Understanding Economic Decisions

What are the types of business organizations?

• Sole proprietorships, partnerships, corporations

• Limited liability companies, cooperatives, franchises

• Non-profit organizations, government agencies, sole proprietorships

• Joint ventures, partnerships, sole proprietorships

What is the role of government in a market economy?

• To enforce laws and regulations, provide public goods, and correct market failures.

• To eliminate all forms of competition and control prices.

• To solely focus on taxation and revenue generation.

• To provide subsidies to all businesses regardless of performance.

How do supply and demand determine prices in a market economy?

• Supply and demand interact to set prices.

• Prices are set by government regulations.

• Prices are determined by production costs alone.

• Prices fluctuate randomly without any relation to supply and demand.

What are the characteristics of the United States economy?

• Limited government, private property, profit, markets, consumer sovereignty, and competition.

• Central planning and state ownership of resources.

• High levels of taxation and government control over all industries.

• Complete absence of competition and consumer choice.

What is the circular flow in economics?

• It shows how consumers (households), businesses (producers), and markets interact.

• It represents the flow of money only between consumers and businesses.

• It illustrates the government’s role in regulating the economy.

• It depicts the relationship between international trade and domestic markets.

What is the function of the Federal Reserve System?

• It regulates the U.S. monetary and financial system.

• It manages the federal budget and taxation.

• It oversees the stock market and securities trading.

• It provides loans to foreign governments.

What is a mixed economy?

• An economic system combining private sector (individual control) and public sector (government control)

• An economic system where all resources are owned by the government

• An economic system that relies solely on free market principles

• An economic system that eliminates private ownership completely

How do financial institutions function in the economy?

• They channel funds from savers to borrowers.

• They primarily focus on stock trading.

• They provide insurance services exclusively.

• They only serve large corporations.

What is the law of supply in economics?

• As the price of a good or service increases, the quantity supplied increases, and vice versa.

• The quantity supplied remains constant regardless of price changes.

• As the price of a good or service decreases, the quantity supplied increases.

• The law of supply states that supply is independent of price.