Question 7 Which of the following is most likely to result in quality goods at e

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Question 7

Which of the following is most likely to result in quality goods at economical prices, cost-effective production methods, and innovation?

An industry open to domestic competition, but protected from international competition

An industry dominated by a few large firms

A market environment of open competition where businesses are free to enter and exit

A business environment that is heavily regulated by the government

0.5 points

Question 8

Which of the following characteristics of monetary policy is most important for the promotion of growth and prosperity?

Rapid monetary expansion in order to reduce unemployment

Keeping interest rates low in order to encourage both saving and investment

Keeping inflation low and the general price level relatively stable

High and variable rates of inflation in order to increase the alertness of business entrepreneurs

Question 9

Which one of the following strategies would be most likely to stimulate recovery from a serious economic recession?

Institute frequent policy changes in order to search for and find the policy combination that would be most effective.

Keep tax rates low in order to stimulate production and minimize the decline in personal and business income.

Reduce the money supply in order to strengthen the dollar and combat inflation.

Increase trade restrictions and tariffs to save jobs and enhance tax revenue.

Question 10

The popularity of trade restrictions, tariffs, and quotas generally reflects that

the benefits to the favored industries are felt domestically, while the secondary effects only negatively impact other nations.

the restrictions create far more jobs in the “protected industries” than are lost as a result of secondary effects.

the benefits of “jobs saved” in favored industries are greater than the costs of the lost jobs in other sectors.

the benefits to the favored industries are highly visible, while the secondary effects of lost jobs in other industries are less visible.

Question 11

When the nature of a good makes it difficult for businesses to withhold it from non-paying customers,

the suppliers will earn high profits.

the suppliers will have a strong incentive to invest and expand production of the good.

markets will tend to supply an insufficient amount of the good.

markets will tend to supply an excessively large amount of the good.

Question 12

Under a democratic representative government, legislators will have a strong incentive to support programs generating substantial benefits for well-organized special-interest groups because

the special-interest voters are likely to be uninformed, while others will feel strongly about an issue.

these programs will be highly efficient – they will consistently generate more benefits than costs.

these programs will be favored by the majority of voters.

the special-interest voters will feel strongly about the issue, while others are likely to be uninformed.

  

Question 13

Which of the following best explains why legislators often find debt financing more attractive than taxation?

Debt financing exposes the current costs of government programs; taxes do not.

Taxation allows politicians to supply voters with immediate benefits without having to impose a visible current cost.

Debt financing reduces the attractiveness of special-interest spending.

The current cost of debt financing is less visible to voters than taxation.

Question 14

Governments are most likely to promote economic prosperity when they

pay high wages and employ a large share of the labor force.

are neutral among the citizenry, protect property rights, and enforce contracts in an evenhanded manner.

manage the economy by imposing regulations, granting subsidies, and adopting tax breaks that favor business.

impose heavy taxation on the rich in order to finance sizeable transfer payments to other segments of the population.

Question 15

Funds are most likely to be spent efficiently when individuals

spend someone else’s money to buy something for themselves.

spend someone else’s money to purchase an item for another person.

spend their own money to purchase an item for another person.

spend their own money to buy something for themselves.

Question 16

A monthly budget is an effective tool that will help you derive more value from your money by

selecting stocks that are more likely to increase in value over the long run.

managing your spending and saving more wisely.

spending a larger share of your earnings on consumption goods now.

enlarging your outstanding credit card debt.

Question 17

The key to converting a small amount of money now into a large amount of money in the future is

making high-risk investments in the hopes of high returns.

spending a small amount each month on lottery tickets.

starting to save regularly at an early age and taking advantage of compound interest.

living a life of austerity and sacrifice so that a significant amount of money will be available at retirement.

Question 18

As the time nears when you expect to use funds in your investment portfolio, you will reduce your risk if you

move more of your assets into stocks and out of bonds.

move all of your funds into technology stocks.

move more of your assets into bonds and out of stocks.

move funds out of a diverse portfolio and reinvest them into two or three specific stocks.

a.

An industry open to domestic competition, but protected from international competition

b.

An industry dominated by a few large firms

c.

A market environment of open competition where businesses are free to enter and exit

d.

A business environment that is heavily regulated by the government

Explanation / Answer

Solution :

7) c

8) c

9) b

10) a

11)

12)

13)

14) a

15) c

16) b

17) c

18) c

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