregate demand shifts to the right, so the new equilibrium occurs at a higher GDP and higher price.What are the largest areas of government spending? Entitlements and mandatory spending Correct! Entitlements and other mandatory spending compose about two-thirds of government spending.Which description characterizes the national debt? Sum of all past national deficits minus any surpluses Correct! National debt includes all past national deficits minus any surpluses that occurred.What is a disadvantage of exporting goods and services to other countries?Exports potentially add another layer in the chain of distribution through wholesalers.Correct! Wholesalers, importing companies, and other intermediaries are part of international trade distribution chains. Their existence facilitates trade across borders but adds costs to international trade transactions.New labor laws were recently passed in Mexico making wages in Mexico closer to wages in the United States.Currently, the United States imports more from Mexico than it exports to Mexico. What is the effect of this situation on Mexico-U.S. trade flows?It will decrease Mexican exports, which will reduce U.S. negative trade balance with Mexico.Correct! Higher relative wages in Mexico will increase the cost of Mexican imports in the U.S. At the same time, U.S. exports to Mexico will remain constant or become more attractive to people in Mexico who earn higher wages.What does the financial market provide to the rest of the economy in the circular flow diagram?Borrowing and stock issues by firms Correct! Firms borrow from financial markets using bonds and raise funds by selling equity.The U.S. Bureau of Labor Statistics (BLS) uses the cost of a fixed basket that represents the average family's purchases to calculate a measure of inflation. Which measure is being calculated?Consumer price index Correct! Consumer price index is a measure of inflation that U.S. government statisticians calculate based on the price level from a fixed basket of goods and services that represents the average consumer's purchases.The University of Michigan's "Surveys of Consumers" has shown a sharp decline in consumer confidence.How will this change affect aggregate demand?The aggregate demand curve will shift to the left.Correct! Consumer confidence is a principal component of aggregate demand.Declining consumer confidence will reduce consumption, so aggregate demand will decrease, shifting the curve to the left.The economy is in a recessionary gap, so the government enacts an expansionary monetary policy. Which effect will this action have on the aggregate demand curve?Shifts to the right Correct! If the government enacts an expansionary monetary policy, interest rates are reduced. This causes consumption to increase, which shifts the aggregate demand curve to the right.What do most long-term projections predict about the status of the federal budget deficit in the United States?Enormous deficits Correct! Based on the current deficit, large deficits are projected to occur.

Which tool does the Federal Reserve use to increase the money supply?Open market purchase of securities Correct! An open market purchase of securities by the Federal Reserve increases the money supply.Which outcome stemmed from the Bretton Woods Conference?Lowered tariffs to encourage worldwide trade Correct! One of the longest lasting effects of the Bretton Woods Conference was the lowering of trade barriers around the world.To manage the economic crisis in the European Union, the euro was depreciated compared to the dollar. How did this change affect international trade between the United States and the European Union?It increased European exports to the United States, and this increased the U.S.negative trade balance with the European Union.Correct! The appreciation of the dollar will make European products cheaper in the U.S., increasing EU exports to the U.S.