question

The level of government regulation of business has always been low.

answer

false

question

Regulating the way business operates is only one of several roles the government has in its relationship with business.

answer

true

question

Our goals for business focus solely on the production and distribution of goods and services.

answer

false

question

The relationship between government and business has become adversarial, but is improving.

answer

false

question

The relationship between goverrnnent and business is limited to government's influence over business.

answer

false

question

Proponents of privatization want goverrnnent to be a producer of services.

answer

false

question

Advocates of privatization base their positions on the need for efficiency and overall performance.

answer

true

question

One of the most direct ways in which government influences business is through transfer payments.

answer

false

question

When providing loan guarantees for business, the goverrnnent actually transfers the money to the business.

answer

false

question

The monetary policy set the Federal Reserve System is completely independent of the influence of other branches of goverrnnent.

answer

false

question

In many ways the most controversial aspect of the government/business relationship is regulation.

answer

true

question

Government regulation generally arises out of some type of market failure.

answer

true

question

Many government regulations over business have been created by the efforts of special interest groups.

answer

true

question

Negative externalities are the additional costs incurred by business due to the outside regulations placed by goverrunent.

answer

false

question

Keeping people informed is an important social goal of goverrunent.

answer

true

question

Early economic regulations and the goverrnnent bodies that administered them were usually formed along industry lines.

answer

true

question

The new social regulation focuses on business's impacts on other businesses.

answer

false

question

Newer social regulations covers business practices in all industries.

answer

true

question

Deregulation has provided uniform benefits for all parties affected.

answer

false

question

One of the recurring problems in industries that have been deregulated is that they tend to become dominated by a few finns.

answer

true

question

Government intervention in business began with a. opening of settlements. b. a push for tariffs. c. governments giving ofland grants. d. the creation of the Interstate Commerce Commission.

answer

b. a push for tariffs.

question

The reason that the United States government passed anti-trust legislation was a. to conform to Adam Smith's economic theory from Wealth of Nations. b. due to lobbying efforts by private citizens' groups. c. due to the anti-competitive practices of some large trusts. d. to restrict competition.

answer

c. due to the anti-competitive practices of some large trusts.

question

Government's new role in its relationship with business during the New Deal era was one of a. partner. b. servant. c. master. d. restoring prosperity and promoting economic growth.

answer

d. restoring prosperity and promoting economic growth.

question

Most Congressional legislation before the 1950s that affected business was a. economic in nature. b. social regulation. c. aimed at protecting individuals' rights. d. to protect consumers' privacy.

answer

a. economic in nature.

question

After the 1950s, most Congressional legislation that affected business was a. economic in nature. b. concerned largely with the quality of life. c. supportive of business. d. aimed at promoting competition.

answer

b. concerned largely with the quality of life.

question

Modem goals for business include all of the following except a. safe working environments. b. fair pay. c. promoting the social welfare. d. equal employment opportunities.

answer

c. promoting the social welfare.

question

The clash of ethical systems between government and business is centered around a. growth and sustainability. b. economic goals and social welfare. c. individualist and collectivist ethics. d. privatization and federalization.

answer

c. individualist and collectivist ethics.

question

Business generally follows the ethic of a. deontology. b. collectivism. c. individualism. d. socialism.

answer

c. individualism.

question

Government is generally thought to follow the ethic of a. deontology. b. collectivism. c. individualism. d. socialism.

answer

b. collectivism.

question

Which of the following is not mentioned as a frustration executives have with government officials, according to a recent McKinsey survey? a. Concerns that regulators do not understand the economics of their industry b. Concerned that government often blames business for society's problems c. Difficulty in determining the best way to work with government d. Concerned that government aims to redistribute the balance of wealth

answer

d. Concerned that government aims to redistribute the balance of wealth

question

Which of the following is not a method that government uses to influence business? a. lobbying b. taxation c. regulation d. industrial policy

answer

a. lobbying

question

The public and goverrunent use all of the following methods of influencing each other except a. politicking. b. voting. c. forming special-interest groups. d. coercion.

answer

d. coercion.

question

Every form of state intervention that affects industry as a distinct part of the economy is called a. internationalization. b. globalization. c. industrial policy. d. privatization.

answer

c. industrial policy.

question

The question of whether current public functions should be performed by the goverrnnent or private sector is addressed by a. industrial policy. b. privatization. c. central planning. d. moral suasion.

answer

b. privatization.

question

Arguments for industrial policy include all of the following except a. for economic reform. b. making government more efficient. c. making goverrnnent more effective. d. stifling innovation.

answer

d. stifling innovation.

question

Arguments against industrial policy include all of the following except a. reduces market efficiency b. The need to rescue "sunset" industries. c. the need to promote "sunrise" industries. d. foreign industrial policy success has been variable.

answer

b. The need to rescue "sunset" industries.

question

A strong industrial policy: a. is present in most developing countries. b. is a term heard continuously. c. is goverrnnent intervention. d. helps frrms compete in a fast-moving global economy.

answer

d. helps frrms compete in a fast-moving global economy.

question

Industrial policy is: a. by default. b. a powerful nonregulating approach by goverrunent to influence business. c. non debatable. d. consistent in each goverrunent administration.

answer

b. a powerful nonregulating approach by goverrunent to influence business.

question

There has always been a strong reaction in the United States to any form of industrial policy because: a. It reduces the market's efficiency. b. It conflicts with the widely held view of goverrnnent's role in the economy. c. Existing attempts to form industrial policies have generally been irrational and uncoordinated. d. Industrial policies violate anti-trust legislation.

answer

b. It conflicts with the widely held view of goverrnnent's role in the economy.

question

The opposite of privatization could be considered a. creeping expropriation. b. industrial policy. c. subsidization. d. federalization.

answer

d. federalization.

question

Government influences business through all of the following nonregulatory methods except a. being a major employer. b. being a standard setter. c. requiring equal employment opportunities be granted to job applicants. d. providing transfer payments.

answer

c. requiring equal employment opportunities be granted to job applicants.

question

Goverrnnent payments to industries or groups with special qualifications are called a. transfer payments. b. subsidies. c. loan guarantees. d. moral suasion.

answer

b. subsidies.

question

Government attempts to persuade business to act in the public interest are called a. monetary policies. b. moral suasion. c. standard setting. d. transfer payments.

answer

b. moral suasion.

question

All of the following are reasons that government regulation of business is needed except a. to ensure that customers and employees are treated fairly. b. maintain competitive markets. c. to protect the envirornnent. d. to ensure that customers and employees are not exposed to unreasonable hazards.

answer

b. maintain competitive markets.

question

Goverrnnent regulations have been criticized for all the following reasons except a. being too extensive. b. being too costly. c. being burdensome to business. d. being ineffective.

answer

d. being ineffective.

question

The act of governing or bringing under the control of law or constituted authority is called a. regulation. b. despotism. c. central planning. d. dictatorship.

answer

a. regulation.

question

The primary reason for government regulation of business is a. hypercompetition. b. central planning of the economy. c. market failure. d. lobbying efforts by business.

answer

c. market failure.

question

Which of the following is not a major reason given for governmental regulation? a. controlling natural monopolies b. controlling negative externalities c. achieving social goals d. maintaining a trade surplus with foreign countries

answer

d. maintaining a trade surplus with foreign countries

question

A market in which the economies of scale are so great that the largest firm has the lowest costs and is able to drive out competitors is called a(n) a. natural monopoly. b. market failure. c. externality. d. deregulated industry.

answer

a. natural monopoly.

question

Government intervention in monopolistic industries is often brought about by a. requests from smaller competitors. b. class-action lawsuits. c. anticompetitive practices. d. frequent bankruptcies within the industries.

answer

c. anticompetitive practices.

question

Negative externalities are often referred to as a. full absorption costs. b. social costs. c. allocated costs. d. envirornnental costs.

answer

b. social costs.

question

Government regulation of business through the control of economic or market variables is a form of a. negative externality. b. social cost. c. economic regulation. d. indirect cost.

answer

c. economic regulation.

question

Governmental regulations that seek to further societal objectives are examples of a. social regulation. b. economic regulation. c. envirornnental control. d. central planning.

answer

a. social regulation.

question

Social regulation's focus on people encompasses their roles as all of the following except a. employees. b. consumers. c. citizens. d. business owners.

answer

d. business owners.

question

The newest type of social regulations is concerned primarily with a. envirornnental protection. b. corporate welfare. c. security. d. educational reform.

answer

c. security.

question

The dilemma of regulation is the tradeoff between a. cost and efficiency. b. effective control and the burden placed on firms. c. private gain and public good. d. individualistic and collectivistic goals.

answer

b. effective control and the burden placed on firms.

question

Which of the following is not considered a part of the induced costs of regulation? a. the effect on innovation b. the effect on investments in plant and equipment c. the effect on small business d. the effect on consumers

answer

d. the effect on consumers

question

The primary purpose of deregulation is to a. decrease competition in the affected industries. b. remove certain industries from old-line economic regulations. c. protect the natural envirornnent. d. allow natural monopolies to form.

answer

b. remove certain industries from old-line economic regulations.

question

The dilemma of deregulation is a. to enhance competition within the industry without harming workers' status. b. to enhance competition within the industry without sacrificing applicable social regulations. c. to prevent monopolies without allowing hypercompetition. d. to provide business more freedom without completely abandoning goverrnnental authority.

answer

b. to enhance competition within the industry without sacrificing applicable social regulations.

question

Which of the following industries has not been affected by deregulation? a. fmancial services. b. trucking c. computer software d. airline

answer

c. computer software

question

Which of the following is not a role increasing goverrnnent's complex relationship with business? a. government is a major purchaser. b. goverrnnent can elevate some businesses while devaluing others. c. goverrnnent cannot have buying power d. goverrnnent can create new businesses through subsidization.

answer

c. goverrnnent cannot have buying power

question

Which of the following is not a concern expressed by executives about government involvement in business? a. it is difficult to determine the best way to work productively with government. b. regulators and policy makers do not understand the economics of their industry c. government blames business for society's problems d. U.S adults said government should do more

answer

d. U.S adults said government should do more

question

The newer form of industrial policy is exemplified by: a. a focus on enabling industrialization. b. Karl Aiginer's book, "Industrial Policy: A Dying Breed or a Re-emerging Phoenix?" c. policy that does not conflict with widely held view on the role of government in the economy. d. Robert Reich's book, "American Frontier."

answer

d. Robert Reich's book, "American Frontier."

question

Arguments against privatization include all of these except: a. social goals. b. service provisions. c. public backlash. d. safety concerns.

answer

b. service provisions.

question

Which of the following is not an effect of induced costs? a. small businesses may be adversely affected. b. new agencies may be created. c. new investments in plant and equipment may be affected. d. innovation may be affected.

answer

b. new agencies may be created.

question

Why is it incumbent upon goverrnnent to promote social goals such as safe working envirornnents, clean air, and safe products?

answer

As sad as it is to admit, business decision-making very rarely takes into account anything except profits and efficiency. Because business managers do not incorporate things like worker safety, fair pay, safe products, etc., it falls to goverrnnent to require measures that aid their achievement.

question

Discuss the ability of the public or its goverrnnent to establish social priorities.

answer

Because our society has become much more complex and more pluralistic, and there are so many more opportunities available, reaching consensus on social priorities is nearly impossible. Business, for all of its power in society, is not in a position to promote or dictate social goals; therefore it usually becomes goverrnnent's role to establish social priorities.

question

Who determines the public interest?

answer

It is very difficult to pinpoint who determines the public interest. The public itself certainly has a large say, through both individual voice and through civic and special interest groups. Business plays a big role by actively shaping public opinion. This effort is most evident in the areas of advertising and corporate-controlled news media. Government, as the official representative of the public, also plays a significant role in determining the public interest. The three major groups are thus involved in an interactive process of developing and deciding the public interest.

question

Discuss the likelihood that the United States can develop a planned, successful industrial policy.

answer

Because the United States is such a complex society and economy, with many different goals and interests, it is unlikely that it could ever develop a coherent industrial policy. One of the main factors limiting this possibility is the country's longstanding emphasis on a free market economy that relies on market forces to gnide economic activity. Finally, the patchwork of ad hoc industrial policies currently in force would need to be overhauled to reach a comprehensive plan that made sense, an unlikely prospect.

question

Distinguish between producing a service and providing a service. Why is this distinction important in the debate over privatization?

answer

Producing a service means that the entity's own employees create the action. Providing a service connotes a situation in which the entity pays for a service that is produces by another entity. This distinction is important to the debate because privatization seeks to increase efficiency within the system. The entity (government agency or private finn) that can create the service most efficiently should be the producer. Proponents of privatization believe that private sector firms can ahnost always produce a service more efficiently than can a government agency.

question

One reason that government might regulate business is to control excessive competition. Govenunent also regulates business to control natural monopolies. Which situation is worse--monopoly or excessive competition?

answer

It is odd that the government seeks to control excessive competition, due to the fact that our "ideal" economic system is based on Adam Smith's depiction of perfect competition, in which there are many sellers, none of whom have any power in the market, and all of whom are subject to the control of the market. What we term "excessive" competition sounds very similar to Smith's ideal situation. On the other hand, monopolies can easily be shown to adversely affect prices and supplies, along with garnering power over the market that is antithetical to a free market economy.

question

Compare and contrast economic regulation and social regulation.

answer

Both types of regulation originate in government and control some aspect of business operation. The primary distinction between the two is their foci. Economic regulation seeks to control the business operations of firms by limiting certain aspects of their commercial activities. Social regulations focus on business's effects on people in their roles as employees, consumers, and citizens. Another difference is that economic regulation tends to focus on specific industries, while social regulation affects all industries.

question

Is privatization always effective or successful? Give examples of a success and a failure.

answer

Privatization is not always effective or successful. One example of a success would be Argentina's privatization of its national water system. The restructuring was both fmancially efficient and socially beneficial. Service expanded to reach areas which previously had no clean water, and far fewer children died from infections and parasitic diseases. On the other hand, when Mayor Daley of Chicago privatized 36,000 parking meters, prices quadrupled, and free parking on Sunday disappeared. The public backlash led other cities to shelve their plans to privatize their parking meters.

question

Discuss the reasons for the overlapping trends of regulation and deregulation.

answer

The overlap of trends of regulation and deregulation arise from both political and economic arenas. Economic reasons seeks to find a balance between freedom of and control over business that will be best for society. From the political perspective, there is an ongoing interplay between different social goals and the means for achieving those goals. As government seeks to fmd the "optimal" balance of these various goals, it uses the methods of regulation and deregulation to help achieve those goals.

question

Why does government regulate business?

answer

Govermnent has many reasons for regulating business. First, regulating other segments of society is one of the primary functions of government. As Michael Walzer says in Spheres of Justice, "...political power is a special sort of good. It has a twofold character....second, it is unlike all the other things because, however it is had and whoever has it, political power is the regulative agency for social goods generally" (15). Second, by abusing its power, business has essentially forced government to regulate it. Some of these abuses include developing monopolies, unfair labor practices, selling products that harm consumers, and polluting the environment. Third, govermnent has sought to promote certain social goals, which have required certain actions that business was not doing on its own.

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