Unit Three Economics

Unit 3: Entrepreneurship & Economic Growth

Thursday March 23, 2023

Cost & Benefit Considerations

• Purchasing property

• Using property

• Disposing of property

Costs of the purchase, Use, or Disposal of property

• Opportunity cost of what was not purchased

• Associated costs with upkeep of property (maintenance)

• Possible loss of value of property and loss at time of sale

Multiple Choice

A cost consideration when purchasing personal property, such as a car would be

• asset value of the property

• maintenance of the property

• time spent viewing the property

• potential co-owners of the property

Government restrictions

• Zoning laws

• Ordinances regulating noise

• Building safety and sanitation

• Preservation of historic buildings

Multiple Choice

All of the following are government restrictions EXCEPT which of the following

• noise regulations

• zoning laws

• investor taxes

• safety and sanitation

Multiple Choice

One government restriction to consider when proposing to build a new business includes

• zoning laws

• investor taxes

• repayment of loans

• hiring subcontractors

Government Restrictions (Example)

• In recent years, some cities in LA have passed ordinances to restrict the ways in which property is developed and constructed

• These type of regulations have been enacted in order to protect the property owners already living in the neighborhood

Multiple Choice

Regulations restricting the size of houses being built on city lots have been enacted in order to

• lower building costs for local construction companies

• ensure that new houses are available to inner city buyers

• protect the property owners already living in the neighborhood

• collect higher property taxes to build infrastructure for the neighborhood

Economic data

• Unemployment rate – the number of people over 16 who do not have a job and are actively seeking employment

• Gross domestic product – the dollar value of all final goods produced within the U.S. borders during one year

Economic data

• Gross domestic product per capita – the dollar value of all final goods produced within a nation’s borders during one year, divided by the population

• National wealth – the total value of wealth possessed by a nation’s citizens at a set point of time. This includes all wealth and all goods produced from any economic activity

• Inflation – a rise in the general level of prices in an economy

Multiple Choice

Looking at the table, which economic condition is characteristic of ALL three nations?

• low GDP per capita

• high levels of inflation

• low inflationary levels

• high levels of unemployment

Business Cycle

• An observable pattern in the fluctuations of economic activity experienced over time, as indicated by output, employment, and prices.

• Generally the fluctuations range from expansion to recession

Multiple Choice

The fluctuations in a business cycle generally range from _______ to _______

• stagflation to investment

• expansion to recession

• investment to stagflation

• recession to expansion

Business Cycles

• Expansionary periods of the business cycle are distinguished by low inflation, low unemployment, increased industrial production and increased sales.

Multiple Choice

An expansionary period in the business cycle is distinguished by

• high inflation

• declining sales

• fewer excise taxes

• low unemployment

Business Cycles

• Recessionary periods of the business cycle are distinguished by high inflation, high unemployment, decreased industrial production and decreased sales.

Multiple Choice

High levels of unemployment combined with high levels of inflation could indicate that the business cycle has entered into a period of

• recession

• stagflation

• expansion

• investment

How productivity relates to growth

• Productivity – refers to an economic measure that shows changes in output per worker hour from one year to the next

• High productivity results in economic growth with high employment and low inflation, while slower productivity indicates slower growth, high unemployment and high inflation

Multiple Choice

Economic growth would most likely result from

• decreased trade

• increased productivity

• increased employment

• decreased sales of stock

how productivity relates to growth

• Productivity reflects the amount of capital and labor used to produce revenues and inventories

• If businesses decrease the amount of labor needed to increase inventories, it would most likely be a result of economic growth

Multiple Choice

If businesses can decrease the amount of labor needed to increase inventories, the result will most likely be

• increased taxes

• increased inflation

• economic growth

• decreased productivity

how technology relates to growth

• Improvements in technology generally affect productivity (capital and labor), which affects growth.

Multiple Choice

The introduction of new manufacturing technologies generally affects economic growth by

• creating safer work environments

• increasing the productivity of labor

• restricting growth because of the additional expense

• stopping production while workers learn the new technology

Characteristics of sole proprietorship

• enjoys the rights to all profits and bears the responsibility for all debts and liability

• no special taxes, unlimited liability, easy to manage, complete ownership, difficult to raise capital

Characteristics of partnership

• The owners have unlimited liability for all debts and obligations of the firm.

• Partners share financial and legal responsibilities for the business, and the business legally ceases to exist if one of the partners leaves the firm.

Characteristics of corporation

• Has many of the legal rights of an individual, including the right to enter into contracts and the right to sue or be sued.

• More regulations, but have a broader set of means for raising money than sole proprietorships or partnerships do (selling stock and issuing bonds)

• Limited liability

Multiple Choice

-No special taxes

-Unlimited liability

-Easy to manage

-Complete ownership

-Difficult to raise capital

These are all characteristics of which of the following?

• partnerships

• free enterprise

• sole proprietorships

• corporations

Multiple Choice

One of the advantages corporations have that sole proprietorships do not is

• limited liability

• ease of start up

• rights to all profits

• lack of special taxes