Term
| Economics as a field of study, would not be needed if? |
|
Definition
|
|
Term
| The goal of economics is: |
|
Definition
| allocate scarce resources efficiently |
|
|
Term
| Since resources are scarce - every choice envolves what? |
|
Definition
|
|
Term
| Explain the economic trilogy |
|
Definition
| since resources are scarce, we have to make choices, choices involve opportunity cost |
|
|
Term
|
Definition
|
|
Term
| List and define/give an example of the factors of production. |
|
Definition
Land - Rent
Labor - Wages or salaries
Capitol - Money (interest)
Entrepreneurship - Willing to take necessary risk in hope of return; profit |
|
|
Term
| The production possibilities frontier graphically demonstrates |
|
Definition
|
|
Term
| Define the production possibilities frontier |
|
Definition
| The alternative combination of goods and services that could be produced using existing resources and technology |
|
|
Term
| What are the three questions any economic system must answer? How are they answered in a market system? |
|
Definition
What to produce - Consumers
How to produce it - Business
Who gets it - Money |
|
|
Term
| Explain the primary difference, from an economic standpoint, between Communism and Socialism. |
|
Definition
Communism = Government owns ALL factors of production
Socialism = The government only owns KEY factors of production |
|
|
Term
| What was the philosophy of John Maynard Keynes and to what circumstances was he responding? What time period did he live? |
|
Definition
| That the government should intervene sometimes. He was responding to the great depression and lived during the 1920's. |
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|
Term
| Why is the circular flow diagram important? |
|
Definition
| It shows the interdependence between households and businesses. |
|
|
Term
| What determines price in a market economy? |
|
Definition
|
|
Term
| Changes in price on the supply curve cause: |
|
Definition
|
|
Term
| The relationship between price and quantity for the demand curve is: |
|
Definition
| P (UP) QtD (DOWN) (Inverse) / Demand = Different |
|
|
Term
| Anything that shifts the demand curve outward and does not affect the supply curve will: |
|
Definition
|
|
Term
| The relationship between price and quantity for the supply curve is? |
|
Definition
| P (UP) QtS (UP) (Direct) / Supply = Same |
|
|
Term
| Anything that shifts the supply curve out and does not change the demand curve? |
|
Definition
|
|
Term
| What happens to price equilibrium when price controls are instigated? |
|
Definition
| There is no price equilibrium if there is price control |
|
|
Term
| Explain the importance of price equilibrium: |
|
Definition
| It is what allows us to be efficient |
|
|
Term
| List two consequences of a price ceiling: |
|
Definition
| Black market and underinvestment in industry |
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|
Term
| Can prices ever be too high? Explain your answer as discussed in class. |
|
Definition
| No, prices can be as high as they want but consumers won't buy them after a certain price point. |
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|
Term
| The price of gas is too high. Your neighbor thinks a price control is the answer. What is the answer and why? |
|
Definition
I think you should just let it work itself out because people NEED gas.
If you implement a price control then you are going to end up with a shortage on your hands because then everyone will be able to purchase it because the price was lowered. |
|
|
Term
| Which microeconomic concept explains why the demand curve is downward sloping? |
|
Definition
| Law of diminishing marginal utility |
|
|
Term
|
Definition
| Total satisfaction I get from a good or service as measured in dollars and cents |
|
|
Term
| If E > 1 - If a business decreases price, what will be the effect upon total revenue? Why? |
|
Definition
| Total revenue will increase because this is elastic. It increases because the quantity demanded increases more than the price decreases. |
|
|
Term
| If E < 1 - If a business increases price, what will be the effect upon total revenue? Why? |
|
Definition
| Total revenue will increase because this is inelastic. It increases because the increase in price is greater than the decrease in quantity demanded. |
|
|
Term
| If price increases by 10% and the calculated elasticity is .5, what will happen to quantity demanded? Use numbers and be specific. |
|
Definition
| Inelastic: It will decrease but by less than what the price increase was. Price increases by 10% and Quantity decreases by 5% |
|
|
Term
| The ultimate effect upon total revenue when prices are raised or lowered is determined by? |
|
Definition
|
|
Term
| The law of diminishing marginal returns states? |
|
Definition
| The more of a good or service I get the less satisfied I start to become which means I am less willing to pay for the next unit. |
|
|
Term
| Why does the TPP curve begin at zero? |
|
Definition
|
|
Term
| Why can the total revenue curve be derived directly from the demand curve? |
|
Definition
| Because the demand curve gives you price and quantity. |
|
|
Term
| When doubling all inputs just doubles the output, _______ occurs. |
|
Definition
| Constant returns to scale |
|
|
Term
| Can most inputs be substituted? |
|
Definition
|
|
Term
| Once a business decides what price to charge for a product, what other question is automatically answered? Why? |
|
Definition
| Quantity because of the demand curve. |
|
|
Term
| The slope of the total cost curve equals ______ |
|
Definition
|
|
Term
| If marginal profit is decreasing, output should be _________ |
|
Definition
|
|
Term
| When marginal profit equals zero, then MR = |
|
Definition
|
|
Term
| The profit maximizing output will be where MR = |
|
Definition
|
|
Term
| Ultimately every decision, in order to be an optimal decision, should be based upon? |
|
Definition
|
|
Term
| Where does price come from under perfect competition? |
|
Definition
| Price equilibrium from the market |
|
|
Term
| Why do profits leave under perfect competition in the long run? |
|
Definition
| Because firms keep entering the market and profits will eventually go away because they are being shared between so many people. |
|
|
Term
| Why are the demand curve and the marginal revenue curve horizontal in perfect competition? |
|
Definition
| They are horizontal because the product is the same and the firm is insignificant so they can keep the price the same. |
|
|
Term
| What is the primary difference between perfect competition and monopolistic competition? |
|
Definition
| In monopolistic the product is different, in perfect the product is the same. |
|
|
Term
| What is the opportunity cost of choices in the monopolistic competition market structure? |
|
Definition
|
|
Term
| What is the final constraint on price for a monopoly? |
|
Definition
|
|
Term
| It is not size that determines a monopoly but rather _____ |
|
Definition
|
|
Term
| In a monopoly, they become a price ________ whereas under perfect competition the firm becomes the price ________. |
|
Definition
|
|
Term
| What may be the most important barrier to entry? |
|
Definition
|
|
Term
| Define and give an example of a natural monopoly. |
|
Definition
| Utilities; it is cheaper to have one company serve to a consumer rather than bearing the expense to run multiple different lines from separate companies. |
|
|
Term
| Which market structure is synonymous with big business? |
|
Definition
|
|
Term
| When firms sell at a lower price than their rivals, regardless of cost issues, what is said to occur? |
|
Definition
|
|
Term
| Explain what happens to output supplied and price when sales maximization rather than profit maximization becomes the goal of an oligopoly. |
|
Definition
| Output increases and the price decreases because they aren't worried about maximizing their profit, they are worried about gaining market and sales maximization. |
|
|
Term
| Prices are said to be ______ in the oligopoly market structure. |
|
Definition
|
|
Term
| Why are cartels so difficult to keep together? |
|
Definition
| There is a high incentive to cheat |
|
|
Term
| Graph the kinked demand curve: |
|
Definition
| Y = P, X = Qt, Horizontal and then an angle down (start of a ramp with a platform |
|
|
Term
| Why are cartels one of the least desirable forms of market structure from an economic perspective? |
|
Definition
| Because they act like a monopoly but receive NONE of the cost benefits. |
|
|
Term
| If entry and exit are said to be costless and unimpeded, the market is _______________. |
|
Definition
|
|
Term
| When does a threat become credible? |
|
Definition
| When the threat is exercised |
|
|
Term
| Why is perfect competition the epitome of efficiency from an economic point of view? |
|
Definition
| It gives the consumers as much as they want at the lowest possible cost. |
|
|
Term
| List the 3 characteristics of a monopolistic market structure. |
|
Definition
Lots of buyers and sellers
Product is different
Fairly easy in and out
Information is perfect |
|
|
Term
| How much control does a monopolistic market structure have over price? |
|
Definition
|
|
Term
| The profit maximizing output amount is determined by which formula? |
|
Definition
|
|
Term
| In a monopolistic market structure, what happens to profits in the long run? |
|
Definition
|
|
Term
| From an economic viewpoint, is a monopolistic market structure efficient? Why or why not? |
|
Definition
| No, it produces as much as we want, but not at the lowest possible cost. |
|
|
Term
| List the 3 characteristics of an oligopoly market structure. |
|
Definition
Few buyers and sellers
The product is different
Fairly difficult to get in and out
Info is perfect |
|
|
Term
| How much control does oligopoly market structure have over price? |
|
Definition
|
|
Term
| The profit maximizing output amount is determined by which formula? |
|
Definition
|
|
Term
| In an oligopoly market structure, what happens to profits in the long run? |
|
Definition
|
|
Term
| From an economic viewpoint, is an oligopoly market structure efficient? Why or why not? |
|
Definition
| No, because they are willing to decrease their profits (profit maximization), to gain market share and have sales maximization. |
|
|
Term
| List the 3 characteristics of a perfect competition market structure. |
|
Definition
Lots and lots of buyers and sellers
Product is the same
Easy in and out
Info is perfect |
|
|
Term
| How much control does a perfect competition market structure have over price? |
|
Definition
| None, they are a price taker. |
|
|
Term
| The profit maximizing output amount is determined by which formula? |
|
Definition
|
|
Term
| In a perfect competition market structure, what happens to profits in the long run? |
|
Definition
| They go away ; no profits. |
|
|
Term
| From an economic viewpoint, is a perfect competition market structure efficient? Why or why not? |
|
Definition
| Yes, because perfect competition produces as much as we want at the lowest possible cost. |
|
|
Term
| When should a business close it's doors in the short-run? Why? |
|
Definition
| If they cannot cover all their variable cost and start to contribute to some of their fixed cost. |
|
|
Term
| List the three characteristics of a monopoly market structure. |
|
Definition
There is only one buyer and seller
Product is different
Difficult of ease in and out
Info perfect |
|
|
Term
| How much control does a monopoly market structure have over price? |
|
Definition
|
|
Term
| The profit maximizing output amount is determined by which formula? |
|
Definition
|
|
Term
| In a monopoly market structure, what happens to profits in the long run? |
|
Definition
|
|
Term
| From an economic viewpoint is a monopoly market structure efficient? Why or why not? |
|
Definition
| No, because they do not produce as much as we want and its not at the lowest possible cost. |
|
|
Term
| The optimal quantity to purchase is at which point? |
|
Definition
| Marginal Utility > or = Price |
|
|
Term
| Define price elasticity of demand. What pertinent information does this provide to businesses? |
|
Definition
| If we change price, by how much does quantity demanded change. - Whether or not to raise or lower your price |
|
|
Term
| Why is percentage of change used when figuring elasticity, as opposed to absolute change? |
|
Definition
|
|
Term
| If price increases by 10% and quantity demanded falls by 3%, then a demand curve with which type of elasticity occurs? |
|
Definition
|
|
Term
| If price increases by 10% and quantity demanded falls by 15%, then a demand curve with which type of elasticity occurs? |
|
Definition
|
|
Term
| If price increases by 10% and quantity demanded falls by 10%, then a demand curve with which type of elasticity occurs? |
|
Definition
|
|
Term
| What do indifference curves demonstrate? |
|
Definition
| Combination of goods and services that I want |
|
|
Term
| The market demand curve is derived from? |
|
Definition
| Horizontal summation of all the individual demand curves |
|
|
Term
| What does the budget line demonstrate? |
|
Definition
| The combination of goods and services I can buy with the income I have. |
|
|
Term
|
Definition
| I am willing to pay more than I have so; difference between what I have to pay and what I am willing to pay |
|
|
Term
| Total fixed costs _____ with a change in inputs. |
|
Definition
|
|
Term
| Explain why the average cost curve has a U shape. |
|
Definition
|
|
Term
| When doubling all inputs leads to more than twice the output ________ occurs. |
|
Definition
|
|
Term
| When doubling all inputs just doubles the output, ______ occurs. |
|
Definition
|
|
Term
| When doubling all the inputs produces less than double the output, _______ occurs. |
|
Definition
|
|
Term
| Compare and contrast historical costs versus analytical costs. |
|
Definition
|
|
Term
| The slope of the total revenue curve equals _______. |
|
Definition
|
|
Term
|
Definition
| Total revenue / quantity produced |
|
|
Term
| Total profit is maximized where marginal profit equals _____ |
|
Definition
|
|
Term
| When marginal profit equals zero, then MR = |
|
Definition
|
|
Term
| In the long run all costs are ____. |
|
Definition
|
|
Term
| Which is more elastic; luxury items or necessities? |
|
Definition
|
|
Term
| Which is less elastic, items with obvious substitutes or items with no apparent substitutes? |
|
Definition
| Items with no apparent substitutes. |
|
|
Term
| In the long run, elasticity tends to move toward elastic or inelastic? |
|
Definition
|
|
Term
| Externalities: What does the market do extremely well? |
|
Definition
| Allocates scarce resources efficiently |
|
|
Term
| Externalities: List the five major times the market fails. |
|
Definition
Income inequality
Monopoly
Externalities
Public Goods
Allocating resources between today and the future |
|
|
Term
| Externalities: With an externality there is a buyer, a seller, a product, and what else? |
|
Definition
| A third party is impacted |
|
|
Term
| Externalities: Define externalities: |
|
Definition
| when there is a buyer, seller, and a third party |
|
|
Term
| Define and give an example of a beneficial externality: |
|
Definition
| When third party is impacted positively; vaccination |
|
|
Term
| Define and give an example of a detrimental externality: |
|
Definition
| When third party is impacted negatively; pollution, smoking |
|
|
Term
| Externalities: With a beneficial externality, the price is too _______. |
|
Definition
|
|
Term
| Externalities: With a detrimental externality, the price is too _______. |
|
Definition
|
|
Term
| Externalities: Since the price signal is incorrect, how much is produced when beneficial externalities occur? |
|
Definition
|
|
Term
| Externalities: Since the price signal is incorrect, how much is produced when a detrimental externality occurs? |
|
Definition
|
|
Term
| Externalities: What is the underlying economic problem where externalities are concerned? |
|
Definition
| Price signal is incorrect |
|
|
Term
| Externalities: Marginal social cost = ______ + _______ |
|
Definition
|
|
Term
| Externalities: From an economic perspective, what should the government do in order to effectively intervene where externalities are concerned? |
|
Definition
| Subsidize beneficial externalities and tax detrimental externalities for the IC |
|
|
Term
| Externalities: By what amount should the government tax/subsidize externalities? |
|
Definition
|
|
Term
| Externalities: If the ______ is corrected, the market will then allocate resources efficiently even in the case of externalities. |
|
Definition
|
|
Term
| Public goods: List and briefly explain the two characteristics of public goods. |
|
Definition
| Non-excludable and not depreciable |
|
|
Term
| Public goods: Define public goods: |
|
Definition
| Things that are non-excludable and not depreciable |
|
|
Term
| Public goods: Define free rider. |
|
Definition
| someone who benefits from someone else and doesn't contribute. |
|
|
Term
| Public goods: Where public goods are concerned, the marginal cost of one more user is ______? |
|
Definition
|
|
Term
| Public goods: From an economic perspective, what should the government do in order to effectively provide public goods? |
|
Definition
|
|
Term
| Allocation of resources between the past, today, and the future: How much money business invests today determines: |
|
Definition
| How much output we have tomorrow. |
|
|
Term
| Allocation of resources between the past, today, and the future: (High/Low) interest rates encourage businesses to pursue capital investments. |
|
Definition
|
|
Term
| Allocation of resources between the past, today, and the future: With _____ interest rates, resources will be diverted to the future. |
|
Definition
|
|
Term
| Allocation of resources between the past, today, and the future: With ______ interest rates, resources will be used today. |
|
Definition
|
|
Term
| Allocation of resources between the past, today, and the future: Name two of the four areas that impact the efficient allocation of resources between the present and the future. |
|
Definition
| It's easier to worry about consuming today rather than in the future. |
|
|
Term
| Allocation of resources between the past, today, and the future: When the buyer and seller do not have access to the same information, what other source of market failure occurs? |
|
Definition
|
|
Term
| Allocation of resources between the past, today, and the future:The current lawsuit against Microsoft is an example of what other source of market failure? |
|
Definition
| Rent Seeking - using up resources to produce nothing |
|
|
Term
| Allocation of resources between the past, today, and the future: Insurance tends to encourage which other source of market failure? |
|
Definition
|
|
Term
| Allocation of resources between the past, today, and the future: In general, what is the best way for the government to intervene in order to address all times that the market fails? |
|
Definition
| Fix the price signal, the market will take care of it by itself |
|
|
Term
| Allocation of resources between the past, today, and the future: What is the primary reason that costs have increased in the service sector and some would argue that quality has decreased? |
|
Definition
| Wages have gone up without a decrease in productions |
|
|
Term
| Allocation of resources between the past, today, and the future: A doctor or a lawyer cannot offer the exact same services to everyone. If they could, society would obtain _____ in the service sector. |
|
Definition
| An increase in productivity |
|
|
Term
| Allocation of resources between the past, today, and the future: Wages have increased in the service sector without an increase in _____. |
|
Definition
|
|
Term
| Income Inequality: When discussing income inequality, there will always be a trade-off between? |
|
Definition
|
|
Term
| Income Inequality: The opportunity cost of economic efficiency is: |
|
Definition
|
|
Term
| Income Inequality: The opportunity cost of income equality is? |
|
Definition
|
|
Term
| Income Inequality: The poverty line has been set at $18,000 and your income is $16,000. Which definition of poverty is being used? |
|
Definition
|
|
Term
| Income Inequality: The poverty line has been set at 1/2 of the average American income of $39,000. You make $30,000. Which definition of poverty is being used? |
|
Definition
|
|
Term
| Income Inequality: Explain the difference between the absolute concept of poverty and the relative concept of poverty. |
|
Definition
Absolute: A set number
Relative: Makes it a percentage of another number |
|
|
Term
| Income Inequality: Today the richest 1/5 of the population has which percentage of the income? |
|
Definition
|
|
Term
| Income Inequality: If the Lorenz curve was a straight line, then incomes would be distributed ____. |
|
Definition
|
|
Term
| Income Inequality: The sag in the Lorenz curve graphically depicts? |
|
Definition
|
|
Term
| Income Inequality: List and explain three reasons that incomes are unequal that most people would say are justified. |
|
Definition
| education, experience, hazards, work harder |
|
|
Term
| Income Inequality: If unequal pay for equal work occurs, then _____ exists. |
|
Definition
|
|
Term
| Income Inequality: When the productivity of a particular worker is assumed to be low because the worker belongs to a certain stereotyped group, _____ has occurred. |
|
Definition
|
|
Term
| Income Inequality: Name two ways to combat poverty used in the US today. |
|
Definition
| Welfare, food stamps, housing subsidy, medicaid |
|
|
Term
| Income Inequality: What is the central economic issue when dealing with issues of programs designed to combat poverty? |
|
Definition
|
|
Term
| Income Inequality: What is one solution to poverty that when implemented correctly will not destroy incentives? |
|
Definition
|
|
Term
| Income Inequality: Explain the role fo the EEOC and affirmation action in income inequality issues. |
|
Definition
| Discrimination reduces the supply of labor so cost goes up. |
|
|
Term
| Taxes: A tax that increases as income increases is known as a ____. |
|
Definition
|
|
Term
| Taxes: A tax rate that is the same at all income levels is known as a ____. |
|
Definition
|
|
Term
| Taxes: A tax that decreases as income increases is known as a ______. |
|
Definition
|
|
Term
| Taxes: The fraction of each additional dollar of income that is paid in taxes is known as the ____. |
|
Definition
|
|
Term
| Taxes: Which kind of tax is the personal income tax? |
|
Definition
|
|
Term
| Taxes: What are the three primary sources of revenue for the Federal Government |
|
Definition
| Income, payroll, corporate. |
|
|
Term
| Taxes: Local governments primarily use which type of tax? |
|
Definition
|
|
Term
| Taxes: State governments primarily use which type of tax? |
|
Definition
|
|
Term
| Taxes: School funding is primarily based on which type of tax? |
|
Definition
|
|
Term
| Taxes: The system of one level of government providing grants for the other level is known as: |
|
Definition
|
|
Term
| Taxes: What has been the reason behind the push in fiscal federalism recently? |
|
Definition
| Pushes decision making down to level of who needs to make it |
|
|
Term
| Taxes: The two key economic concepts with regard to taxation are? |
|
Definition
|
|
Term
| Taxes: The rationale that equally situated individuals should be taxed equally is known as: |
|
Definition
|
|
Term
| Taxes: The rational that differently situated individuals should be taxed differently is known as: |
|
Definition
|
|
Term
| Taxes: Which taxation principle underlies the rationale that people using a National Park should pay a fee in order to use the Park? |
|
Definition
|
|
Term
| Taxes: The efficiency concept of taxation states: |
|
Definition
| The tax itself shouldn't change the consumers behavior |
|
|
Term
| Taxes: Excess burden of tax causes the individual to do what? |
|
Definition
|
|
Term
| Taxes: Which theory states that the burden of tax sticks there the government places it? |
|
Definition
|
|
Term
| Taxes: The more inelastic the demand for a product, the (more or less) the consumer will pay for the tax increase? |
|
Definition
|
|
Term
| Since no more goods are added during trade, what is the purpose of trade? |
|
Definition
|
|
Term
| List two reasons nations trade |
|
Definition
| resources they don't have and it's CHEAPER because at comparative advantage, encourage or discourage relationships and/or beliefs |
|
|
Term
| If countries trade, will one country be worse off after the trade than they were before? Why? |
|
Definition
| No, they wouldn't trade if they were |
|
|
Term
| Trade redistributes goods so that both parties are (better off, worse off) than they were before the trade. |
|
Definition
|
|
Term
| Compare and contrast absolute advantage and comparative advantage, giving an example of each. |
|
Definition
Absolute: you can produce a product or service using less resources than another
Comparative: You can produce a product or service more efficiently |
|
|
Term
| If brazil can produce coffee using fewer resources than the US, they have which type of advantage? |
|
Definition
|
|
Term
| If both countries can produce televisions, but Japan has an advantage in factory efficiency, which type of advantage is being demonstrated? |
|
Definition
|
|
Term
| What is the advantage of comparative advantage from an economic perspective? |
|
Definition
| Specialization, allocating scarce resources efficiently |
|
|
Term
| The lawyer who can type who hires a secretary to type so he/she can spend more time practicing law is demonstrating which type of advantage? |
|
Definition
|
|
Term
| Specialization increases ______ for everybody concerned. |
|
Definition
|
|
Term
| Which type of countries will benefit most from trade, similar countries or dissimilar countries? |
|
Definition
|
|
Term
| List two problems associated with international trade |
|
Definition
| Rules & Regs, transportation, currency, lose jobs |
|
|
Term
| A tax on an import is called? |
|
Definition
|
|
Term
| A legal limit on the amount of goods allowed into a country is called? |
|
Definition
|
|
Term
| A payment by a government to the exporter to help reduce the costs and thus allow the exporter to compete more efficiently is called? |
|
Definition
|
|
Term
| Tariff money is paid to whom? |
|
Definition
|
|
Term
| How can a producer "beat" a tariff? |
|
Definition
|
|
Term
| Quota money is paid to whom |
|
Definition
|
|
Term
| From an economic perspective, what is the disadvantage to the producer with a quota? |
|
Definition
| no incentive to be efficient |
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Term
| Trad restrictions cost Americans ______ a year in higher prices. |
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Definition
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Term
| List two reasons that trade is restricted |
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Definition
| loss of jobs, political, rules & regs |
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Term
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Definition
| selling an import below cost to capture market share |
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Term
| Ultimately, who is most impacted by trade restrictions? Why? |
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Definition
| Consumers because we end up paying higher prices |
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Term
| List two agreements that were designed to help free trade. |
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Definition
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