APEX Econ 5.3: The Government Is a Referee – Flashcards
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Why does the government need to regulate the free market to protect competition?
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Producers driven by the profit motive seek to reduce their competition
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Which of these gives companies an anticompetitive impulse?
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The profit motive
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What is one effect of the profit motive?
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It pushes companies to seek to eliminate competition
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What is a cartel?
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A group of producers working together to raise prices and profits
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Which of these is a group of producers working together to raise prices and increase profits?
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A cartel
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What unfair business practice do cartels use?
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Price fixing
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Match each unfair business practice with an example of its use. A. Predatory pricing B. Making misleading statements C. Price fixing
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A. A large furniture maker charges a price below production cost in order to eliminate small competitors B. A coffee maker falsely claims that its drinks reduce the incidence of heart attacks C. A group of music companies agrees to charge $20 for CDs
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Match each action with the unfair business practice it represents. A. Bid rigging B. Production Limitation C. Price fixing
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A. A defense contractor gets its competitors to agree not to enter bids B. A cartel of sugar growers agrees to reduce the amount of sugar it brings to market C. A group of oil companies agrees to charge $3 for a gallon of gas
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Match each type of unfair business practice with its description. A. Vendor Lock-in B. Price fixing C. Predatory pricing
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A. A company says that a wide range of products can be used with its product, which is not actually true B. A group of companies agrees to charge the same inflated price for a good C. A large company charges a price below production cost in order to eliminate small competitors
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What is one benefit of consumer-protection regulations?
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A reduction in injuries and deaths
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What is one benefit of consumer-protection regulations?
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Greater consumer confidence
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What is one drawback to consumer-protection regulations?
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Higher prices for consumers
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What do consumer-advocacy groups do?
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Promote the interest of consumers
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What is one way that consumer-advocacy groups help protect consumers?
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By providing product information
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What is the purpose of consumer-advocacy groups?
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To promote the interest of consumers
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What does enforcing consumer-protection regulations involve?
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Government oversight of the production process
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What does the government have to do to enforce consumer-protection regulations?
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Oversee production
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What is one thing the government does as it enforces consumer-protection regulations?
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Tests products such as drugs and automobiles for safety
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Match each company or organization with the correct label. A. Organization of Petroleum Exporting Countries (OPEC) B. Lockheed Martin Corporation C. Antitrust Division of the Department of Justice
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A. Cartel B. Government contractor C. Competition regulator
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Match each company, organization, or agency with the correct label. A. Consumer Reports B. Food and Drug Administration (FDA) C. Federal Trade Commission (FTC)
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A. Consumer advocacy publication B. Consumer protection agency C. Competition regulation
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Match each company or organization with the correct label. A. Boeing Corporation B. Federal Aviation Administration (FAA) C. Federal Trade Commission (FTC)
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A. Government contractor B. Consumer-protection agency C. Competition regulator
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What happens to the expenses involved in compliance with government regulations?
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Passed on to the consumer
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Who ultimately pays for compliance with government regulations?
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Consumers
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What is done with the costs of complying with consumer-protection regulations?
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Eventually passed on to consumers in the form of higher prices
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Which of these enables the government to make up for a budget deficit?
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The bond market
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In order to make up for a budget deficit, the government can do what?
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Issue bonds
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When the government runs a budget deficit, what must it eventually do in order to pay back its debt?
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Have a budget surplus
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How do antitrust laws affect the circular flow of the free-market system?
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They speed up the flow of capital and wages
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What effect do consumer-protection regulations have on the circular flow of the free-market system?
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They inspire consumer confidence, which leads to increased purchases from producers
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Which of these inspires consumer confidence, increases purchases, and speeds up the flow of investment and wages in the circular flow of the free- market system?
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Consumer-protection regulations
