Question 1

When economists study the national economy or global economy, they are using a ____ approach.

Accepted Answer

When economists study the national economy or global economy as a whole, they are using a macroeconomic approach. This involves analyzing large-scale economic trends and policies that affect entire industries, markets, and countries, such as inflation rates, unemployment rates, GDP, and international trade.

Question 2

Which of the following represents the biggest customer of American business?

Accepted Answer

Consumers represent the biggest customer group of American business as they make up the largest portion of the population and have the power to drive demand for goods and services. While government and other businesses may be important customers for some industries, overall they do not represent as large of a customer group as consumers. Foreign governments and the military may also be significant customers in certain industries, but they do not represent the biggest customer group overall.

Question 3

All of the following would typically be considered consumer products except a

Accepted Answer

A high-powered drill press is typically not considered a consumer product as it is intended for industrial or commercial use rather than for personal or household use. The other options (2-liter of Coke, DVD player, prom dress, and bag of dog food) are all consumer products as they are intended for personal or household use.

Question 4

Which of the following is not a feature of laissez-faire capitalism?

Accepted Answer

Guaranteed income is not a feature of laissez-faire capitalism. Laissez-faire capitalism is characterized by competition, private ownership of wealth, economic freedom, and a limited role of government. The concept of guaranteed income goes against the principles of laissez-faire capitalism, which promote market forces and individual responsibility.

Question 5

Diane is passionate about soccer and decides to open her own soccer sporting goods store. She invests her money, time, and effort into making the store a success. Diane can be best described as a(n)

Accepted Answer

An entrepreneur is someone who takes risks in starting and managing a business venture in order to make a profit. Diane fits this description as she has invested her own money, time, and effort into opening her soccer sporting goods store.

Question 6

Olan Okowo recently moved to the United States with many hopes and dreams. However, he realizes that economic freedom includes all of the following except the right to

Accepted Answer

Economic freedom does not guarantee economic success. It only guarantees the right to use owned resources to produce a profit, accept or reject any job offered, sell a product at the price chosen, and buy any economic good or service that producers sell. Economic success is determined by various factors such as market demand, competition, and personal effort.

Question 7

According to economists, natural resources, labor, capital, and entrepreneurship are called

Accepted Answer

Natural resources, labor, capital, and entrepreneurship are referred to as factors of production, which are the resources used by firms to produce goods and services. This term is commonly used in economics to explain the inputs needed to produce goods and services in an economy.

Question 8

A person who risks his or her time, effort, and money to start and operate a business is called a(n)

Accepted Answer

An entrepreneur is a person who undertakes the risk of starting and running a new business venture, usually with the aim of earning profit or becoming successful in their chosen industry. They invest their own time, effort, and money, and take responsibility for the success or failure of their enterprise. A free-market specialist, intrapreneur, competitor, or profit taker do not necessarily encompass the complete definition of an entrepreneur.

Question 9

An economic system in which individuals and businesses make the decisions about what to produce and what to buy, and the market determines how much is sold and at what prices, is called a ____ economy.

Accepted Answer

A market economy is characterized by the freedom of individuals and businesses to produce and buy goods and services, and the market determines the prices and quantities exchanged. Supply and demand are the main determinants of production and consumption decisions.

Question 10

The work performed to produce goods and services is referred to as

Accepted Answer

The work performed to produce goods and services is known as labor. It involves the human efforts, skills, and abilities used in the production process. Other options such as land, financial resources, material resources, and capital goods can contribute to production, but they cannot produce goods and services on their own without the human effort.

Question 11

Matt Newell, a former Air Force pilot, decides to operate a helicopter tour company to provide customers with breathtaking views of the Rocky Mountains. He obtains a loan and purchases the necessary land, facilities, advertising, and five helicopters for his business. What important factor of production has he overlooked in creating his business?

Accepted Answer

Matt Newell has purchased equipment and capital (facilities) for his business, and he is providing the entrepreneurship (innovation and risk-taking) necessary to start and operate the business. However, he has overlooked the need for labor to operate the helicopters and provide customer service. Without employees, his business cannot function.

Question 12

Approximately what portion of our nation's total production is made up of consumer goods?

Accepted Answer

Consumer goods make up about 70 percent of total production in many economies, reflecting the significant portion of economic activity dedicated to producing goods and services for personal consumption.

Question 13

Capital or capital goods as recognized by economists would include all of the following except

Accepted Answer

Crude oil is a natural resource and typically not considered a capital good by economists. Capital goods are man-made products used to produce other goods and services.

Question 14

Which of the following scenarios would best exemplify Adam Smith's view of best serving the interests of society?

Accepted Answer

Adam Smith believed that the best way to serve the interests of society was through the pursuit of individual self-interest. He argued that an economic system based on individuals pursuing their own self-interest would ultimately result in the greatest benefit for society as a whole. In a system where individuals are free to pursue their own interests, they will naturally seek out the most efficient and productive ways to produce goods and services, leading to increased innovation and economic growth. Therefore, choice E is the best example of Adam Smith's view of best serving the interests of society.

Question 15

A natural resource, as recognized by economists, would include which of the following?

Accepted Answer

A natural resource refers to resources that come from nature, such as minerals, water, and timber. Crude oil is a prime example of a natural resource. Buildings, tools, machinery, and equipment are not considered natural resources as they are man-made products.

Question 16

The study of an individual's economic decisions would be an example of

Accepted Answer

Microeconomics focuses on the economic behaviors and decision-making of individuals, households, and firms, while macroeconomics looks at the broader trends and performance of the economy as a whole. Fiscal policy and monetary policy are tools used by governments to influence the economy at the macro level, and national economic policy encompasses all of the various policies and actions taken by a government to manage its economy. However, the study of an individual's economic decisions would fall under the realm of microeconomics.

Question 17

The United States, whose economy exhibits elements of both capitalism and socialism, has what is known as a ____ economy.

Accepted Answer

The United States has a mixed economy because it combines characteristics of both capitalism (such as private ownership and free markets) and socialism (such as government regulation and social welfare programs). This means that the economy is not purely based on one economic system, but rather a mixture of different economic philosophies.

Question 18

For a Pepperidge Farm production facility, managers and employees would be

Accepted Answer

Managers and employees are considered part of the labor resource, as they are involved in the production and operation processes of the facility.

Question 19

In Adam Smith's view, which of the following is not the role of government in business?

Accepted Answer

According to Adam Smith's view, government's role in business is primarily to ensure internal order, provide defense against foreign governments, furnish public works, and provide education. However, Smith believed that business activity should be left to the free market and should not be heavily regulated by the government. Therefore, option B, which suggests that regulating business activity is a role of the government in business, is not supported by Smith's views.

Question 20

Steve Wilson, a chef at a major restaurant in San Francisco, wants to start his own restaurant. He surveys the market, finds a suitable location, and calculates how much money he will need to lease the building and purchase the necessary equipment and supplies. Steve visits his banker and requests a loan. The money Steve will receive from the loan and the resources he will purchase with it are known as

Accepted Answer

The money that Steve will receive from the loan and the resources he will purchase with it are known as capital, which is the money or assets that a business uses to finance its operations and growth.

Quiz 1: Exploring the World of Business and Economics