BBA Major Field Exam – Business Questions and Answers 100% Correct.

Scarcity and Choice - ANSWER-Human wants and needs are unlimited and resources to satisfy them are limited. Choices must be made between the possible alternatives 3 Questions every economy must answer - ANSWER-What to produce? How to produce it? For whom it is produced? 3 Questions What to produce? - ANSWER-Have to evaluate more than just needs. Involves the wants and needs of individuals. 3 Questions How to produce it? - ANSWER-Center upon the methods and resources (land, labor, capital, enterprise) used in the production process. Optimum way to achieve the desired output utilizing these methods and resources. 3 Questions For whom it is produced for? - ANSWER-Issue of the distribution of the output resulting from the application of the production methods and resources. Market Imperfections/Market Failure - ANSWER-when market equilibrium results in too many or too few resources being used in the production of a good or service. This can be caused by lack of competition, externalities, public goods Lack of competition (Market Imperfections) - ANSWER-Must have competition among both producers and consumers for markets to function effectively Externalities (Market Imperfections) - ANSWER-When a cost or benefit is imposed on people other than the consumers and producers of a product (Ex. pollution from manufacturing negatively affects the community rather than either the buyer or seller) Public Goods (Market Imperfections) - ANSWER-Goods are collectively consumed by everyone and there is no way to bar people who do not pay from consumption (Ex. National defense) Law of Demand - ANSWER-Inverse relationship between the price of a good and that quantity buyers are willing to purchase in a defined time period Price as the Determinants (Demand) - ANSWER-Primary determinant of the quality demanded is the price of the good. Changes in the price of a good result in movement of the equilibrium point along the