B.11 Economic concepts Flashcards
(16 cards)
Which of the following is NOT one of the four factors of production?
A) Labor
B) Capital
C) Wages
D) Entrepreneurship
Wages
Explanation: The four factors of production are labor, capital, land, and entrepreneurship.
B.11 Economic concepts
Which of the following best describes the law of supply?
A) As the price of a good or service decreases, the quantity demanded increases
B) As the price of a good or service increases, the quantity demanded increases
C) As the price of a good or service decreases, the quantity supplied decreases
D) As the price of a good or service increases, the quantity supplied increases
As the price of a good or service increases, the quantity supplied increases
Explanation: The law of supply states that as the price of a good or service increases, the quantity supplied increases. This is because producers are incentivized to produce more of the good or service when they can sell it for a higher price.
B.11 Economic concepts
Which of the following is a characteristic of a perfectly competitive market?
A) There are many buyers and sellers
B) There are significant barriers to entry and exit
C) The products sold by different firms are differentiated
D) Firms can influence the price of the product
There are many buyers and sellers
Explanation: A perfectly competitive market is characterized by many buyers and sellers, homogeneous products, ease of entry and exit, and perfect information. The other options are characteristics of imperfectly competitive markets.
B.11 Economic concepts
Which of the following is a measure of a firm’s profitability?
A) Gross profit margin
B) Net income
C) Return on investment (ROI)
D) All of the above
All of the above
Explanation: Gross profit margin, net income, and ROI are all measures of a firm’s profitability. Gross profit margin is the ratio of gross profit to revenue, net income is the profit after all expenses have been deducted, and ROI is the ratio of net income to investment.
B.11 Economic concepts
Which of the following is an example of a positive externality?
A) Pollution from a factory that affects the health of nearby residents
B) A homeowner installing solar panels that reduce carbon emissions
C) A company paying its employees a living wage
D) A farmer using pesticides that harm nearby wildlife
A homeowner installing solar panels that reduce carbon emissions
Explanation: A positive externality is a benefit that is experienced by a third party as a result of an economic transaction. Installing solar panels that reduce carbon emissions is an example of a positive externality because it benefits the environment and the community as a whole.
B.11 Economic concepts
Which of the following is an example of a regressive tax?
A) Income tax
B) Sales tax
C) Property tax
D) Corporate tax
Sales tax
Explanation: A regressive tax is a tax that takes a larger percentage of income from low-income earners than from high-income earners. Sales tax is an example of a regressive tax because low-income earners spend a larger percentage of their income on taxable goods and services than high-income earners.
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A company produces widgets at a total cost of $100,000 and sells them for $150,000. What is the company’s profit?
A) $50,000
B) $100,000
C) $150,000
D) $200,000
$50,000
Explanation: Profit is calculated by subtracting total costs from total revenue. In this case, the company’s revenue is $150,000 and its total cost is $100,000, so its profit is $50,000.
B.11 Economic concepts
Which of the following is an example of a public good?
A) Private healthcare
B) A toll road
C) National defense
D) Cable television
National defense
Explanation: A public good is a good or service that is non-excludable and non-rivalrous. National defense is an example of a public good because it is provided by the government and is available to all citizens regardless of their ability to pay for it.
B.11 Economic concepts
Which of the following is an example of a command economy?
A) The United States economy
B) The Chinese economy
C) The Japanese economy
D) The German economy
The Chinese economy
Explanation: A command economy is an economic system in which the government makes all the economic decisions. The Chinese economy is an example of a command economy because the government has a significant role in directing the country’s economic development.
B.11 Economic concepts
Which of the following is an example of a progressive tax?
A) Sales tax
B) Property tax
C) Corporate tax
D) Income tax
Income tax
Explanation: A progressive tax is a tax that takes a larger percentage of income from high-income earners than from low-income earners. Income tax is an example of a progressive tax because the tax rate increases as income increases.
B.11 Economic concepts
Which of the following is an example of a fiscal policy tool?
A) Monetary policy
B) Interest rates
C) Government spending
D) Inflation targeting
Government spending
Explanation: Fiscal policy is the use of government spending and taxation to influence the economy. Government spending is an example of a fiscal policy tool because it can be used to stimulate economic growth or slow down inflation.
B.11 Economic concepts
Which of the following is an example of a trade barrier?
A) Tariffs
B) Free trade agreements
C) Open borders
D) Foreign aid
Tariffs
Explanation: A trade barrier is a government-imposed restriction on international trade. Tariffs are an example of a trade barrier because they are taxes imposed on imported goods, making them more expensive and less competitive in the domestic market.
B.11 Economic concepts
Which of the following is an example of a monopoly?
A) The electric company in a small town
B) The fast food industry
C) The airline industry
D) The smartphone market
The electric company in a small town
Explanation: A monopoly is a market structure in which there is only one supplier of a particular product or service. The electric company in a small town is an example of a monopoly because it is the only provider of electricity in the area.
B.11 Economic concepts
Which of the following is an example of a factor that could shift the demand curve for a product?
A) Changes in the price of the product
B) Changes in the price of a complementary good
C) Changes in consumer income
D) All of the above
All of the above
Explanation: The demand curve for a product can shift due to changes in the price of the product, changes in the price of complementary goods, changes in consumer income, changes in consumer tastes and preferences, and other factors.
B.11 Economic concepts
Which of the following is an example of a scenario that could lead to stagflation?
A) Increased government spending and a decrease in taxes
B) A decrease in the money supply and an increase in interest rates
C) A decrease in the money supply and a decrease in taxes
D) Increased government spending and an increase in the money supply
A decrease in the money supply and an increase in interest rates
Explanation: Stagflation is a condition in which the economy experiences both high inflation and high unemployment. A decrease in the money supply and an increase in interest rates could lead to stagflation by reducing the money available for borrowing and spending, which could slow down economic growth and lead to higher unemployment, while also increasing the cost of borrowing and raising prices, leading to higher inflation.
B.11 Economic concepts
Jennifer, a financial planner, is attending a seminar on macroeconomic factors that could influence financial planning strategies. During the seminar, the presenter discusses the use of fiscal policy tools to constrain or cool down an overheating economy. Which of the following actions, if taken by the government, BEST represents an example of using fiscal policy to constrain economic activity?
A) Increasing the discount rate
B) Increasing government purchase of Treasury securities
C) Decreasing the budget of the Department of Transportation
D) Decreasing the corporate federal income tax rate
Decreasing the budget of the Department of Transportation
Explanation: Fiscal policy refers to the use of government spending and tax policies to influence economic conditions.
Among the options presented:
Option A refers to monetary policy, not fiscal policy. The discount rate is a tool used by central banks to influence the supply of money in the economy.
Option B also alludes to monetary policy. The purchase of Treasury securities by the government is typically done to influence liquidity and interest rates in the economy.
Option C is an example of contractionary fiscal policy. By decreasing the budget of a government department, government spending is reduced, which can lead to a decrease in aggregate demand and help constrain economic activity.
Option D refers to a tax policy. While it is related to fiscal policy, decreasing the corporate tax rate typically stimulates economic activity rather than constraining it.
B.11 Economic concepts
