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Chapter Two Economics: The Framework for Business Review Questions 1. How did the global economic crisis unfold? In 2008 the banking system was on the verge of collapsing. Home foreclosures soared, due to home and personal loans not being paid off. Property and the housing marketing plummeted. Layoffs put more than a million Americans out of work 2. What steps did the Federal government and the Federal Reserve take to mitigate the crisis? The Federal Reserve stepped in and bailout out AIG Congress passed the Troubled Assets Relief Program The American Recovery and Reinvestment Act was signed by Congress Treasury Department spent money on an auto industry 3. Compare and contrast microeconomics and macroeconomics. …show more content…

Describe the 4 degrees of competition within the free market system. Offer 2 to 3 examples of each type of competition. Degree of competition Examples Pure Competition The seller has the option to accept any price for the product, regardless of the generally accepted price. Monopolistic Competition Identical products are sold, but brand loyalty is created so the consumer will keep on buying the product. Oligopoly The petroleum and telecommunication markets, the automobile industry, and the bank system Monopoly Say if Comcast was the only cable television provider in your area. If you want cable, you have no choice but to go to Comcast and because of this they can charge anything they want 7. Why does quantity supplied tend to increase when prices go up and decrease when prices go down? Why does quantity demanded move in the opposite direction? As the supplier tries to increase production, more workers need to be hired. At first, these workers are very productive. But, as the number of workers increase, average costs rise. The pool of workers becomes restricted, meaning that additional workers are not as productive as the first hires. Average costs tend to rise as production increases. This is captured by a supply curve that is upward sloping. 8. Describe the key principles of socialist and communist economic systems. Does more government control mean less economic opportunity? Why or

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