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1. America's business success is largely due to an economic and social climate that allows
businesses to operate freely.
2. Global economics and politics have no significant influence on businesses in the United
States.
3. The IMF has recently proposed a one-time global wealth tax to help bring the debt of
nations closer to pre-recession levels.
4. The study of how society chooses to employ resources to produce goods and services and
to distribute them for consumption among various competing groups and individuals is known as
sociology.
5. Economists study how people use resources to produce and distribute goods and services
for consumption among competing groups and individuals.
6. Macroeconomics is the economic perspective that looks at the operation of a nation's
economy as a whole.
7. Microeconomics focuses on the decisions and behavior of people and organizations in
particular markets.
8. Resource development is concerned with finding the best way to utilize the fixed amount
of resources a society has available.
9. Resource development is the study of how to increase resources and to create the
conditions that will make better use of those resources.
10. Peace and prosperity will flourish if we can find the one best way to divide existing
resources among nations.
11. Thomas Malthus believed that overpopulation was a major cause of poverty.
12. In developing nations of the world, population has leveled off and is not expected to
increase dramatically in the future.
13. Studies about the effects of population growth on the economy are part of
macroeconomics.
14. Economic progress can occur when business owners provide jobs and economic growth
for their employees, their communities, and themselves.
15. Economist Adam Smith's important contribution was an inquiry as to why some nations
are wealthy, while others remain poor.
16. Adam Smith believed the self-interest of businesspeople would lead them to create
needed goods, services, and jobs.
17. The "invisible hand" in Adam Smith's theory turns self-directed gain into social and
economic benefits for all.
18. According to Adam Smith, the "invisible hand" refers to the government's effort to always
keep a check on the wealth creation of individuals, so that no one business would control a
market for a particular good or service.
19. An economist is examining how consumers in the automobile market have responded to
recent price increases by car manufacturers. He is examining a microeconomic situation.
20. Macroeconomics looks at long-run economic problems while microeconomics examines
short-run economic problems.
21. Thomas Malthus believed that people in most countries would never be able to achieve
high standards of living unless the problems of overpopulation were addressed.
22. Adam Smith believed that since businesspeople are motivated to improve their own
prosperity, their actions are unlikely to benefit society as a whole.
23. Adam Smith believed that an economic system couldn't truly prosper unless people were
taught to value the welfare of others above their own personal gain.
24. The concept of the invisible hand begins with the assumption that the primary motivation
of entrepreneurs is that they will prosper from their own hard work.
25. Adam Smith's research focused on determining the best way to distribute a fixed amount
of resources, rather than on how to create more wealth.
26. Large educated populations can contribute to an economy by offering knowledge and
entrepreneurship.
27. Adam Smith believed that incentives to seek personal gain would create wealth, but that
the government must then step in to make sure that this wealth is equitably distributed.
28. As indicated by the Making Ethical Decisions box, activities that lead to corruption can
destroy free economic opportunities because they interfere with the right to freely compete.
29. In capitalist countries, the government decides what to produce and how the goods and
services will be produced.
30. Capitalism is the foundation of the U.S. economic system.
31. State capitalism is the combination of free markets and government control.
32. The most fundamental of all rights in capitalism is the right to private property.
33. Under capitalism, the government prohibits people and businesses from competing with
each other.
34. A basic right under capitalism is the right of businesses to receive government funding.
35. Free-market capitalism has made it more difficult for individuals to gain wealth.
36. Due to the fundamental rights afforded to us by a free-market capitalistic system, people
are more willing to take calculated risks.
37. A free-market economic system is one in which the market of buyers and sellers decides
what is produced, how much is produced, and how it is distributed.
38. Under the basic principle of supply, as the price goes down, manufacturers and suppliers
of a product tend to supply less of the product to the market.
39. Demand refers to the quantity of a good that consumers are willing and able to buy at
different prices at a specific time.
40. At the equilibrium price, the quantity consumers desire to buy equals the quantity sellers
desire to sell.
41. If the quantity supplied in a market exceeds the quantity demanded, a shortage will exist.
42. If a shortage exists in a market for a good, the price of that good will tend to fall.
43. The point of intersection between the supply and demand curves is called the stress
point.
44. In the long run, the market price tends to adjust toward the equilibrium point.
45. Countries that rely on a free-market system are plagued by persistent shortages or
surpluses of goods and services.
46. One of the drawbacks of free markets is the fact that competition in such markets
undermines the ability of price to adjust to its equilibrium value in the long run.
47. In perfect competition, each firm produces a product that is clearly differentiated from the
products of other firms in the same market.
48. A monopoly occurs when there is a single seller for a product or service.
49. Economists refer to a market in which a few sellers dominate the supply side as
monopolistic competition.
50. Product differentiation is a key to success in monopolistic competition.
51. In the United States, laws prohibit the creation of most types of monopolies.
52. One strength of a free-market economic system is that it emphasizes the fair and humane
treatment of the less fortunate in society.
53. The greed of businesspeople represents one of the greatest dangers to the operation of a
free-market system.
54. Fatima resides in a country where the economic system is primarily based on free-market
capitalism. Fatima is likely to have the freedom to buy and sell property.
55. A surplus currently exists for a product called widgets. In a free-market system, the
government must step in and buy any widgets that consumers do not buy in order to eliminate
the surplus and establish equilibrium.
56. In a free-market economic system, the lack of government control and regulation means
that businesses find it easy to take advantage of customers by offering poor quality products at
high prices.
57. History shows that free-market capitalism leads to a fair and equitable distribution of
wealth.
