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[email protected] Test Bank Business Essentials 8th Canadian Edition Chapter 1 Understanding the Canadian Business System
1.1 Multiple-Choice Questions 1) Profit is A) what remains after business expenses are subtracted from business revenues. B) what remains after dividends have been paid to stocholders. C) e!ual to total revenue minus cash expenses. ") what remains after income taxes have been paid. #) double the amount the compan$ pa$s in. Answer% A "iff% 1 &$pe% MC Pa'e (ef% *ill% +nowled'e ,bective% 1.1 ) /hat are profits0 A) &otal mone$ taen in b$ a corporation B) ncreases in income from $ear to $ear C) ncreases in a corporation2s stoc price ") (evenue 'enerated b$ 'oods and services #) "ifference between revenues and expenses Answer% # "iff% 1 &$pe% MC Pa'e (ef% *ill% +nowled'e ,bective% 1.1 3) Profit is A) the maret value of shares of stoc in a compan$. B) the level of expenses divided b$ the firm2s assets. C) what remains after business expenses are subtracted from business revenues. ") 'ross revenue minus taxes a compan$ pa$s.
#) 'ross sales minus taxes a compan$ pa$s. Answer% C "iff% 1 &$pe% MC Pa'e (ef% *ill% +nowled'e ,bective% 1.1
4) &his wee5 Abe2s Muffler *hop had sales of 647775 emplo$ees were paid 617775 the cost of 'oods was 61775 and rent was 677. Profit for the wee was A) 63777. B) 61777. C) 64777. ") 677. #) 677. Answer% B "iff% &$pe% MC *ill% Application ,bective% 1.1
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) 8ow are provincial universities in Canada different from business firms0 A) &he$ do not see to mae a profit. B) &he$ deal with people5 not thin's. C) &heir or'ani9ational boundaries exclude business firms. ") &he$ do not produce 'oods or services. #) &he$ are more important to societ$ than business firms. Answer% A "iff% &$pe% MC Pa'e (ef% *ill% Comprehension ,bective% 1.1 :) Forbes ma'a9ine raned 134 countries in terms of how attractive the$ were to do business in. /here did Canada ran0 A) ;irst B) *econd C) ;ifth ") &went$-fifth #) #i'ht$-seventh Answer% A "iff% &$pe% MC Pa'e (ef% *ill% +nowled'e ,bective% 1.1 <) #xamples of businesses include all of the followin' except A) local supermarets. B) one-person businesses5 lie barbershops. C) non-profit or'ani9ations. ") lar'e corporations lie Canadian Pacific or Alcan Aluminum. #) farms. Answer% C "iff% &$pe% MC Pa'e (ef% *ill% Comprehension ,bective% 1.1
=) >>>>>>>> produce most of the 'oods and services consumed in Canada. A) Businesses B) ?abour unions C) @on-profit or'ani9ations ") Canadian provincial 'overnments #) Charities Answer% A "iff% 1 &$pe% MC Pa'e (ef% *ill% Comprehension ,bective% 1.1 ) @ot-for-profit or'ani9ations A) are content with small profits5 whereas business firms want lar'e profits. B) are more important than business firms in the Canadian econom$. C) use the funds from 'overnment 'rants or from the sale of 'oods or services to provide service to the public. ") sell onl$ services5 not 'oods. #) are not allowed to operate in the manufacturin' sector. Answer% C "iff% &$pe% MC Pa'e (ef% *ill% Comprehension ,bective% 1.1 17) f two people exchan'e an apple5 the$ each still have ust one apple5 but if the$ exchan'e ideas5 the$ now each have two ideas. &his is an illustration of A) the importance of natural resources. B) the principle of speciali9ation of labour. C) the difference between information and all the other factors of production. ") the importance of profit in maret economies. #) the importance of 'overnment re'ulation. Answer% C "iff% &$pe% MC Pa'e (ef% *ill% Comprehension ,bective% 1. 11) &he e$ difference between economic s$stems is the different wa$s in which the$ mana'e A) the factors of production. B) the transportation of 'oods within their borders. C) 'overnment rules and re'ulations. ") the pa$ment of worers. #) the de'ree of competition that is allowed in various domestic industries. Answer% A "iff% &$pe% MC Pa'e (ef% *ill% +nowled'e ,bective% 1.
1) An economic s$stem is A) an a'reement between countries that deals with free trade. B) the wa$ in which a nation allocates its resources amon' its citi9ens. C) a 'overnment decree that re!uires certain 'oods and services to be provided. ") a lon' standin' a'reement between citi9ens and 'overnments on how an econom$ is run. #) a lar'e 'overnment department that oversees how the econom$ is runnin'. Answer% B "iff% &$pe% MC *ill% +nowled'e ,bective% 1.
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13) /hat does a planned econom$ rel$ on a centrali9ed 'overnment to do0 A) *upport free enterprise in ever$ wa$ possible B) Allocate all or most factors of production C) #ncoura'e citi9ens to bu$ shares of stoc in small companies ") +eep its control activities to a minimum #) "irect worers to start their own small businesses Answer% B "iff% &$pe% MC Pa'e (ef% *ill% +nowled'e ,bective% 1. 14) n a command econom$5 the central 'overnment A) supports free enterprise in ever$ wa$ possible. B) decides on the allocation of all or most factors of production. C) encoura'es citi9ens to bu$ shares of stoc in small companies rather than lar'e ones. ") eeps its control activities to a minimum so it doesn2t interfere with business efficienc$. #) creates shorta'es on purpose in order to motivate businesses to be more efficient. Answer% B "iff% &$pe% MC Pa'e (ef% *ill% +nowled'e ,bective% 1. 1) n termswhile of factors offorecasts production5 ,il2sofcrude oil reserves are an example of >>>>>>>>5 maret are mperial an example >>>>>>>>. A) labour entrepreneurs B) information labour C) capital information ") natural resources information #) information natural resources Answer% " "iff% &$pe% MC Pa'e (ef% *ill% Comprehension ,bective% 1.
1:) /ith re'ard to factors of production5 it is correct to sa$ that A) natural resources are prett$ evenl$ distributed across different countries. B) the factors of production are mana'ed differentl$ in different countries. C) capital is the most unfair factor of production. ") entrepreneurs are a factor of production onl$ in certain countries De.'.5 China). #) technolo'$ is the most important factor of production. Answer% B "iff% 3 &$pe% MC *ill% +nowled'e ,bective% 1.
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1<) #ntrepreneurs are important because the$ A) mae and spend lots of mone$. B) are 'ood at main' decisions. C) tae riss to start new businesses. ") are usuall$ better mana'ers than non-entrepreneurs. #) sell shares of stoc to investors. Answer% C "iff% &$pe% MC Pa'e (ef% *ill% Comprehension ,bective% 1. 1=) #li9abeth wants to set up a consultin' business that speciali9es in mathematical problem solvin'. /hich of the followin' factors of production would she re!uire0 A) Capital B) ?abour C) nformation resources ") @atural resources #) All of these Answer% # "iff% &$pe% MC Pa'e (ef% *ill% Comprehension ,bective% 1. 1) #mbrace the opportunities and accept the riss is a phrase that best characteri9es the >>>>>>>> attitude. A) entrepreneurial B) capitalist C) communist ") socialist #) mana'erial Answer% A "iff% &$pe% MC Pa'e (ef% *ill% Comprehension ,bective% 1.
7) *omethin' that would contribute directly to improvin' labour as a factor of production would be A) findin' new oil reserves. B) better education for more of the population. C) increasin' the purchasin' power of emplo$ees. ") pro'rams desi'ned to decrease unemplo$ment. #) findin' more efficient wa$s to produce products. Answer% B "iff% 3 &$pe% MC Pa'e (ef% *ill% Comprehension ,bective% 1. 1) As a factor of production5 labour includes A) ever$one in a business. B) onl$ non-unioni9ed emplo$ees. C) onl$ unioni9ed emplo$ees. ") onl$ lower-level mana'ers5 not upper-level mana'ers. #) onl$ worers who do production wor. Answer% A "iff% &$pe% MC Pa'e (ef% *ill% +nowled'e ,bective% 1. ) /hich of the followin' is correct with respect to the factors of production0 A) &he labour factor reco'ni9es that it is importance to have labour unions to offset the power of mana'ement. B) Capital is a more important factor than labour. C) As the Canadian econom$ has become lar'er and more complex5 the importance of entrepreneurs has declined. ") Enlie land5 labour5 and capital5 information can be shared without bein' diminished. #) 8uman resources is an example of the natural resources factor. Answer% " "iff% &$pe% MC Pa'e (ef% *ill% Comprehension ,bective% 1. 3) @atural resources as a factor of production for minin' are a practical consideration when a minin' compan$ considers A) the ease with which ore could be mined. B) the number of miners available to mine the ore. C) the amount of capital re!uired to build the mine. ") the profit that can be made from minin' the ore. #) the number of customers who want to bu$ ore. Answer% A "iff% 3 &$pe% MC Pa'e (ef% *ill% Comprehension ,bective% 1. 4) /hat is the difference between a command econom$ and a maret econom$0
A) A command econom$ is found onl$ in communist countries5 while a maret econom$ is found onl$ in capitalist countries. B) A command econom$ is more efficient than a maret econom$. C) A maret econom$ 'ives 'reater life satisfaction to people. ") A command econom$ relies on centrali9ed 'overnment control of the factors of production5 while in a maret econom$ suppl$ and demand determine production and allocation decisions. #) &here reall$ are no si'nificant differences between a command econom$ and a maret econom$. Answer% " "iff% 3 &$pe% MC Pa'e (ef% *ill% Comprehension ,bective% 1. ) /hat can we sa$ about the dollar value of business-to-business DBB) transactions compared to the dollar value of business-to-consumer DBC) transactions0 A) BB transactions have a lower dollar value because there are fewer businesses than there are consumers. B) &he dollar value of BB transactions exceeds that of BC transactions. C) &he dollar value of BB transactions must e!ual the dollar value of BC transactions. ") t is not possible to determine whether the dollar value of BB transactions is less than or more dollarto value of BCwhether transactions because of of industrial secrec$. is less than or #) t isthan notthe possible determine the dollar value BB transactions more than the dollar value of BC transactions because of data limitations. Answer% B "iff% &$pe% MC Pa'e (ef% < *ill% Comprehension ,bective% 1. :) &he economic s$stem in which producers and consumers control production and allocation decisions throu'h suppl$ and demand is called A) a centrall$ planned econom$. B) privati9ation. C) a maret econom$. ") communism. #) socialism. Answer% C "iff% &$pe% MC *ill% +nowled'e ,bective% 1.
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<) /hich countr$ has a command econom$0 A) Australia B) Fapan C) Canada ") German$ #) @orth +orea Answer% # "iff% 1 &$pe% MC Pa'e (ef% < *ill% Comprehension ,bective% 1. =) /hich of the followin' is correct with re'ard to the communist economic s$stem0 A) &he centrali9ed plannin' emphasis on capital e!uipment and militar$ hardware has caused declines in the prices of consumer 'oods. B) Government ownership of the means of production is onl$ temporar$. C) Most 'overnment-operated enterprises are ver$ efficient because of central plannin'. ") ,verall production expands rapidl$ because of central plannin'. #) &he 'overnment owns and operates all sources of production. Answer% # "iff% &$pe% MC Pa'e (ef% < *ill% Comprehension ,bective% 1. ) *tanislav lives in a countr$ where all the factors of production are owned b$ the 'overnment. &he economic s$stem in his countr$ is most likely A) communism. B) capitalism. C) mixed maret. ") socialism. #) it is not possible to tell with the information provided. Answer% A "iff% &$pe% MC Pa'e (ef% < *ill% Comprehension ,bective% 1. 37) Fohn lives in a countr$ where producers and consumers control production5 and where allocation decisions are made throu'h the mechanism of suppl$ and demand. Fohn lives in a countr$ with a >>>>>>>> econom$. A) privati9ed B) socialist C) communist ") maret #) nationali9ed Answer% " "iff% &$pe% MC Pa'e (ef% < *ill% Comprehension ,bective% 1. 31) A Globe*can poll showed that the hi'hest support for the free maret econom$ was found in
A) Fapan. B) China. C) the Enited *tates. ") Canada. #) Bra9il. Answer% B "iff% &$pe% MC
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*ill% +nowled'e ,bective% 1. 3) A maor drawbac to communism as an economic s$stem is that A) 'overnment control of the factors of production is onl$ temporar$. B) people don2t lie communism. C) individuals contribute accordin' to their abilit$. ") individuals receive economic benefits accordin' to their needs. #) production of 'oods and services is inefficient because of the lac of a profit incentive. Answer% # "iff% 3 &$pe% MC Pa'e (ef% < *ill% Comprehension ,bective% 1. 33) Command economies are most liel$ to be found in A) the newl$ emer'in' economies of southeast Asia. B) communist and socialist nations. C) western #uropean countries. ") Fapan. #) Canada and the Enited *tates. Answer% B "iff% &$pe% MC Pa'e (ef% < *ill% Comprehension ,bective% 1. 34) An econom$ that has a stron' central 'overnment that controls labour5 capital5 and natural resources has few entrepreneurs is a A) maretand econom$. B) command econom$. C) free-enterprise econom$. ") capitalist econom$. #) oli'opolistic econom$. Answer% B "iff% 1 &$pe% MC Pa'e (ef% < *ill% +nowled'e ,bective% 1.
3) Communism and socialism are A) basic forms of maret economies. B) becomin' more popular. C) extreme opposites. ") basic forms of command economies. #) identical forms. Answer% " "iff% &$pe% MC *ill% +nowled'e ,bective% 1.
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3:) Mexico allows producers and consumers to mae production and allocation decisions throu'h the mechanism of suppl$ and demand. *uch a s$stem is called A) socialism. B) communism. C) privati9ation. ") nationali9ation. #) a maret econom$. Answer% # "iff% 1 &$pe% MC Pa'e (ef% < *ill% Comprehension ,bective% 1. 3<) *ocialist economies ma$ stifle economic 'rowth because A) mana'ement positions in state-controlled industries are often filled on the basis of political considerations. B) the$ have too few re'ulations concernin' product safet$. C) the$ are found in countries where people don2t have man$ sills. ") the$ are usuall$ found in countries with cold climates. #) the$ encoura'e excessive unioni9ation of emplo$ees. Answer% A "iff% 3 &$pe% MC Pa'e (ef% < *ill% Comprehension ,bective% 1. 3=) An economic s$stem that permits private ownership and control of small businesses but where the 'overnment controls lar'e critical industries is nown as A) a mixed econom$. B) socialism. C) communism. ") capitalism. #) mercantilism. Answer% B "iff% 1 &$pe% MC Pa'e (ef% < *ill% +nowled'e ,bective% 1.
3) /hich of the followin' statements is correct0
A) *weden is the best example of a countr$ with a pure socialist econom$. B) A Globe*can poll found that the 'reatest support for the free maret econom$ was found amon' the citi9ens of ndia. C) &he Enited *tates is a pure capitalist econom$. ") Man$ countries in the world have a purel$ communist econom$. #) Ender socialism5 smaller businesses are often privatel$ owned. Answer% # "iff% 3 &$pe% MC Pa'e (ef% < *ill% Comprehension ,bective% 1. 47) /hich of the followin' is correct with re'ard to the issue of different economic s$stems0 A) &here is a 'eneral consensus that command economies are more efficient than maret economies because a centrali9ed 'overnment can consider a wider ran'e of economic factors when decisions are made. B) n recent $ears5 more and more countries have reected communism and embraced more maret-based economies. C) *ocialism is the most extensive command economic s$stem because 'overnment owns all the maor industries. ") A Globe*can poll of 7 777 people in 7 different countries showed that support for a free maret econom$ was most pronounced in *in'apore. #) All of these are correct. Answer% B "iff% &$pe% MC Pa'e (ef% < *ill% Comprehension ,bective% 1. 41) *ocialism is best described as A) a ind of command econom$ in which the 'overnment owns and operates all industries. B) a ind of command econom$ in which the 'overnment owns and operates lar'e critical industries. C) an econom$ that is free from an$ re'ulation or plannin'. ") a maret econom$ in which marets decide what5 when5 and how much to produce. #) an economic s$stem with elements of a maret econom$5 but not a planned econom$. Answer% B "iff% &$pe% MC Pa'e (ef% < *ill% Comprehension ,bective% 1.
4) Maret economies have all of the followin' characteristics5 except that the$ A) allow businesses to char'e whatever the$ want for their products and services. B) encoura'e entrepreneurship b$ offerin' profits as an incentive. C) re!uire 'overnment intervention in order to prosper. ") rel$ on marets5 not 'overnments5 to decide what5 when5 and for whom to produce. #) allow customers free choice. Answer% C "iff% &$pe% MC Pa'e (ef% < *ill% Comprehension ,bective% 1. 43) /hich of the followin' is correct with respect to privati9ation and dere'ulation0 A) "ere'ulation $ields hi'her economic performance than privati9ation. B) Privati9ation onl$ wors in socialist countries. C) Privati9ation means convertin' companies that are in financial trouble into 'overnmentcontrolled or'ani9ations. ") &he trend toward both privati9ation and dere'ulation slowed somewhat after the financial crisis of 77=. #) &he$ mean essentiall$ the same thin'. Answer% " "iff% 3 &$pe% MC Pa'e (ef% = *ill% Comprehension ,bective% 1. 44) Canada is home to aDn) >>>>>>>> econom$. A) mixed maret B) oli'opolistic C) socialist ") maret #) command Answer% A "iff% &$pe% MC Pa'e (ef% = *ill% +nowled'e ,bective% 1. 4) Maret economies are considered beneficial for small businesses because the$ A) provide small businesses with lots of 'overnment assistance and protection. B) provide a central economic plan within which small businesses can easil$ prosper. C) protect small businesses from the power of lar'e corporations. ") allow small businesses to fail. #) allow the business to do whatever it wants as lon' as it doesn2t brea the law. Answer% # "iff% &$pe% MC Pa'e (ef% < *ill% Comprehension ,bective% 1.
4:) n which economic s$stem will profit motivate entrepreneurs to use resources efficientl$ and to produce 'oods that consumers want0 A) A centrall$ planned econom$ B) Communism C) A maret econom$ ") *ocialism #) A barter econom$ Answer% C "iff% 1 &$pe% MC *ill% +nowled'e ,bective% 1.
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4<) Fose is from Guatemala. 8e is unsure about the nature of business in Canada. Hou point out that a t$pical business in Canada operates in fundamentall$ the same wa$ as a business in A) the People2s (epublic of China. B) Poland. C) Peru. ") #n'land. #) Fapan. Answer% " "iff% 3 &$pe% MC Pa'e (ef% *ill% Comprehension ,bective% 1. 4=) /hich of the followin' is correct with respect to input and output marets0 A) n the input maret5 firms suppl$ 'oods and services in response to demand on the part of households. B) n the output maret5 firms bu$ resources from households5 which then suppl$ those resources. C) Consumer bu$in' patterns provide information that helps companies decide which products to produce. ") Consumers are restricted in the companies the$ can wor for. #) nput and output marets exist onl$ in communist countries. Answer% C "iff% 3 &$pe% MC Pa'e (ef% <-= *ill% Comprehension ,bective% 1.
4) /hich of the followin' is correct with respect to mixed maret economies0 A) &he$ have features that are not found in either command or maret economies. B) As a result of the financial crisis of 77=5 there is a trend toward increased 'overnment re'ulation of business in mixed maret economies. C) Ier$ few countries have this t$pe of s$stem. ") &here is a trend toward increased 'overnment ownership of business in mixed maret economies. #) &he mixed maret econom$ is the best t$pe of economic s$stem. Answer% B "iff% &$pe% MC Pa'e (ef% = *ill% Comprehension ,bective% 1. 7) &he federal 'overnment sold the ?ester B. Pearson nternational Airport in &oronto to a 'roup of entrepreneurs5 which then set up the Greater &oronto Airports Authorit$. &his sale is an example of A) socialism. B) freedom of choice. C) entrepreneurship. ") dere'ulation. #) privati9ation. Answer% # "iff% &$pe% MC Pa'e (ef% = *ill% Comprehension ,bective% 1. 1) /hich of the followin' is correct with respect to privati9ation0 A) &he &@& Post Group in the @etherlands has been converted from private to 'overnment ownership. B) Privati9ation is most liel$ to occur in communist countries. C) Privati9ation has been a 'eneral trend durin' the last decade5 but some countries are 'oin' in the opposite direction and pursuin' nationali9ation instead. ") *everal companies have been nationali9ed in Canada in recent $ears. #) &he recession of 77= accelerated the trend toward privati9ation. Answer% C "iff% 3 &$pe% MC Pa'e (ef% = *ill% Comprehension ,bective% 1.
) &he role of 'overnment in our economic s$stem includes all of the followin' except A) customers. B) innovators. C) competitors. ") re'ulators. #) taxation a'ents. Answer% B "iff% &$pe% MC *ill% +nowled'e ,bective% 1.3
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3) *and$ is responsible for monitorin' compliance with re'ulations in her compan$. *he needs to now that the important areas of 'overnment re'ulation are A) protectin' competition and upholdin' environmental re'ulations. B) protectin' social 'oals5 upholdin' environmental re'ulations5 and protectin' shareholder ri'hts. C) protectin' competition5 protectin' consumers5 and upholdin' environmental re'ulations. ") protectin' competition5 protectin' consumers5 protectin' social 'oals5 and protectin' the environment. #) protectin' shareholder ri'hts5 and followin' business law. Answer% "iff% " &$pe% MC Pa'e (ef% -17 *ill% Comprehension ,bective% 1.3 4) &he Canada Consumer Product *afet$ Act replaces the A) 8a9ardous Products Act. B) ;ood and "ru' Act. C) /ei'hts and Measures Act. ") Advertisin' and Paca'in' Act. #) &extile ?abellin' Act. Answer% A "iff% &$pe% MC Pa'e (ef% 17 *ill% +nowled'e ,bective% 1.3
) /hich of the followin' is correct with re'ard to the Competition Act0 A) A compan$ can cut prices in one re'ion of Canada while sellin' at a hi'her price ever$where else even if this substantiall$ lessens competition. B) Businesses are 'enerall$ satisfied that the Competition Bureau moves fairl$ !uicl$ in approvin' or den$in' mer'er plans. C) P$ramid sellin' is permitted as lon' as participant now the$ are involved in a p$ramid sellin' scheme and the$ now the$ are not allowed to mae windfall profits from the scheme. ") &he mere existence of a conspirac$ is assumed to be proof that competition has been reduced. #) All of these are correct. Answer% " "iff% 3 &$pe% MC Pa'e (ef% *ill% Comprehension ,bective% 1.3 :) Madeline is responsible for answerin' !uestions about what her compan$ can do under the Competition Act. /hich one of the followin' is allowed under the Act0 A) &he return of surpluses b$ credit unions to their members B) Pricin' products unreasonabl$ low to eliminate competition C) ;ormin' a mer'er or a monopol$ that lessens competition ") (efusin' to sell to a retailer who will5 in turn5 sell the product si'nificantl$ below the su''ested price #) Givin' retail selective allowances and rebates to cover advertisin' expenses to specific retailers Answer% A "iff% &$pe% MC Pa'e (ef% *ill% Comprehension ,bective% 1.3 <) /hich of the followin' is correct re'ardin' the Competition Act0 A) &he Act prohibits a'reements between companies that reduce competition. B) &he 'overnment has to prove that a'reements between companies actuall$ reduce competition. C) (ecent chan'es to the Act have reduced fines for misleadin' maretin' practices because it has been shown that these fines don2t have an$ effect. ") *urve$s of business executives show that the$ thin the Competition Bureau is actuall$ !uite !uic in approvin' or den$in' mer'er re!uests. #) All of the above. Answer% A "iff% 1 &$pe% MC Pa'e (ef% *ill% Comprehension ,bective% 1.3
=) n 7145 @etflix was told to submit information about its Canadian subscribers to the C(&C5 but it refused to do so5 ar'uin' that the C(&C didn2t have an$ urisdiction over online media. /hen the C(&C simpl$ dropped the issue5 this showed that A) the C(&C does not have an$ power over companies that provide cable or television entertainment. B) the top mana'ement of C(&C is incompetent. C) the top mana'ement of the C(&C is not nowled'eable about companies that provide entertainment. ") the C(&C does not have ri'ht to control broadcast content that is provided over the nternet. #) it is unclear what urisdiction the C(&C has in enforcin' Canadian content rules. Answer% # "iff% 3 &$pe% MC Pa'e (ef% *ill% Comprehension ,bective% 1.3 ) /h$ are sales taxes called re'ressive taxes0 A) Because food and dru's are often exempt B) Because the more one maes5 the lower the rate of sales tax that is applied to one2s purchases C) Because poorer people pa$ a hi'her percenta'e of their income than richer people ") Because it applies to sales taxes #) Because Answer% C the$ discoura'e the purchase of some products "iff% 3 &$pe% MC Pa'e (ef% 11 *ill% Comprehension ,bective% 1.3 :7) Fohn has ust received a rather lar'e increase in salar$5 but he is upset because he feels that he should not be char'ed a hi'her rate of tax on this extra mone$. Fohn is bein' taxed b$ a >>>>>>>> tax s$stem. A) provincial B) federal C) pro'ressive ") restrictive #) re'ressive Answer% C "iff% &$pe% MC *ill% +nowled'e ,bective% 1.3
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:1) /hich of the followin' is correct with respect to the issue of 'overnment taxation0 A) Pro'ressive revenue taxes are harder on low-income people than on hi'h-income people. B) (evenue taxes are desi'ned primaril$ to encoura'e people to bu$ certain inds of 'oods and avoid bu$in' other inds. C) (estrictive taxes prevent businesses from expandin'. ") (e'ressive revenue taxes are levied at the same rate re'ardless of a person2s income. #) All of the statements are correct. Answer% " "iff% &$pe% MC Pa'e (ef% 11 *ill% Comprehension ,bective% 1.3 :) &he G*& is considered a re'ressive tax because A) food and dru's are often exempt. B) the more a person maes5 the lower the rate of sales tax applied to that person2s purchase. C) it is unfair. ") poorer people pa$ a hi'her percenta'e of their income than richer people. #) it is desi'ned to discoura'e the purchase of certain products. Answer% " "iff% &$pe% MC Pa'e (ef% 11 *ill% Comprehension ,bective% 1.3 :3) ncentive pro'rams are desi'ned to A) encoura'e families to have more babies. B) encoura'e businesses to locate in economicall$ depressed parts of the countr$. C) create corporate welfare bums. ") encoura'e families to move to depressed parts of the countr$. #) reimburse businesses for main' unprofitable but necessar$ products. Answer% B "iff% &$pe% MC Pa'e (ef% 11 *ill% Comprehension ,bective% 1.3 :4) /hich law forbids most monopolies in Canada0 A) Consumer Protection Act B) ?obb$in' Act C) ;air &rade Act ") Competition Act #) #nvironmental Contaminants Act Answer% " "iff% 1 &$pe% MC Pa'e (ef% *ill% +nowled'e ,bective% 1.3
:) @utrition labellin' and claims are intended to provide consumers with information to aid them in the selection of a health$ diet aimed at reducin' ris of premature illness and death due to diet-related chronic diseases. nsufficient labellin' is a violation of which act0 A) ;ood and "ru' Act B) /ei'hts and Measures Act C) Advertisin' and Paca'in' Act ") &extile ?abellin' Act #) Consumer Protection Act Answer% A "iff% &$pe% MC Pa'e (ef% 17 *ill% +nowled'e ,bective% 1.3 ::) /hich of the followin' statements is most correct with respect to 'overnment in its role as re'ulator0 A) Business complains that the Competition Bureau is too slow in approvin' or den$in' mer'er plans. B) &he 'overnment reall$ has ver$ little power in its role as re'ulator. C) Because of the move toward dere'ulation5 federal and provincial 'overnments have become less and less involved in re'ulatin' business activit$. ") &he main areas of 'overnment re'ulation of business are achievin' social 'oals5 protectin' consumers5 and providin' assistance to small business firms. #) *tudies have shown that 'overnment re'ulation reduces the effectiveness of business firms. Answer% A "iff% &$pe% MC Pa'e (ef% *ill% Comprehension ,bective% 1.3 :<) /hich of the followin' is correct with re'ard to public-private partnerships0 A) &hese partnerships have resulted in windfall profits for the businesses that have 'otten involved in them. B) &hese partnerships have resulted in bad public relations for the businesses that have 'otten involved in them. C) &hese in partnerships have created a monopol$ situation for the businesses that have 'otten involved them. ") &hese partnerships cost more mone$ than the traditional approach Dwhere the 'overnment puts up the mone$ and then hires contractors to do the necessar$ wor). #) &hese partnerships have 'enerall$ been failures in terms of the !ualit$ of service provided. Answer% " "iff% 3 &$pe% MC Pa'e (ef% 11 *ill% Comprehension ,bective% 1.3
:=) /hen ?abatt Brewin' sales representatives 'ave mone$ to store operators who a'reed to not lower prices on some brands of beer5 the compan$ was prosecuted for en'a'in' in A) bait-and-switch advertisin'. B) resale price maintenance. C) a p$ramid scheme. ") sellin' mislabeled products. #) a violation of the Beer Act. Answer% B "iff% &$pe% MC Pa'e (ef% 17 *ill% Comprehension ,bective% 1.3 :) &he three main wa$s in which business can influence 'overnment polic$ are A) advertisin'5 lobb$ists5 and trade associations. B) political contributions5 letters to the editors of newspapers5 and advertisin'. C) advertisin'5 trade associations5 and political contributions. ") trade associations5 lobb$ists5 and letters to the editors of newspapers. #) lobb$ists5 political contributions5 and advertisin'. Answer% A "iff% &$pe% MC Pa'e (ef% 11 *ill% Comprehension ,bective% 1.3 <7) &he federal ?obb$in' Act re!uires lobb$ists to A) re'ister with the "epartment of Consumer and Commercial (elations. B) contribute a minimum of 617 777 to political campai'ns. C) attend at least two sessions in the 8ouse of Commons each $ear. ") report on their communications with desi'nated public office holders. #) meet with members of Parliament on a re'ular basis. Answer% " "iff% &$pe% MC Pa'e (ef% 1 *ill% +nowled'e ,bective% 1.3 <1) *uppose that several microelectronics manufacturers want to set up a trade association. &he$ need to now that trade associations are allowed to do all of the followin' except A) allocate marets for their members. B) influence the ind of le'islation that is passed. C) conduct trainin' pro'rams relevant to the industr$. ") arran'e trade shows. #) publish newsletters featurin' articles on new products. Answer% A "iff% &$pe% MC Pa'e (ef% 1 *ill% Comprehension ,bective% 1.3
<) &he price at which the !uantit$ of 'oods demanded and the !uantit$ of 'oods supplied are e!ual is referred to as A) the 'oin' rate. B) the point-of-no-return price. C) the maret price. ") the hi'hest price. #) the lowest price. Answer% C "iff% &$pe% MC *ill% +nowled'e ,bective% 1.4
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<3) n a small town of 35777 people5 the number of car washes has 'rown from two to five in the last two months. /hich result will liel$ occur0 A) &he increase in suppl$ will have no effect on the e!uilibrium price. B) &he increase in suppl$ will lead to a decrease in demand. C) &he increase in suppl$ will lead to a decrease in the e!uilibrium price. ") &he increase in suppl$ will lead to an increase in demand. #) &he increase in suppl$ will lead to an increase in e!uilibrium price. Answer% C "iff% &$pe% MC *ill% +nowled'e ,bective% 1.4
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<4) &he term demand refers to A) the stoc exchan'e. B) the willin'ness and abilit$ of bu$ers to purchase a product or service. C) the willin'ness and abilit$ of businesses to sell a product or service. ") the willin'ness of bu$ers to accept hi'h prices for hi'h !ualit$ 'oods. #) the willin'ness of 'overnment to sell 'oods and services. Answer% B "iff% &$pe% MC Pa'e (ef% 1 *ill% +nowled'e ,bective% 1.4 <) /hat is demand0 A) &he idea that bu$ers will purchase more of a product as the price drops B) &he price and !uantit$ of a product at which the !uantit$ demanded is e!ual to the !uantit$ supplied C) &he idea that producers will offer more of a product as the price rises ") &he willin'ness and abilit$ of bu$ers to purchase a product #) @one of these Answer% " "iff% &$pe% MC Pa'e (ef% 1 *ill% +nowled'e ,bective% 1.4
<:) /ith re'ard to demand and suppl$ in a maret econom$5 it is correct to sa$ that
A) demand refers to the price that consumers are willin' to pa$ for a product. B) the demand and suppl$ schedule indicates how man$ units of a 'iven product will be sold at different prices. C) demand and suppl$ curves are used to determine the demand and suppl$ schedule. ") e!uilibrium prices are onl$ rarel$ achieved. #) if a seller tried to increase profits b$ main' more products to sell5 the result would be a more efficient use of resources because economies of scale would be achieved. Answer% B "iff% &$pe% MC Pa'e (ef% 1 *ill% Comprehension ,bective% 1.4 <<) &he law of demand states that A) producers will offer more of a product as the price falls. B) demand and suppl$ meet at an e!uilibrium point. C) bu$ers will purchase more of a product as the price falls. ") producers will offer more of a product as the price rises. #) bu$ers will purchase more of a product as the price rises. Answer% C "iff% 1 &$pe% MC Pa'e (ef% 1 *ill% +nowled'e ,bective% 1.4 <=) &he law of suppl$ states that A) bu$ers will purchase more of a product as the price falls. B) demand and suppl$ meet at an e!uilibrium point. C) producers will offer more of a product as the price rises. ") producers will offer more of a product as the price falls. #) bu$ers will purchase more of a product as the price rises. Answer% C "iff% 1 &$pe% MC Pa'e (ef% 1 *ill% +nowled'e ,bective% 1.4 <) /hat is suppl$0 A) &he idea that sellers will sell more of a product as the price increases B) &he price and !uantit$ of a product at which the !uantit$ demanded is e!ual to the !uantit$ supplied C) &he idea that bu$ers will want less of a product as the price increases ") &he willin'ness and abilit$ of producers to offer a 'ood or service for sale #) @one of these Answer% " "iff% &$pe% MC Pa'e (ef% 1 *ill% +nowled'e ,bective% 1.4
=7) an5 the owner of -for-1 Pi99a5 has noticed that when he increases the price of his pi99as b$ 6.775 the number of pi99as that he sells drops b$ 37 percent. an has discovered
A) the law of suppl$ and demand. B) the suppl$ curve. C) the demand curve. ") the law of suppl$. #) the law of demand. Answer% # "iff% 1 &$pe% MC Pa'e (ef% 1 *ill% Comprehension ,bective% 1.4 =1) +ristine discovered that when she dropped the price of her paintin's5 more people were asin' her to create paintin's for them. +ristine is experiencin' A) the law of suppl$ and demand. B) maret price variations. C) the law of suppl$. ") economic ustice. #) the law of demand. Answer% # "iff% &$pe% MC Pa'e (ef% 1 *ill% Comprehension ,bective% 1.4 =) A demand and suppl$ schedule A) allows assessment of the relationship between different levels of demand and suppl$ at different prices. B) describes the suppl$ for a product. C) describes the demand for a product. ") is a formula b$ which one determines maret e!uilibrium. #) is the contractual a'reement made between the bu$er and seller. Answer% A "iff% &$pe% MC Pa'e (ef% 1 *ill% Comprehension ,bective% 1.4 =3) /hich term is used to identif$ the willin'ness and abilit$ of bu$ers to purchase a product0 A) ,bli'ation B) "emand C) /ealth ") Profits #) Prosperit$ Answer% B "iff% 1 &$pe% MC Pa'e (ef% 1 *ill% +nowled'e ,bective% 1.4
=4) producer automobile batteries notes its thatbatter$ the price of batteries risen over each of the pastAthree $ears.of&he firm decides to expand production. &hishas illustrates A) the law of suppl$.
B) the law of maret price. C) the law of e!uilibrium. ") the law of demand. #) the law of suppl$ and demand. Answer% A "iff% &$pe% MC Pa'e (ef% 1 *ill% Comprehension ,bective% 1.4 =) &he point at which the !uantit$ of a product or service demanded is the same as the !uantit$ supplied is called A) the surplus point. B) the e!uilibrium point. C) the suppl$ point. ") the profit point. #) the demand point. Answer% B "iff% 1 &$pe% MC Pa'e (ef% 1 *ill% +nowled'e ,bective% 1.4 =:) At the point where the suppl$ curve crosses the demand curve on a 'raph A) no profits will be made. B) all products offered for sale will be sold. C) a shorta'e will result if the price is too low. ") no sales will be made. #) a surplus will result if the price is too low. Answer% B "iff% 1 &$pe% MC Pa'e (ef% 1 *ill% Comprehension ,bective% 1.4 =<) &he points on a curve showin' the relationship between the price of a 'ood or service and the !uantit$ of that curve. 'ood or service willin' to be produced is nown as the A) e!uilibrium B) demand curve. C) balance curve. ") variable price curve. #) suppl$ curve. Answer% # "iff% 1 &$pe% MC Pa'e (ef% 1 *ill% +nowled'e ,bective% 1.4
==) &he points on a curve showin' the relationship between the price of a 'ood or service and the !uantit$ of that or service which customers will purchase is nown as the A) variable price'ood curve. B) e!uilibrium curve.
C) demand curve. ") suppl$ curve. #) balance curve. Answer% C "iff% 1 &$pe% MC *ill% +nowled'e ,bective% 1.4
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=) #!uilibrium in the maret is attained when A) the laws of suppl$ and demand interact to set the price and !uantit$ of a product at which bu$ers and sellers a'ree. B) there are no dramatic chan'es in the maret over time. C) suppliers are willin' to produce the !uantit$ demanded. ") no sin'le firm has more than 7 percent of the maret. #) consumers are willin' to pa$ the price bein' char'ed. Answer% A "iff% &$pe% MC Pa'e (ef% 1 *ill% Comprehension ,bective% 1.4 7) &he price at which the !uantit$ of a product willin' to be purchased b$ customers and the !uantit$ of product willin' to be made b$ a producer are e!ual is nown as A) the brea-even price. B) the oli'opol$ price. C) the balanced price. ") the elastic price. #) either the maret price or the e!uilibrium price. Answer% # "iff% &$pe% MC Pa'e (ef% 1 *ill% +nowled'e ,bective% 1.4
1) #rnesto2s Pi99a is about to offer customers a new variet$ of a personal pi99a. /hich of the followin' actions b$ #rnesto2s Pi99a would most liel$ prevent a surplus or a shorta'e of the personal pi99as in its first wee0 A) ?imit the suppl$ of the personal pi99a B) ?ower demand for the personal pi99a C) *et the price of substitute 'oods ") #stimate the maret price of the personal pi99a #) ?ower the price of the pi99a throu'hout the wee Answer% " "iff% &$pe% MC Pa'e (ef% 14 *ill% +nowled'e ,bective% 1.4 ) f the e!uilibrium point of -for-1 Pi99a is 777 pi99as per wee and 617.77 per pi99a5 and the owner decides to mae 177 pi99as and sell them at the same price5 what is the liel$ outcome0 A) &he business will have less expenses and also have 'reater profit. B) &he business will have a shorta'e. C) &he business will mae more profit. ") &he business will have a surplus. #) &he business will have less expenses but no more profit. Answer% B "iff% &$pe% MC Pa'e (ef% 14 *ill% Comprehension ,bective% 1.4 3) -for-1 Pi99a is operatin' at the point where the suppl$ curve intersects the demand curve. f the owner decides to increase the price and not chan'e the production level5 what will result0 A) A shorta'e B) A surplus C) More profit ") A shift in the suppl$ curve #) A shift in the demand curve Answer% B "iff% &$pe% MC Pa'e (ef% 14 *ill% Comprehension ,bective% 1.4
4) &he maret research department of B*J Corp. estimated that 777 C"s would be purchased at a price of 6=.77 each. As it turned out5 the demand was :777. &he compan$ is in aDn) >>>>>>>> condition. A) shorta'e B) 'rowth C) inflation ") surplus #) depression Answer% A "iff% &$pe% MC Pa'e (ef% 14 *ill% Comprehension ,bective% 1.4 ) f the maret for chocolate was at the e!uilibrium point and suddenl$ half of the chocolate in the world disappeared5 what would be the immediate effect0 A) &he price would increase due to a shorta'e. B) &he price would decrease due to maret e!uilibrium. C) &he price would increase due to a surplus. ") &he price would decrease due to a surplus. #) &here would be no chan'e in either price or demand. Answer% "iff% A &$pe% MC Pa'e (ef% 14 *ill% Comprehension ,bective% 1.4 :) /hich of the followin' is correct with respect to the issue of suppl$ and demand0 A) A demand curve shows that consumers usuall$ demand products of hi'her !ualit$. B) A suppl$ curve shows that businesses will suppl$ more units of a product5 but will lower the level of product !ualit$. C) t is difficult to achieve an e!uilibrium price. ") /hen the !uantit$ demanded exceeds the amount supplied5 businesses shut down. #) @one of the statements are correct. Answer% # "iff% &$pe% MC Pa'e (ef% 13 *ill%Comprehension ,bective% 1.4 <) An exchan'e process between bu$ers and sellers of a particular 'ood or service is nown as A) a maret. B) economic trade. C) mercantilism. ") suppl$ utilit$. #) barterin'. Answer% A "iff% &$pe% MC Pa'e (ef% 1 *ill% +nowled'e ,bective% 1.4 =) n the production of wheat5 the law of demand
A) states that bu$ers will purchase more wheat as the price decreases. B) reflects the farmer2s desire to increase wheat production. C) comes into pla$ when farmers produce a bumper crop of wheat. ") refers to the exchan'e process between the farmer and the bu$er of wheat. #) states that at ver$ hi'h prices5 there will be no suppl$. Answer% A "iff% &$pe% MC Pa'e (ef% 1 *ill% Comprehension ,bective% 1.4 ) n economic terms5 a maret is A) available in capitalist nations5 but not in communist nations. B) located where bu$ers can most easil$ access it. C) the ph$sical location Dfor example5 a 'rocer$ store) where exchan'es tae place between bu$ers and sellers. ") an exchan'e process between sellers and bu$ers. #) all of the above. Answer% " "iff% &$pe% MC Pa'e (ef% 1 *ill% +nowled'e ,bective% 1.4 177) /hat is liel$ to happen when demand for a commodit$ is hi'h0 A) Consumers will tr$ to find substitutes for the commodit$. B) &he price of the commodit$ will rise. C) Criminal behaviour increases with re'ard to the commodit$ De.'.5 stealin'). ") &he price of substitute commodities will increase. #) All of these statements are correct. Answer% # "iff% &$pe% MC Pa'e (ef% 14 *ill% Comprehension ,bective% 1.4 171) a real estate&om a'ent5 wants set to&om5 sell their home. could usetoa convince a potential customer where the price should be A) variable cost curve. B) demand and suppl$ schedule. C) suppl$ curve. ") demand curve. #) propert$ anal$sis. Answer% B "iff% &$pe% MC Pa'e (ef% 13 *ill% Comprehension ,bective% 1.4
17) A new sales tax has the effect of shiftin' the suppl$ curve upward. &his will 'enerall$ move the e!uilibrium point
A) down and to the left. B) up and to the ri'ht. C) down and to the ri'ht. ") up and to the left. #) it has no effect on the e!uilibrium point. Answer% " "iff% &$pe% MC Pa'e (ef% 13 *ill% Comprehension ,bective% 1.4 173) Private enterprise re!uires which four elements to function effectivel$0 A) Communism5 capitalism5 socialism5 and privati9ation B) &he ri'ht to product safet$5 consumer choice5 freedom of information5 and no 'overnment intervention in business C) ?and5 labour5 capital5 and entrepreneurship ") *uppl$5 demand5 e!uilibrium5 and monopol$ #) Private propert$ ri'hts5 freedom of choice5 profits5 and competition Answer% # "iff% &$pe% MC Pa'e (ef% 14 *ill% +nowled'e ,bective% 1. 174) After checin' out a new car deal at her local GM Canada dealership5 *all$ decided to bu$ one. /hich of the followin' best describes what happened0 A) *all$ exercised her freedom of choice. B) General Motors exercised its freedom of choice. C) Both General Motors and *all$ exercised their freedom of choice. ") &his example doesn2t relate to freedom of choice. #) @either General Motors nor *all$ exercised their freedom of choice because the$ were both forced into their respective roles. Answer% C "iff% &$pe% MC Pa'e (ef% 14 *ill% Comprehension ,bective% 1.
17) Maret economies that rel$ on a private enterprise s$stem maintain that the creation of wealth should be the concern of A) business firms. B) labour unions. C) the 'overnment. ") wor teams. #) individuals. Answer% # "iff% 1 &$pe% MC Pa'e (ef% 14 *ill% Comprehension ,bective% 1. 17:) >>>>>>>> must be present if companies are 'oin' to be motivated to offer consumers lower prices. A) Government re'ulations B) ;reedom of choice C) Competition ") Profits #) ;reedom of choice and competition Answer% C "iff% 1 &$pe% MC *ill% +nowled'e ,bective% 1.
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17<) A motive to start a business is >>>>>>>>5 while >>>>>>>> creates the need to run the business efficientl$. A) profit 'overnment B) mone$ 'overnment C) profit pride ") profit competition #) competition profit Answer% " "iff% &$pe% MC Pa'e (ef% 14 *ill% +nowled'e ,bective% 1. 17=) ndividual ownership of propert$ is a e$ element in A) the private enterprise s$stem. B) a planned econom$. C) socialism. ") the factors of production. #) communism. Answer% A "iff% &$pe% MC Pa'e (ef% 14 *ill% Comprehension ,bective% 1.
17) ,ne outcome of competition is that business firms
A) usuall$ develop a monopol$. B) can i'nore price wars. C) have unrestricted access to natural resources. ") must operate efficientl$. #) reduce their need for expansion capital. Answer% " "iff% &$pe% MC Pa'e (ef% 14 *ill% Comprehension ,bective% 1. 117) /hat provides the motivation for an entrepreneur to operate his or her business efficientl$0 A) &he ri'ht to vote B) Private propert$ ri'hts C) Competition ") Privati9ation #) ;reedom of choice Answer% C "iff% 1 &$pe% MC Pa'e (ef% 14 *ill% +nowled'e ,bective% 1. 111) /hich of the followin' is correct0 A) n perfect competition5 most firms in an industr$ are lar'e. B) n monopolistic competition5 there are fewer sellers than in perfect competition but still man$ bu$ers. C) All thin's considered5 perfect competition is the ideal situation. ") n order for an oli'opol$ to exist5 there must not be more than three sellers. #) n a monopol$5 the firm that is the onl$ supplier does not have to worr$ about how much consumer demand will fall as it raises its prices. Answer% B "iff% 3 &$pe% MC Pa'e (ef% 14-1: *ill% Comprehension ,bective% 1. 11) &he four de'rees of competition include all of the followin' except A) pure competition. B) monopolistic competition. C) monopolies. ") oli'opolies. #) pure monopolistic competition. Answer% # "iff% &$pe% MC Pa'e (ef% 14-1: *ill% +nowled'e ,bective% 1.
113) @atural cor lost its >>>>>>>> when a new technolo'$ allowed wine bottles to be sealed with plastic cors. A) perfect competition B) product differentiation C) monopol$ ") monopolistic competition #) oli'opol$ Answer% C "iff% 1 &$pe% MC *ill% +nowled'e ,bective% 1.
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114) An outcome of competition is that business firms A) must operate efficientl$. B) have unrestricted access to natural resources. C) reduce their need for expansion capital. ") develop a monopol$. #) can drop out of the pricin' war unnoticed. Answer% A "iff% &$pe% MC Pa'e (ef% 14 *ill% Comprehension ,bective% 1. 11) Brown Compan$ wants to have an advanta'e over its competitors. &o 'ain this advanta'e5 it must develop a product that is either >>>>>>>> or of >>>>>>>> than that of the competition. A) lower priced e!ual !ualit$ B) lower priced hi'her !ualit$ C) priced the same e!ual !ualit$ ") priced the same lower !ualit$ #) hi'her priced e!ual !ualit$ Answer% B "iff% &$pe% MC Pa'e (ef% 14 *ill% +nowled'e ,bective% 1. 11:) /hen individual firms are small and the number of firms is lar'e5 this describes which de'ree of competition0 A) *elective competition B) Monopolistic competition C) Monopol$ ") Perfect competition #) ,li'opol$ Answer% " "iff% &$pe% MC Pa'e (ef% 14 *ill% Comprehension ,bective% 1.
11<) Bob owns the *t. Paul *treet one-stop convenience store5 1 of <7 convenience stores in his
re'ion. /hich de'ree of competition is Bob facin'0 A) Monopolistic competition B) ,li'opol$ C) Perfect competition ") ,li'opolistic competition #) Monopol$ Answer% C "iff% &$pe% MC Pa'e (ef% 14 *ill% Comprehension ,bective% 1. 11=) n a maret with perfect competition A) bu$ers and sellers do not now the price structure of the maret. B) price is set b$ suppl$ and demand. C) there are ver$ few sellers. ") firms are relativel$ lar'e. #) products have ver$ few similarities. Answer% B "iff% &$pe% MC Pa'e (ef% 14 *ill% Comprehension ,bective% 1. 11) /hich one of the followin' is the best example of perfect competition0 A) A'ricultural industr$ B) Automobile industr$ C) Etilit$ industr$ ") Clothin' industr$ #) *oft drin industr$ Answer% A "iff% &$pe% MC Pa'e (ef% 14 *ill% Comprehension ,bective% 1.
17) Mc"onnell "ou'las5 a manufacturer of lar'e commercial aircraft5 raises its prices of aircraft b$ 17 percent. Boein'5 another manufacturer of lar'e commercial aircraft5 raises its prices b$ percent. Airbus5 a third manufacturer of lar'e commercial aircraft5 follows with an increase of . percent. #ach of these companies is practicin' a t$pe of pricin' strate'$ characteristic of A) controlled competition. B) monopolistic competition. C) an oli'opol$. ") perfect competition. #) a monopol$. Answer% C "iff% 3 &$pe% MC Pa'e (ef% 1 *ill% Comprehension ,bective% 1. 11) n a 'iven national maret5 onl$ five firms mae and distribute little red wa'ons. &his illustrates which de'ree of competition0 A) Monopol$ B) *elective competition C) ,li'opol$ ") Monopolistic competition #) Perfect competition Answer% C "iff% &$pe% MC Pa'e (ef% 1 *ill% Comprehension ,bective% 1. 1) Competition lie that between &ide and Cheer5 Coe and Pepsi5 and *ears and (alph ?auren is A) oli'opolistic competition. B) monopolistic competition. C) oli'opol$. ") perfect competition. #) monopol$. Answer% B "iff% &$pe% MC Pa'e (ef% 1 *ill% Comprehension ,bective% 1.
13) /hich of the followin' businesses has a natural monopol$0 A) A provincial electric utilit$ B) Iia (ail C) A Chapters boostore ") Pepsi #) "e Beers "iamonds Answer% A "iff% &$pe% MC Pa'e (ef% 1: *ill% Comprehension ,bective% 1. 14) Baile$ /ear manufactures children2s clothin'. &he compan$ is able to set its prices hi'her than its competitors because of the fine material it uses and the attention it pa$s to the !ualit$ of the sewin'. Baile$ /ear is operatin' in a competitive environment of A) monopolistic competition. B) perfect competition. C) oli'opolistic competition. ") oli'opol$. #) monopol$. Answer% A "iff% &$pe% MC Pa'e (ef% 1 *ill% Comprehension ,bective% 1. 1) Competition in which there are man$ bu$ers5 a lot of product differentiation5 and relative ease of entr$ or exit of the maret is nown as A) monopol$. B) oli'opolistic competition. C) oli'opol$. ") perfect competition. #) monopolistic competition. Answer% # "iff% &$pe% MC Pa'e (ef% 1 *ill% +nowled'e ,bective% 1. 1:) /hich of the followin' is correct re'ardin' monopolistic competition0 A) &here are man$ competitors in the industr$. B) Products are differentiated. C) Competitors can enter and leave the maret easil$. ") Competitors ma$ be lar'e or small. #) All of these statements are correct. Answer% # "iff% 3 &$pe% MC Pa'e (ef% 1 *ill% Comprehension ,bective% 1.
1<) /hen there are a handful of ver$ lar'e sellers5 maret entr$ is difficult5 and a compan$ can
have a maor impact on the product price5 this is a situation nown as A) perfect competition. B) monopol$. C) oli'opol$. ") monopolistic competition. #) free maret enterprise. Answer% C "iff% &$pe% MC *ill% +nowled'e ,bective% 1.
Pa'e (ef% 1
1=) n the maret for breafast cereals5 a few lar'e producers5 such as General Mills5 Post5 Quaer5 and +ello''5 dominate the maret. &his best describes which of the followin'0 A) Perfect competition B) Monopolistic competition C) ?imited cartel ") Monopol$ #) ,li'opol$ Answer% # "iff% &$pe% MC Pa'e (ef% 1 *ill% Comprehension ,bective% 1. 1) n aDn) >>>>>>>>5 individual firms are small and the number of such firms is lar'e. A) mixed maret B) oli'opol$ C) perfect competition ") monopol$ #) monopolistic competition Answer% C "iff% 1 &$pe% MC Pa'e (ef% 14 *ill% +nowled'e ,bective% 1. 137) Computers B Es is a manufacturer of customi9ed microcomputers. &he$ are able to set their prices hi'her than competitors because the$ can assemble a computer to a customer2s exact specifications. Computers B Es is operatin' in a competitive environment of A) oli'opolistic competition. B) perfect competition. C) monopolistic competition. ") monopol$. #) oli'opol$. Answer% C "iff% &$pe% MC Pa'e (ef% 1 *ill% Comprehension ,bective% 1. 131) n a maret with perfect competition A) price is set b$ suppl$ and demand.
B) there are ver$ few sellers. C) products have ver$ few similarities. ") firms are relativel$ lar'e. #) the bu$ers and sellers do not now the price structure of the other part$. Answer% A "iff% &$pe% MC Pa'e (ef% 14 *ill% Comprehension ,bective% 1. 13) /hich of the followin' is the most liel$ pricin' approach for a monopol$0 A) Char'e customers whatever $ou please. B) Give customers a real bar'ain on price. C) Char'e a price that will not cause consumer demand to drop. ") Endercut the prices of the competition. #) Give customers a fair price that cannot be matched b$ competitors. Answer% C "iff% &$pe% MC Pa'e (ef% 1: *ill% Comprehension ,bective% 1. 133) ,ntario 8$dro operates in a situation of A) monopolistic competition. B) pure competition. C) oli'opol$. ") fair competition. #) monopol$. Answer% # "iff% &$pe% MC Pa'e (ef% 1: *ill% Comprehension ,bective% 1. 134) &he Gap maes their products appear to be sli'htl$ different from those of their competitors b$ tactics such as brand names. &heir de'ree of competition is A) pure competition. B) oli'opol$. C) monopol$. ") monopolistic competition. #) none of these. Answer% " "iff% 1 &$pe% MC Pa'e (ef% 1 *ill% Comprehension ,bective% 1.
13) 8ow does monopolistic competition differ from perfect competition0 A) &here are more sellers in a maret characteri9ed b$ monopolistic competition. B) t is easier for sellers to enter a maretKindustr$ characteri9ed b$ monopolistic competition. C) n a perfectl$ competitive maret5 it is easier to mae a profit. ") n a maret characteri9ed b$ monopolistic competition5 individual firms have more control over price. #) n monopolistic competition5 small producers have a harder time main' a profit. Answer% " "iff% &$pe% MC Pa'e (ef% 14-1 *ill% Comprehension ,bective% 1. 13:) /hich of the followin' seems the most liel$ pricin' approach for a monopol$0 A) Char'e customers whatever $ou please. B) Give customers a real bar'ain b$ char'in' a low price. C) Char'e a price that will not cause consumer demand to drop. ") Endercut the prices char'ed b$ competitors. #) A'ree with competitors to fix prices so that profit mar'ins can be maintained. Answer% C "iff% &$pe% MC Pa'e (ef% 1: *ill% Comprehension ,bective% 1. 13<) &ide5 Pepsi5 Guess5 and Bod$ *hop are all corporations involved in which t$pe of competition0 A) Pure competition B) ,li'opol$ C) Monopolistic competition ") #!uilibrium #) @one of these Answer% C "iff% &$pe% MC Pa'e (ef% 1 *ill% Comprehension ,bective% 1.
13=) /hat is a natural monopol$0 A) ,ne that occurs without an$ business firm tr$in' to achieve itLthat is5 it ust happens because the business does thin's ri'ht. B) A situation where one compan$ can most efficientl$ suppl$ all the product or service that is needed b$ consumers C) ,ne where 'overnment finds it natural to 'rant monopol$ powers to certain business firms. ") ,ne that occurs when a business firm sets out to achieve a monopol$ and no other firm tries to stop it. #) &here is no such thin' as a natural monopol$. Answer% B "iff% &$pe% MC Pa'e (ef% 1: *ill% Comprehension ,bective% 1. 13) /hat is suppl$ mana'ement0 A) A s$stem that ensures there are no shorta'es in consumer products and service B) A s$stem that ensures companies producin' products lie automobiles do not artificiall$ restrict suppl$ in order to drive up the price of their products C) A s$stem that establishes domestic production !uotas for commodities lie dair$ products5 maple s$rup5 e''s5 chicens5 and ture$s ") A s$stem Answer% C that is desi'ned to create perfect competition in certain industries "iff% &$pe% MC Pa'e (ef% 1: *ill% Comprehension ,bective% 1. 1. Critical &hinin' Questions 1) AB "istributors is a compan$ that serves as a shippin' intermediar$ for other companies. ts sales revenue has increased from the previous $ear. Fonathan5 a sales mana'er at AB5 sa$s5 *ince the compan$ has increased its revenue5 it is now more profitable. /hich of the followin'5 if true5 would most stron'l$ support Fonathan2s contention0 A) AB "istributor "istributor is is aa for-profit relativel$ compan$. new compan$. B) AB C) AB "istributor2s costs have decreased from the previous $ear. ") AB "istributor2s competitors have had increased revenue. #) AB "istributor has hired more emplo$ees recentl$. Answer% C "iff% 3 &$pe% MC *ill% Anal$sis
) AB "istributors is a compan$ that serves as a shippin' intermediar$ for other companies. ts sales revenue has increased from the previous $ear. Fonathan5 a sales mana'er at AB5 sa$s5 *ince the compan$ has increased its revenue5 it is now more profitable. /hich of the followin'5 if true5 would most weaen Fonathan2s contention0 A) AB "istributor2s clients are happ$ with the compan$2s services. B) *hippin' costs for the industr$ have si'nificantl$ increased over the last $ear. C) AB "istributor2s emplo$ees are dissatisfied with the compan$2s worin' conditions. ") &he shippin' intermediar$ industr$ has experienced a slowdown overall. #) Man$ of AB "istributor2s emplo$ees are new to the business. Answer% B "iff% 3 &$pe% MC *ill% Anal$sis 3) AB "istributors is a compan$ that serves as a shippin' intermediar$ for other companies. ts sales revenue has increased from the previous $ear. Fonathan5 a sales mana'er at AB5 sa$s5 *ince the compan$ has increased its revenue5 it is now more profitable. /hich of the followin' points out a flaw in Fonathan2s reasonin'0 A) nformation about the compan$2s expenses is necessar$ to tell whether it is profitable. B) ma$ have emplo$ees lost mone$are therelativel$ previous $ear. C) AB Most"istributor of AB "istributor2s new. ") @ot all of the revenue ma$ contribute toward profits. #) Man$ of AB "istributor2s competitors ma$ not be doin' as well. Answer% A "iff% 3 &$pe% MC *ill% Anal$sis 4) AB "istributors is a compan$ that serves as a shippin' intermediar$ for other companies. ts sales revenue has increased from the previous $ear. Fonathan5 a sales mana'er at AB5 sa$s5 *ince the compan$ has increased its revenue5 it is now more profitable. Another mana'er at AB "istributor5 *hawna5 su''ests that if the compan$2s revenue had not increased5 it would not have been able to increase its profits. /hich of the followin' points out a flaw in *hawna2s reasonin'0 A) ,ther similar companies have increased their profits too. B) (evenue is not alwa$s relevant to fi'urin' profitabilit$. C) Profitabilit$ is not the onl$ obective of the compan$. ") &he compan$ can increase revenue onl$ b$ cuttin' costs. #) t is possible to increase profits b$ lowerin' costs. Answer% # "iff% 3 &$pe% MC *ill% Anal$sis
) Allied ndustries is a manufacturer of basic buildin' materials lie read$ mix concrete5 a''re'ates5 and other construction material. t sells its products primaril$ to three lar'e real estate companies. ,ne of these companies5 Cicada Corporation5 has ased for a hu'e discount for future orders. Allied2s C#, feels that this ma$ be a 'ood move to retain a customer5 but man$ senior mana'ers thin otherwise. Assume that Allied has re!uired Cicada to not handle an$ of Allied2s competitors2 products. /hich of the followin' most stron'l$ su''ests that this arran'ement is le'al0 A) &he pricin' demands of Cicada have forced man$ buildin' suppliers out of business. B) Companies similar to Allied have demonstrated stron' financial performance in recent $ears. C) Cicada often sells 'roups of homes to institutions that then resell them to individual consumers. ") n the past5 Cicada and Allied were part of the same compan$. #) Monopolistic competition is encoura'ed b$ the 'overnment in some cases. Answer% B "iff% 3 &$pe% MC *ill% Anal$sis :) Man$ companies start as niche operations in order to 'et a foothold a'ainst lar'er competitors and then 'row into broader competitors. #nterprise (ent-A-Car be'an b$ buildin' a networ of nei'hborhood rather than competin' with 8ert9 and Avis in airport locations. #nterprise is now a lar'e offices car rental compan$. /hich of the followin' is best supported b$ the statements above0 A) &he best path to lon'-term 'rowth is to avoid confrontation with lar'er competitors for as lon' as possible. B) t is 'enerall$ better to confront one established competitor at a time rather than man$ at once. C) #ven when competin' in a niche5 a compan$ should act in ever$ respect as if it is tar'etin' ever$ maret se'ment. ") &he car rental industr$ is the best example for niche companies to consider when evaluatin' how to 'row into prominence. #) A compan$2s initial 'oals do not place limits on its lon'-term success. Answer% # "iff% &$pe% MC *ill%3 Anal$sis
<) Anon Corporation is a manufacturer of /id'ets. ;aced with increasin' input material costs5 the compan$ is contemplatin' a price increase in the ran'e of 1-7 percent. &here are si'nificant disa'reements amon' senior personnel in the compan$ about this move. /hich of the followin'5 if true5 would stren'then the ar'ument in favor of a price increase0 A) *ubstitutes for /id'ets are available in the maret. B) &he price of materials consumed alon' with /id'ets has 'one up. C) A chan'e in the environment is liel$ to stimulate overall demand for /id'ets. ") Competitors have announced that the$ intend to eep prices at current levels. #) (elaxation of import restrictions would lead to forei'n competitors floodin' the maret. Answer% C "iff% 3 &$pe% MC *ill% Anal$sis =) Anon Corporation is a manufacturer of /id'ets. ;aced with increasin' input material costs5 the compan$ is contemplatin' a price increase in the ran'e of 1-7 percent. &here are si'nificant disa'reements amon' senior personnel in the compan$ about this move. /hich of the followin'5 if true5 would weaen the ar'ument for a price increase0 A) &he input costs of raw materials are expected to increase further in the comin' months. B) Customers are lo$al to the brand mainl$ because the$ believe in the !ualit$ of in'redients used. C) Anon2s competitors have announced an increase in prices. ") ,ne of Anon2s maor competitors has ust declared banruptc$. #) Maret research done b$ the compan$ reveals that demand for /id'ets is readil$ affected b$ the price. Answer% # "iff% 3 &$pe% MC *ill% Anal$sis ) Anon Corporation is a manufacturer of /id'ets. ;aced with increasin' input material costs5 the compan$ is contemplatin' a price increase in the ran'e of 1-7 percent. &here are si'nificant disa'reements amon' senior personnel in the compan$ about this move. Assumin' other factors remain constant5 Anon would have the most power to raise prices if /id'ets were which of the followin'0 A) ?ife-savin' dru's B) Automobiles C) Bevera'es ") &o$s #) Feweller$ Answer% A "iff% 3 &$pe% MC *ill% Anal$sis
17) (etepson5 nc. has been in business for over 7 $ears. (etepson is best nown for its Guide to Colle'es line of boos desi'ned for hi'h school students seein' admission to under'raduate pro'rams. Basic information about a pro'ram is included in the boos at no char'e to the colle'es5 but colle'es ma$ purchase additional advertisin' space. &raditionall$5 (etepson has made mone$ b$ sellin' advertisin' in its boos and b$ char'in' students for the boos themselves. (ecentl$5 however5 profits are down5 and the compan$ is considerin' whether new developments in information technolo'$ will mae its current business model obsolete. /hich of the followin' !uestions is most relevant to (etepson2s decisions with respect to the viabilit$ of its business model0 A) "oes (etepson currentl$ have hi'h maret share or low maret share in the industries in which it competes0 B) 8as (etepson been profitable throu'hout its histor$0 C) /ould the profit mar'ins of an$ new businesses be hi'her or lower than current profit mar'ins0 ") &o what extent will colle'e students be liel$ to choose boos to 'et information about colle'es0 #) Are people who bou'ht (etepson boos in the past liel$ to bu$ new editions of those boos after the$ leave colle'e0 Answer% " "iff% 3 &$pe% MC *ill% Anal$sis 11) A new watch manufacturer would lie to determine the maret price of a new line of watches. 8ow could the manufacturer most effectivel$ determine the maret price0 A) Place several of the new watches on sale at a watch store and see which sells most !uicl$ B) Arran'e to sell the watches in a number of diverse auctions C) *et the price of one watch hi'her than another and see which sells the most !uicl$ ") *urve$ potential customers and retailers on what the$ thin the price should be #) Canvass executives from competin' companies about what the$ thin the price should be Answer% B "iff% 3 &$pe% MC *ill% Anal$sis 1) A new feature on the latest Acme smart phone has made it wildl$ popular. /hich action should Acme tae to maximi9e profits0 A) ncrease the suppl$ of the smart phone B) "ecrease the suppl$ of the smart phone C) (educe the price of the smart phone ") Maintain the current suppl$ until demand falls #) Create a shorta'e of the smart phone Answer% A "iff% 3 &$pe% MC *ill% Anal$sis
13) /hich of the followin' is not a liel$ reason wh$ a small business in a free enterprise s$stem should see the ideal combination of price char'ed and !uantit$ supplied0 A) &o maintain 'oodwill amon' customers B) &o maximi9e profits C) &o avoid surpluses and shorta'es ") &o avoid 'overnment re'ulation #) &o discoura'e competition Answer% " "iff% 3 &$pe% MC *ill% Anal$sis 1.3 &rueK;alse Questions 1) Business principles are helpful to non-profit or'ani9ations as the$ tr$ to achieve their service 'oals. Answer% &(E# "iff% &$pe% &; Pa'e (ef% *ill% Comprehension ,bective% 1.1 ) A business is an or'ani9ation that sees to earn profits b$ providin' 'oods and services to customers. Answer% &(E# "iff% 1 &$pe% &; Pa'e (ef% *ill% +nowled'e ,bective% 1.1 3) A 711 stud$ b$ Forbes ma'a9ine raned Canada as the world2s top countr$ in which to do business out of 134 countries. Answer% &(E# "iff% 1 &$pe% &; Pa'e (ef% *ill% +nowled'e ,bective% 1.1 4) Man$ or'ani9ations in Canada do not even tr$ to mae a profit. Answer% &(E# "iff% 1 &$pe% &; Pa'e (ef% *ill% +nowled'e ,bective% 1.1 ) Profit is computed b$ subtractin' depreciation expenses and income taxes from total business revenue. Answer% ;A?*# "iff% 1 &$pe% &; Pa'e (ef% *ill% +nowled'e ,bective% 1.1
:) &he term business t$picall$ includes lar'e or'ani9ations5 such as General Motors)5 which
see a profit5 but does not include individuals who are self-emplo$ed5 e.'.5 a carpenter5 or a beautician who operates a shop in her home. Answer% ;A?*# "iff% &$pe% &; Pa'e (ef% 4 *ill% Comprehension ,bective% 1.1 <) A business is an or'ani9ation that sees to earn profits b$ providin' one or more of the factors of production to consumers. Answer% ;A?*# "iff% &$pe% &; Pa'e (ef% 4 *ill% +nowled'e ,bective% 1.1 =) An economic s$stem allocates a nation2s resources amon' its citi9ens. Answer% &(E# "iff% &$pe% &; Pa'e (ef% *ill% +nowled'e ,bective% 1. ) A command econom$ relies on a centrali9ed 'overnment to control all or most of the factors of production and to mae all or most production and allocation decisions. Answer% &(E# "iff% &$pe% &; Pa'e (ef% *ill% +nowled'e ,bective% 1. 17) &here are several different economic s$stems5 but the$ all allocate resources in fundamentall$ the same wa$. Answer% ;A?*# "iff% &$pe% &; Pa'e (ef% *ill% Comprehension ,bective% 1. 11) nformation resources are not needed b$ those businesses that produce onl$ ph$sical 'oods. Answer% ;A?*# "iff% &$pe% &; Pa'e (ef% *ill% Comprehension ,bective% 1. 1) Capital is needed onl$ at the start-up phase of a business. Answer% ;A?*# "iff% &$pe% &; Pa'e (ef% *ill% Comprehension ,bective% 1.
13) &he natural resources component of the factors of production includes the ph$sical and mental capabilities of people in the wor force.
Answer% ;A?*# "iff% 1 &$pe% &; Pa'e (ef% *ill% Comprehension ,bective% 1. 14) f two people exchan'e apples5 the$ still each have onl$ one apple5 but if two people exchan'e ideas5 each person now has two ideas instead of one. &his example is consistent with the ar'ument that information as a factor of production is conceptuall$ different than land5 labour5 and capital as factors of production. Answer% &(E# "iff% 1 &$pe% &; Pa'e (ef% *ill% Anal$sis ,bective% 1. 1) n the input maret5 firms suppl$ 'oods and services in response to demand on the part of households. Answer% ;A?*# "iff% 1 &$pe% &; Pa'e (ef% < *ill% +nowled'e ,bective% 1. 1:) Communism and socialism are both t$pes of command economies. Answer% &(E# "iff% 1 &$pe% &; Pa'e (ef% < *ill% Comprehension ,bective% 1. 1<) /orers in socialist countries are usuall$ allowed to choose their occupations5 but a lar'e proportion 'enerall$ wor for the 'overnment. Answer% &(E# "iff% &$pe% &; Pa'e (ef% < *ill% +nowled'e ,bective% 1. 1=) Capitalism relies on demand and suppl$ in the maretplace to determine what5 when5 and for whom to produce. Answer% &(E# "iff% &$pe% &; Pa'e (ef% = *ill% +nowled'e ,bective% 1.
1) &here are more command economies in the world now than there were 37 $ears a'o. Answer% ;A?*# "iff% &$pe% &; Pa'e (ef% < *ill% +nowled'e ,bective% 1. 7) A Globe*can poll of 7 777 people in 7 different countries showed that the hi'hest support for capitalism was in the Enited *tates and the lowest level of support was in Cuba. Answer% ;A?*# "iff% &$pe% &; Pa'e (ef% < *ill% +nowled'e ,bective% 1. 1) China2s constitution has been amended to le'itimate private enterprise. Answer% &(E# "iff% &$pe% &; Pa'e (ef% < *ill% +nowled'e ,bective% 1. ) &he most important role of 'overnment is that of re'ulator. Answer% ;A?*# "iff% &$pe% &; Pa'e (ef% -11 *ill% Comprehension ,bective% 1. 3) &he reasons wh$ the 'overnment re'ulates man$ aspects of business activit$ include protectin' competition5 protectin' consumers5 achievin' social 'oals5 and protectin' the environment. Answer% &(E# "iff% 1 &$pe% &; Pa'e (ef% -17 *ill% Comprehension ,bective% 1.3 4) &otal Canadian Answer% ;A?*# 'overnment expenditures in 713 were about 677 billion. "iff% 1 &$pe% &; Pa'e (ef% *ill% +nowled'e ,bective% 1.3 ) (evenue taxes are levied to control certain activities that le'islative bodies believe should be controlled. Answer% ;A?*# "iff% 1 &$pe% &; Pa'e (ef% 11 *ill% +nowled'e ,bective% 1.3
:) f the Canadian Auto /orers DCA/) want to brin' their interests to 'overnment officials5 the$ can hire a lobb$ist. Answer% &(E# "iff% 1 &$pe% &; Pa'e (ef% 11-1 *ill% Comprehension ,bective% 1.3 <) &he Competition Act prohibits resale price maintenance5 which occurs when companies refuse to sell their products to discount stores. Answer% ;A?*# "iff% &$pe% &; Pa'e (ef% -17 *ill% Comprehension ,bective% 1.3 =) &here is 'eneral a'reement that the bailout of Canadian automaers in 77 was a 'ood decision. Answer% ;A?*# "iff% &$pe% &; Pa'e (ef% 17 *ill% Comprehension ,bective% 1.3 ) A demand and suppl$ schedule is derived from maret research and other s$stematic studies of the maret. Answer% &(E# "iff% 3 &$pe% &; Pa'e (ef% 1 *ill% +nowled'e ,bective% 1.4 37) &he law of demand states that bu$ers will purchase more of a product as its price drops. Answer% &(E# "iff% 1 &$pe% &; Pa'e (ef% 1 *ill% +nowled'e ,bective% 1.4 31) n economic terms5 a maret refers to a specific place De.'.5 a supermaret). Answer% ;A?*# "iff% &$pe% &; Pa'e (ef% 1 *ill% +nowled'e ,bective% 1.4 3) f the maret for diamonds is at e!uilibrium and "e Beers increased its prices5 people would still demand the same !uantit$ of diamonds. Answer% ;A?*# "iff% &$pe% &; Pa'e (ef% 13 *ill% Application ,bective% 1.4
33) A demand curve shows the amount of 'oods and services a producer will create at different
prices. Answer% ;A?*# "iff% &$pe% &; *ill% +nowled'e ,bective% 1.4
Pa'e (ef% 13
34) &he point on a demand and suppl$ schedule where suppl$ and demand are e!ual is nown as the brea-even point. Answer% ;A?*# "iff% &$pe% &; Pa'e (ef% 13 *ill% +nowled'e ,bective% 1.4 3) A surplus in the maret is 'ood news for the firm sellin' a product or service because there are additional customers still tr$in' to purchase the product. Answer% ;A?*# "iff% &$pe% &; Pa'e (ef% 14 *ill% Comprehension ,bective% 1.4 3:) &he e!uilibrium the !uantit$ supplied.price is the profit-maximi9in' point at which the !uantit$ demanded e!uals Answer% &(E# "iff% 1 &$pe% &; Pa'e (ef% 13 *ill% +nowled'e ,bective% 1.4 3<) &he private enterprise s$stem 'uarantees a profit for each business firm5 as lon' as it does not brea the law. Answer% ;A?*# "iff% &$pe% &; Pa'e (ef% 14 *ill% Comprehension ,bective% 1. 3=) &he concept of freedom of choice applies onl$ to bu$ers of 'oods and services5 not to sellers. Answer% ;A?*# "iff% &$pe% &; Pa'e (ef% 14 *ill% Comprehension ,bective% 1. 3) /hat a compan$ chooses to produce will be affected b$ the profits it hopes to mae. Answer% &(E# "iff% &$pe% &; Pa'e (ef% 14 *ill% Comprehension ,bective% 1.
47) &he private enterprise s$stem 'uarantees that competition amon' business firms will be fair. Answer% ;A?*#
"iff% &$pe% &; Pa'e (ef% 14 *ill% Comprehension ,bective% 1. 41) n monopolistic competition5 sellers tr$ to mae their products appear at least sli'htl$ different from those of other competitors b$ tactics such as brand names5 desi'n5 st$lin'5 and advertisin'. Answer% &(E# "iff% &$pe% &; Pa'e (ef% 1 *ill% Comprehension ,bective% 1. 4) As a 'eneral rue5 in perfect competition De.'.5 in farmin') there will be ver$ few sellers. Answer% ;A?*# "iff% &$pe% &; Pa'e (ef% 14 *ill% Comprehension ,bective% 1. 43) &he privati9ation of postal services in several countries is consistent with the ar'ument that there is no such thin' as a natural monopol$. Answer% &(E# "iff% &$pe% &; Pa'e (ef% 1: *ill% Comprehension ,bective% 1. 44) &he maret for clothin' is best characteri9ed as monopolistic competition. Answer% &(E# "iff% &$pe% &; Pa'e (ef% 1 *ill% +nowled'e ,bective% 1. 4) Monopolisticall$ competitive businesses ma$ be lar'e or small and ma$ enter or exit the maret easil$. Answer% "iff% &(E# &$pe% &; *ill% +nowled'e ,bective% 1.
Pa'e (ef% 1
4:) Coe and Pepsi represent oli'opolistic competition. Answer% &(E# "iff% &$pe% &; Pa'e (ef% 1 *ill% Comprehension ,bective% 1.
4<) A differentiatin' strate'$ used in monopolistic competition is to use brand names such as &ide and Cheer. Answer% &(E# "iff% &$pe% &; Pa'e (ef% 1 *ill% Comprehension ,bective% 1. 4=) Private enterprise re!uires the presence of four elements% D1) private propert$ ri'hts5 D) freedom of choice5 D3) competition5 and D4) no 'overnment control. Answer% ;A?*# "iff% 3 &$pe% &; Pa'e (ef% 14 *ill% +nowled'e ,bective% 1. 4) Gasoline stations are an example of a t$pe of business involved in perfect competition. Answer% &(E# "iff% &$pe% &; Pa'e (ef% 14 *ill% Comprehension ,bective% 1. 7) An oli'opol$ exists when firms in an industr$ are so small and numerous that no one is powerful enou'h to dominate the maret. Answer% ;A?*# "iff% 1 &$pe% &; Pa'e (ef% 1 *ill% +nowled'e ,bective% 1. 1) n the suppl$ mana'ement s$stem5 producers are allowed to produce more than their allowed !uota if prices drop below a certain specified level. Answer% ;A?*# "iff% 1 &$pe% &; Pa'e (ef% 1: *ill% +nowled'e ,bective% 1. 1.4 *hort Answer Questions 1) /hat is a business0 Answer% A business is an or'ani9ation that provides 'oods or services that are sold to earn profits. "iff% 1 &$pe% *A Pa'e (ef% 4 *ill% Comprehension ,bective% 1.1
) /hat are profits and wh$ are the$ important in Canada2s economic s$stem0 Answer% Profits revenues minus expenses - &he$ are rewards for tain' riss - &he$ are used to support 'overnment and charities5 and to pa$ wa'es - &he$ are needed to continue the financin' of 'oods and services production "iff% &$pe% *A Pa'e (ef% *ill% Comprehension ,bective% 1.1 3) /hat are the five factors of production0 Answer% &he factors of production are labour5 capital5 entrepreneurs5 ph$sical resources5 and information resources. "iff% 1 &$pe% *A Pa'e (ef% *ill% +nowled'e ,bective% 1. 4) /hat is an entrepreneur0 Answer% - An individual who or'ani9es and mana'es labour5 capital5 and natural resources to produce 'oods and services to earn a profit5 but who also runs the ris of failure - Business person - Mana'er - nitiator - ?eader - (is taer "iff% &$pe% *A Pa'e (ef% *ill% Comprehension ,bective% 1. ) #xplain the terms5 command econom$ and maret econom$. Give an illustration of each. Answer% - Command% 'overnment dominated5 'overnment controls the factors of production5 people often wor for the 'overnment5 share the wealth e!uall$5 one class societ$5 example - Cuba - Market% the people have a sa$ in what the 'overnment does5 individuals control factors of production5 independent wealth5 richKmiddle classKpoor5 example - Canada "iff% &$pe% *A Pa'e (ef% < *ill% Comprehension ,bective% 1. :) /hat is the fundamental difference between a command econom$ and a maret econom$0 Answer% A command econom$ relies on a centrali9ed 'overnment to control all or most factors of production and to mae all or most production and allocation decision. n a maret econom$5 individuals control production and allocation decisions throu'h suppl$ and demand. "iff% 1 &$pe% *A Pa'e (ef% < *ill% Comprehension ,bective% 1.
<) /hat is a mixed maret econom$0
Answer% A mixed maret econom$ is one that has features of both command and maret economies. *ince ver$ few economies are purel$ command or maret economies5 most countries of the world technicall$ have a mixed maret econom$. But China2s mixed maret econom$ is !uite different than Canada2s. "iff% 1 &$pe% *A Pa'e (ef% = *ill% Comprehension ,bective% 1. =) /hat is the difference between dere'ulation and privati9ation0 Answer% "ere'ulation means a reduction in the number of laws affectin' business activit$ and in the powers of 'overnment enforcement a'encies. Privati9ation means convertin' 'overnment enterprises into private sector companies. n the 17s5 there was a definite trend toward dere'ulation and privati9ation5 but the maor economic problems that man$ countries have been facin' in recent $ears5 particularl$ in their financial sectors5 has meant the re-imposition of stricter 'overnment controls in some areas of the econom$. "iff% &$pe% *A Pa'e (ef% = *ill% Comprehension ,bective% 1. ) ?ist one maor benefit and one maor drawbac of each t$pe of economic s$stem. Answer% A maret econom$ is efficient and provides wealth for man$ people in the societ$5 but there ma$ be a si'nificant disparit$ between the rich and poor. A command econom$ is less efficient5 but there is t$picall$ less disparit$ between rich and poor. "iff% &$pe% *A Pa'e (ef% <-= *ill% Comprehension ,bective% 1. 17) &here are three maor t$pes of economic s$stems in existence. dentif$ and briefl$ describe them. Answer% - Command economies% a t$pe in which the 'overnment controls all or most factors of production and maes all or most production decisions - Market economies% a t$pe in which individuals control all or most factors of production and mae all or most production decisions - Mixed economies% a t$pe with elements of both a command econom$ and a maret econom$ "iff% &$pe% *A Pa'e (ef% <- *ill% Comprehension ,bective% 1.
11) /hat is socialism0 Answer% *ocialism is a less extensive command s$stem in which the 'overnment owns and operates selected maor industries. &he 'overnment ma$ control banin'5 transportation5 or manufacturin' industries5 for example. *maller businesses5 such as clothin' stores and restaurants5 are privatel$ owned. "iff% 1 &$pe% *A Pa'e (ef% = *ill% Comprehension ,bective% 1. 1) 8ow does 'overnment compete with business in Canada0 Answer% Government competes with business throu'h the activities of Crown corporations lie 8$dro Quebec5 Manitoba 8$dro5 the ?i!uor Control Board of ,ntario5 and Canada Post. Crown corporations exist at both the federal and provincial levels. Man$ people ar'ue that business firms could provide these 'oods and services more efficientl$ than the 'overnment can. "iff% 1 &$pe% *A Pa'e (ef% *ill% Comprehension ,bective% 1.3 13) /hat four areas are the focus of the 'overnment2s role as a re'ulator0 Answer% &he four areas are promotin' competition De.'.5 ensurin' that health$ competition exists amon' business competitors)5 protectin' consumers De.'.5 le'islation re'ardin' ha9ardous products)5 achievin' social 'oals De.'.5 universal access to health care)5 and protectin' the environment De.'.5 passin' air pollution le'islation). "iff% 1 &$pe% *A Pa'e (ef% -11 *ill% Comprehension ,bective% 1.3 14) 8ow does 'overnment influence business0 8ow does business influence 'overnment0 Answer% Government influences business throu'h each of the roles that 'overnment pla$s in our societ$. ;or example5 as a customer5 'overnment purchases influence the amount of demand that exists for the products and services that business produces. Business influences 'overnment in a variet$ of wa$s5 includin' the use of lobb$ists5 who tr$ to influence the t$pe le'islation that 'overnment is considerin' that mi'ht affect how businesses operate. "iff% 1 &$pe% *A Pa'e (ef% -1 *ill% Comprehension ,bective% 1.3 1) /hat is the law of demand0 /hat is the law of suppl$0 Answer% &he law of demand states that bu$ers will purchase more of a product as its price drops and less of a product as its price increases. &he law of suppl$ states that sellers will offer more of a product for sale as its price increases. "iff% 1 &$pe% *A Pa'e (ef% 1 *ill% +nowled'e ,bective% 1.4
1:) #xplain what happens when the demand curve intersects with the suppl$ curve. Answer% At this intersection5 we have the e!uilibrium or maret price. At this price5 there will be neither a shorta'e nor surplus. ,ver time5 marets tend to price products at the e!uilibrium price. "iff% &$pe% *A Pa'e (ef% 13 *ill% Comprehension ,bective% 1.4 1<) #xpert #lectronics sells state-of-the-art destop computer s$stems. &he compan$ is able to fill all orders5 but it has no waitin' list. 8ow is #xpert #lectronics apparentl$ pricin' its computer s$stems0 Answer% t appears that #xpert #lectronics is pricin' its computers at the e!uilibrium price5 i.e.5 at the intersection of the demand and suppl$ curves. At the e!uilibrium price5 the !uantit$ of 'oods demanded and the !uantit$ of 'oods supplied is e!ual. "iff% &$pe% *A Pa'e (ef% 13 *ill% Comprehension ,bective% 1.4 1=) /hat does the suppl$ curve show0 Answer% &he suppl$ curve shows how much of a product will be supplied at different prices. "iff% &$pe% *A Pa'e (ef% 13 *ill% Comprehension ,bective% 1.4 1) /hat does the demand curve show0 Answer% &he demand curve shows how man$ products will be demanded at different prices. "iff% &$pe% *A Pa'e (ef% 13 *ill% Comprehension ,bective% 1.4 7) /hat happens when a compan$ underestimates demand0 Answer% - &oo few products are produced - Potential profits lost - Enhapp$ customers cannot bu$ what the$ want - +nowled'e of the shorta'e attracts more competition "iff% &$pe% *A Pa'e (ef% 14 *ill% Comprehension ,bective% 1.4 1) n a countr$ operatin' under a capitalistic5 maret-based econom$5 what four elements must be present in the economic s$stem to mae it wor0 Answer% &he re!uired elements are private propert$ ri'hts5 freedom of choice5 profits5 and competition. "iff% &$pe% *A Pa'e (ef% 14 *ill% Comprehension ,bective% 1.
) ?ist the four de'rees of competition that can exist in a private enterprise s$stem.
Answer% Perfect competition5 monopolistic competition5 oli'opol$5 and monopol$ "iff% &$pe% *A Pa'e (ef% 14-1: *ill% +nowled'e ,bective% 1. 3) "escribe monopolistic competition. Answer% n a maret characteri9ed b$ monopolistic competition5 there are fewer sellers than in perfect competition. will attempt differentiate their product from Monopolisticall$ those of their competitors. Product*ellers differentiation 'ivestosellers some control over prices. competitive businesses can be lar'e or small and can enter and exit the maret easil$. "iff% &$pe% *A Pa'e (ef% 1 *ill% Comprehension ,bective% 1. 4) 8ow does Canada2s suppl$ mana'ement s$stem wor0 Answer% n Canada2s suppl$ mana'ement s$stem5 production !uotas are established for commodities lie dair$ products5 maple s$rup5 e''s5 chicens5 and ture$s. Producers of these commodities are not allowed to produce more than the !uota the$ have been 'ranted. &o discoura'e forei'n competitors from enterin' the maret5 hi'h tariffs are char'ed on imports of these commodities. "iff% &$pe% *A Pa'e (ef% 1: *ill%Comprehension ,bective% 1. 1. #ssa$ Questions 1) #xplain the role of both profit-seein' businesses and non-profit or'ani9ations in the overall meanin' of business. Answer% Businesses are or'ani9ations that provide 'oods and services that are then sold to earn profits. ndeed5 the prospect of earnin' profitsNthe difference between a business2s revenue and its expensesNis what encoura'es people to open and expand businesses. After all5 profits are the reward owners 'et for risin' their mone$ and time. &he ri'ht to pursue profits distin'uishes a business from non-profit or'ani9ations5 such as universities5 hospitals5 and 'overnment a'encies5 that run in much the reward same wa$ but that 'enerall$ do not see profits. /hereas profits ma$ be considered the final in profit-seein' businesses5 the final reward for non-profit or'ani9ations mi'ht be5 for example5 operational efficienc$. "iff% 3 &$pe% #* Pa'e (ef% 4- *ill% Comprehension ,bective% 1.1
) /hat are the factors of production0 #xplain each one. Answer% - Natural resources% items used in the production of 'oods and services in their natural state5 includin' land5 water5 minerals5 and trees - Labour% the mental and ph$sical trainin' and talents of people sometimes called human resources - Capital% the funds needed to operate an enterprise - Entrepreneur% an individual who or'ani9es and mana'es natural resources5 labour5 and capital to produce 'oods and services to earn a profit5 but who also runs the ris of failure - @ewer perspectives tend to broaden the idea of natural resources to include all ph$sical resources - /hile the production of tan'ible 'oods once dominated most economic s$stems5 toda$ information resources pla$ a maor role "iff% &$pe% #* Pa'e (ef% *ill% Comprehension ,bective% 1. 3) Consider the followin' statement% A nation2s economic s$stem is its s$stem for allocatin' its resources amon' its citi9ens5 both individuals and or'ani9ations. /hat are a nation2s resources5 and what important role do the$ pla$ in a nation2s economic s$stem0 Answer% A nation2s resources5 often referred to as the factors of production5 include four traditional factors% labour5 capital5 entrepreneurs5 and ph$sical resources. (ecentl$5 information resources have been added to the list. An economic s$stem is defined b$ how it mana'es and allocates these factors of production. n a planned econom$5 for example5 the factors of production are 'overnment-owned and controlled. n a maret econom$5 such as that of Canada5 individual producers and consumers control production and allocation b$ creatin' combinations of suppl$ and demand. n a mixed-maret econom$ lie Canada2s5 which features characteristics of both a planned and a maret econom$5 there is some 'overnment control of some factors of productionNoften throu'h the nation2s maor industries5 such as transportation5 communication5 and informationNalon'side some private ownership. "iff% 3 &$pe% #* Pa'e (ef% *ill% Comprehension ,bective% 1. 4) /hat is the difference between capitalism and socialism0 Answer% - Capitalism% an economic s$stem in which marets decide what5 when5 and for whom to produce - Capitalist maret econom$% citi9ens run businesses5 more efficient5 choose $our own ob - *ocialism% a ind of command econom$ in which the 'overnment owns and operates the main industries5 while individuals own and operate less crucial industries. t is less efficient5 and a lar'e proportion of people end up worin' for 'overnment "iff% &$pe% #* Pa'e (ef% < *ill% Comprehension ,bective% 1.
) /hat is socialism0 Answer% *ocialism is a partiall$ planned s$stem in which the 'overnment owns and operates selected maor industries. n such mixed maret economies5 the 'overnment ma$ control5 for example5 banin'5 transportation5 or manufacturin' industries. *maller businesses5 such as clothin' stores and restaurants5 are privatel$ owned. "iff% 1 &$pe% #* Pa'e (ef% < *ill% Comprehension ,bective% 1. :) All the different economic s$stems of the world are movin' toward a mixed econom$ with elements of a planned econom$ and a maret econom$. A'ree or disa'ree and support $our position. Answer% *ince communist countries are adoptin' at least some dere'ulation and privati9ation5 and capitalist countries re'ulate private enterprise5 it can be ar'ued that all countries are movin' toward a mixed maret econom$. But there are still maor differences between the economies of the various countries of the world. n Cuba and @orth +orea5 for example5 citi9ens have far less economic freedom than Canadian citi9ens. "iff% &$pe% #* Pa'e (ef% <- *ill% Comprehension ,bective% 1. <) 8ow does a planned econom$ differ from a maret econom$0 Answer% A planned econom$ relies on a centrali9ed 'overnment to control all or most factors of production and to mae all or most production and allocation decisions. n a maret econom$5 individuals control production and allocation decisions throu'h suppl$ and demand. Planned economies are s$stems in which the 'overnment owns and operates all or most factors of production. Maret economies rel$ on capitalism and free enterprise to create an environment in which producers and consumers are free to bu$ and sell what the$ choose. "iff% &$pe% #* Pa'e (ef% -< *ill% Comprehension ,bective% 1.
=) "iscuss the 'overnment2s role as% Da) a competitor5 Db) a re'ulator5 Dc) a taxation a'ent5 and Dd) a provider of incentive pro'rams. Answer% - Competitor% the 'overnment competes with business throu'h Crown corporations Dener'$5 (o$al Canadian Mint5 *t. ?awrence *eawa$ Authorit$). - Regulator% federal and provincial 'overnments in Canada still re'ulate man$ aspects of business activit$. Government re'ulates business throu'h man$ administrative boards5 tribunals5 or commissions DC(&C5 C&C5 Canadian /heat Board). - Taxation agent% taxes are imposed to fund 'overnment services and pro'rams and to re'ulate and control certain activities. &here are revenue taxes and restrictive taxes. - Proider of incentie programs% throu'h pro'rams lie the ndustrial (e'ional "evelopment Pro'ram5 federal assistance is delivered to industries5 particularl$ those in disadvanta'ed re'ions. ,ther pro'rams include tax and dut$ rebates. "iff% &$pe% #* Pa'e (ef% -11 *ill% Comprehension ,bective% 1.3 ) 8ow does the 'overnment ustif$ re'ulation of business activities0 As an owner or mana'er5 do $ou believe re'ulation of business is ustified0 As a consumer0 Answer% Government ustifies the re'ulation of business activities on the 'rounds that consumers be protected unreasonable b$ business firms De.'.5 anticompetitivemust actions which arefrom desi'ned to benefitbehaviour the business at the expense of consumers). Government wants to encoura'e and protect competition b$ seein' to eliminate restrictive trade practices. *ome business owners dislie 'overnment re'ulation because it prevents them from en'a'in' in certain activities De.'.5 price-fixin')5 but 'enerall$ speain'5 business owners reco'ni9e that 'overnment re'ulations are desi'ned to create a fair and honest business world that has the best interests of ever$one as its 'oal. But there is much debate about whether 'overnment re'ulation actuall$ achieves that 'oal. ;or their part5 consumers believe that business must be re'ulated so that consumers are protected from selfish or ill-advised activit$ b$ business firms. "iff% &$pe% #* Pa'e (ef% -11 *ill% Anal$sis ,bective% 1.3 17) #xplain the roles of demand and suppl$ in a maret econom$. Answer% ,n all economic levels of a maret econom$5 decisions about what to bu$ and what to sell are determined primaril$ b$ the forces of demand and suppl$. "emand is the willin'ness and abilit$ of bu$ers to purchase a product suppl$ is the willin'ness and abilit$ of producers to offer a 'ood or service for sale. &he law of demand states that bu$ers will purchase more of a product as its price drops and less as its price increases. &he law of suppl$ states that producers will offer more of a product for sale as its price rises and less as its price drops. "iff% &$pe% #* Pa'e (ef% 1-13 *ill% Comprehension ,bective% 1.4
11) #xplain what happens when the demand curve intersects with the suppl$ curve. Answer% &he intersection mars the e!uilibrium5 or maret price. At this price5 there will be neither a shorta'e nor surplus. ,ver time5 marets tend to price products at the e!uilibrium price. At the intersection of the demand and suppl$ curve5 we have the e!uilibrium5 or maret price. At this price5 there will be neither a shorta'e nor surplus. ,ver time5 marets tend to price products at the e!uilibrium. "iff% &$pe% #* Pa'e (ef% 13 *ill% Comprehension ,bective% 1.4 1) naccuracies in forecastin' an exact suppl$-demand schedule create surpluses and shorta'es. "escribe what surpluses and shorta'es are usin' the concepts of suppl$ and demand and indicate the probable impact of each upon price. Answer% *urpluses occur when the !uantit$ supplied exceeds the !uantit$ demanded5 prices will decrease. *horta'es occur when the !uantit$ demanded exceeds the !uantit$ supplied5 prices will increase. "iff% &$pe% #* Pa'e (ef% 14 *ill% Comprehension ,bective% 1.4 13) #xplain role of private enterprise in a maret econom$. nclude an explanation of the elements thatthe comprise free enterprise. Answer% Maret economies rel$ on a private enterprise s$stem5 one that allows individuals to pursue their own interests with minimal 'overnment restriction. Private enterprise re!uires four elements% private propert$ ri'hts5 freedom of choice5 profits5 and competition. Private propert$ ri'hts allow the ownership of resources used to create wealth to be in the hands of individuals. ;reedom of choice allows a number of freedoms in the maret5 includin' the freedom for a worer to sell his or her labour to an$ emplo$er he or she chooses5 the freedom to choose which products and brands to bu$5 and the freedom for producers to choose whom the$ hire and what the$ will produce. Profits are the incentives for entrepreneurs to assume the riss of business ownership. Competition occurs when businesses vie for the same resources and customers competition is a driver of 'oods and services !ualit$ and price levels. All four of these elements are welcomed in a maret econom$. "iff% &$pe% #* Pa'e (ef% 14 *ill%Comprehension ,bective% 1.
14) Iermont Computers is a manufacturer of computers on the lar'e5 but isolated5 island nation of @ew Iermont. Althou'h imports are extremel$ limited5 but there are a handful of computer manufacturers in addition to Iermont Computers. /hile the 'overnment provides some services5 such as public education and a well-maintained road s$stem5 almost all businesses are privatel$ owned. 8ome ownership is unusuall$ hi'h5 with =7 percent of all families ownin' their own home. Iermont Computers is sellin' a state-of-the-art destop computer s$stem for 15 veros Dthe local currenc$). At this price5 the compan$ is able to fill all orders5 but the$ have no waitin' list. /hat t$pe of economic s$stem exists in @ew Iermont0 *upport $our conclusions. Answer% t appears that @ew Iermont operates under a maret-based5 capitalist econom$. n a maret econom$5 there is private ownership of the factors of production. Almost all businesses are privatel$ owned and people are able to own their own homes. &he political basis for a maret econom$ is capitalism5 which sanctions the private ownership of the factors of production and encoura'es entrepreneurship b$ offerin' profits as an incentive. "iff% &$pe% #* Pa'e (ef% 14-1 *ill% Comprehension ,bective% 1. 1) #xplain the effects of monopolies on consumers and the econom$. Answer% f a compan$ has a monopol$5 it can harm consumers b$ raisin' prices5 cuttin' output5 or stiflin' innovation. ;urthermore5 because most monopolies have total control over certain products and prices and the maret share for those products5 competitors are liel$ to find it extremel$ difficult to enter marets where monopolies exist. Conse!uentl$5 a number of laws and re'ulations have been established to prohibit individual companies or 'roups of companies from 'ainin' control of marets in wa$s that restrain competition or harm consumers. "iff% 3 &$pe% #* Pa'e (ef% 1: *ill% Comprehension ,bective% 1. 1:) #xpert #lectronics sells state-of-the-art destop computer s$stems. t competes with several other lar'e computer manufacturers. 8ow would $ou characteri9e the level of competition for computers0 8ow are prices set in this t$pe of competitive environment0 f #xpert #lectronics cuts the prices for its computer s$stems5 how will competitors liel$ respond0 Answer% Because there are onl$ a few sellers5 this is a situation of oli'opol$. n an oli'opol$5 the prices products are usuall$ n an oli'opol$5 when firm prices of or comparable offers incentives to increase sales5ver$ the similar. others usuall$ protect sales b$one doin' thecuts same. "iff% &$pe% #* Pa'e (ef% 14-1: *ill% Comprehension ,bective% 1.
1<) "iscuss the reasons wh$ the Canadian 'overnment permits certain natural monopolies while forbiddin' attempts b$ private sector business firms to develop a monopol$. Are natural monopolies a 'ood thin'5 or should all monopolies be banned0 Answer% *o-called natural monopolies are industries in which one or'ani9ation can most efficientl$ suppl$ all the product or service needed b$ consumers De.'.5 provincial electric utilities). t is ar'ued that natural economies eliminate unnecessar$ duplication5 costs5 and waste. Competition is the reason wh$ business wors so well in capitalistic societ$5 and monopolies5 b$ definition5 mean that there is no competition. /hen a monopol$ exists5 companies run less efficientl$5 product or service !ualit$ suffers5 and societ$ does not benefit. *ome people ar'ue that there is no such thin' as a natural monopol$5 and that 'overnment-sanctioned monopolies lie Canada Post can be replaced with private sector or'ani9ations that will do the ob better. &he$ point to privati9ation trends as proof of their ar'ument. *upporters of 'overnment monopolies ar'ue that if the$ are privati9ed5 Canadians in various parts of the countr$ will lose access to various services that are now provided b$ monopolies. "iff% &$pe% #* Pa'e (ef% 1: *ill% Comprehension ,bective% 1. 1=) "escribe perfect competition in terms of the number of competitors5 ease of entr$ into the maret5 similarit$ of 'oodsKservices offered b$ competin' firms5 and level of control over price b$ individual firms. Give an example of a purel$ competitive maret or industr$. Answer% ;or perfect competition to exist5 all of the firms in an industr$ must be small and the number of the firms in the industr$ must be lar'e. Ender these conditions5 no sin'le firm is powerful enou'h to influence the price of its product. &he products of each firm are so similar that bu$ers will perceive them as identical to those of other firms. Because each firm is small5 it is eas$ for firms to enter or leave the maret. E.*. a'riculture is a 'ood example of perfect competition. "iff% 3 &$pe% #* Pa'e (ef% 14 *ill% Comprehension ,bective% 1. 1) "escribe monopolistic competition in terms of the number of competitors5 ease of entr$ into the maret5 similarit$ of 'oodsKservices offered b$ competin' firms5 and level of control over price b$ individual firms. Give an example of a maret or industr$ characteri9ed b$ monopolistic competition. Answer% n a maret characteri9ed b$ monopolistic competition5 there are fewer sellers than in perfect competition. *ellers will attempt to differentiate their product from those of their competitors. Product differentiation 'ives sellers some control over prices. /hile monopolisticall$ competitive businesses can be lar'e or small5 the$ can enter and exit the maret easil$. &here are man$ examples of monopolisticall$ competitive marets5 particularl$ in the retail maret Dthe maret for eans5 the maret for laundr$ deter'ents5 the maret for soft drins5 etc.). "iff% 3 &$pe% #* Pa'e (ef% 1 *ill% Comprehension ,bective% 1.
7) "escribe oli'opol$ in terms of the number of competitors5 ease of entr$ into the maret5 similarit$ of 'oodsKservices offered b$ competin' firms5 and level of control over price b$ individual firms. Give an example of a maret or industr$ that is an oli'opol$. Answer% /hen an industr$ has onl$ a few sellers5 an oli'opol$ exists. /hile there are onl$ a few sellers5 the$ tend to be lar'e. &he entr$ of new competitors is difficult because of the lar'e capital investment needed. As with monopolistic competition5 sellers will attempt to differentiate their product from those of their competitors and each seller will have some control over price. 8owever5 when one firm cuts prices5 others will tend to do the same. &herefore5 the prices of comparable products are usuall$ similar. &he automobile5 airline5 and steel industries are all oli'opolies. "iff% 3 &$pe% #* Pa'e (ef% 1 *ill% Comprehension ,bective% 1. 1) "escribe monopol$ in terms of the number of competitors5 ease of entr$ into the maret5 and level of control over price b$ individual firms. Give an example of a maret or industr$ that is a monopol$. Answer% A monopol$ exists when an industr$ or maret has onl$ one producer. &he sole supplier eno$s complete control over the prices of its products. ts onl$ constraint is a decrease in consumer demand due to increased prices. n the Enited *tates5 the *herman Antitrust Act and the Cla$ton Act forbid man$ monopolies and re'ulate prices char'ed b$ natural monopolies. "iff% 3 &$pe% #* Pa'e (ef% 1: *ill% Comprehension ,bective% 1. ) Compare and contrast the four de'rees of competition in a private enterprise s$stem. Answer% &he four de'rees of competition include perfect competition5 monopolistic competition5 oli'opol$5 and monopol$. n perfect competition5 all firms in an industr$ are small5 but the number of firms in the industr$ is lar'e. @o sin'le firm is powerful enou'h to influence price therefore5 price is determined b$ such maret forces as suppl$ and demand. &he products in a perfectl$ competitive maret are so similar that bu$ers view them as identical to those of other firms. n monopolistic competition5 there are man$ bu$ers and sellers. ,ften5 sellers attempt to differentiate their products and services from others throu'h desi'n5 st$lin'5 advertisin'5 or the
!n monopolistic use of brand5 names thisface oftenfew 'ives sellers some control over competition businesses maret entr$Kexit barriers. n prices. an oli'opol$5 an industr$ has onl$ a handful of sellers5 who are 'enerall$ !uite lar'e. Maret entr$ is difficult because lar'e capital outla$s are needed for new start-ups. n an oligopoly5 the actions of one firm tend to affect the actions of all firms for example5 when one firm chan'es price5 all firms tend to chan'e price rather !uicl$. A monopoly exists when an industr$ or maret has onl$ one producer that dominates the entire maret. &hou'h monopolies are 'enerall$ ille'al5 natural monopoliesLsuch as provincial utilit$ companiesLare allowed and are subect to 'overnment re'ulation. &he$ are allowed to exist since one such compan$ can often efficientl$ suppl$ all electricit$ needs. "iff% 3 &$pe% #* Pa'e (ef% 14-1: *ill% Comprehension ,bective% 1.
3) /hat problems are evident in Canada2s suppl$ mana'ement s$stem0 Answer% Consumers ma$ pa$ hi'her prices because the suppl$ mana'ement s$stem imposes
tariffs on forei'n products in order to discoura'e their sale in Canada. As a result5 Canadian producers can raise their prices because there is less competition from forei'n producers. &he suppl$ mana'ement s$stem continues to operate in spite of evidence that it also encoura'es smu''lin'5 reduces innovation5 and inhibits exports. "iff% 3 &$pe% #* Pa'e (ef% 1: *ill% Anal$sis ,bective% 1.
