Midterm ReviewMidterm Review

HonorsHonors

The added benefit received from the The added benefit received from the purchase or use of the next unit of a purchase or use of the next unit of a productproduct

Marginal utilityMarginal utility

What does a production possibilities What does a production possibilities frontier demonstrate?frontier demonstrate?

Total production combination of any Total production combination of any two productstwo products

The opportunity cost of increasing The opportunity cost of increasing production of one in terms of the loss production of one in terms of the loss of the otherof the other

The arrangement of labor so that The arrangement of labor so that each worker is doing fewer tasks each worker is doing fewer tasks than before:than before:

Division of laborDivision of labor

What does specialization lead to?What does specialization lead to?

Increased productivityIncreased productivity

Where is labor bought and sold?Where is labor bought and sold?

Factor marketFactor market

What is the key benefit of the free What is the key benefit of the free enterprise system characteristic of enterprise system characteristic of private property rights?private property rights?

Private property can be used as Private property can be used as collateral for entrepreneurs to qualify collateral for entrepreneurs to qualify for bank loans to start new for bank loans to start new businessesbusinesses

What type of business structure has What type of business structure has unlimited life?unlimited life?

CorporationCorporation

The private ownership of the factors The private ownership of the factors of production:of production:

CapitalismCapitalism

If the price of a product increased, If the price of a product increased, what would happen to the demand of what would happen to the demand of those things considered its those things considered its compliment?compliment?

Shift leftShift left

What is the likely elasticity of What is the likely elasticity of demand for cocaine?demand for cocaine?

InelasticInelastic

Of what business type is double Of what business type is double taxation is a disadvantage?taxation is a disadvantage?

CorporationCorporation

Under what conditions of demand Under what conditions of demand would a monopoly be the most free would a monopoly be the most free to raise prices?to raise prices?

Inelastic demandInelastic demand

What 4 benefits do entrepreneurs What 4 benefits do entrepreneurs provide?provide?

Jobs, tax receipts, products, Jobs, tax receipts, products, philanthropyphilanthropy

Which economic system, has the Which economic system, has the lowest standard of living?lowest standard of living?

TraditionalTraditional

Which economic system fails most to Which economic system fails most to provide for the poor and sick?provide for the poor and sick?

Market Market

Why would a person be unwilling to Why would a person be unwilling to pay the same price for a second pay the same price for a second shirt, similar, but of a different color shirt, similar, but of a different color than the first?than the first?

The second shirt provides diminished The second shirt provides diminished marginal utilitymarginal utility

A college education is an example of:A college education is an example of:

Investing in one’s human capitalInvesting in one’s human capitalSpecializationSpecialization

If a company that uses heavy If a company that uses heavy machinery has to order more machinery has to order more machinery to increase production, machinery to increase production, the elasticity of supply will likely be:the elasticity of supply will likely be:

InelasticInelastic

The efficient use of the means of The efficient use of the means of production (also referred to as the production (also referred to as the raterate of production: of production:

ProductivityProductivity

An assembly line is an example of:An assembly line is an example of:

The division of laborThe division of labor

Explains the Law of Demand in that Explains the Law of Demand in that as the price increases for a product, as the price increases for a product, many consumers will purchase many consumers will purchase similar cheaper items insteadsimilar cheaper items instead

Substitution effectSubstitution effect

When a politician proclaims support When a politician proclaims support for free universal health care for all, for free universal health care for all, you should scream:you should scream:

TINSTAAFL!TINSTAAFL!

What market type is most likely to What market type is most likely to engage in acts of collusion?engage in acts of collusion?

OligopolyOligopoly

In free market systems, individuals In free market systems, individuals are largely free to buy and sell what are largely free to buy and sell what they want. That compromise they want. That compromise between buyer and seller wherein between buyer and seller wherein both benefit from the transaction is both benefit from the transaction is called:called:

Voluntary exchangeVoluntary exchange

What free market characteristic acts What free market characteristic acts as the economic engine of the as the economic engine of the economy, creating a powerful economy, creating a powerful incentive that creates new incentive that creates new entrepreneurs seeking opportunity entrepreneurs seeking opportunity and success?and success?

Profit motiveProfit motive

Why are prices relatively low in a Why are prices relatively low in a monopolistically competitive market?monopolistically competitive market?

Lots of competition with little Lots of competition with little chances to colludechances to collude

Why do market economic systems Why do market economic systems provide consumers with the most provide consumers with the most satisfaction?satisfaction?

They provide a large variety of goods They provide a large variety of goods and servicesand services

CompetitionCompetition

What concept does the common What concept does the common retail slogan, “The customer is retail slogan, “The customer is always right” reflect?always right” reflect?

Consumer sovereigntyConsumer sovereignty

What government role is being What government role is being played when Congress passes a bill played when Congress passes a bill meant to reinforce federal Lemon meant to reinforce federal Lemon Laws?Laws?

Setting legal frameworkSetting legal framework

What role is the govt. playing when it What role is the govt. playing when it is enforcing anti-trust laws?is enforcing anti-trust laws?

Maintaining competitionMaintaining competition

Taxing the wealthy at a higher rate is Taxing the wealthy at a higher rate is an example of the govt. engaged in:an example of the govt. engaged in:

Redistributing wealthRedistributing wealth

What business form accounts for What business form accounts for over 70% of all US businesses?over 70% of all US businesses?

Sole proprietorshipSole proprietorship

Define the market wherein a Define the market wherein a differentiated product with many differentiated product with many sellers is sold amid heavy non-price sellers is sold amid heavy non-price advertising:advertising:

Monopolistic competitionMonopolistic competition

Which business form had the Which business form had the disadvantage of unlimited liability disadvantage of unlimited liability and finds it most difficult to attract and finds it most difficult to attract top personnel?top personnel?

Proprietorship Proprietorship

What is the theoretical model What is the theoretical model economists use to measure the economists use to measure the competitive nature of real markets?competitive nature of real markets?

Perfect competitionPerfect competition

One partner in a partnership who’s One partner in a partnership who’s protected from unlimited liability protected from unlimited liability because she helped finance the because she helped finance the venture, but does not take part in venture, but does not take part in managing the firm is called:managing the firm is called:

A limited partnerA limited partner

What market structure defines the What market structure defines the women’s shoe market?women’s shoe market?

Monopolistic competitionMonopolistic competition

What type of monopoly is the newly What type of monopoly is the newly created liquid memory market, a new created liquid memory market, a new advancement in computer advancement in computer technology patented by Econolabco?technology patented by Econolabco?

Technological monopolyTechnological monopoly

What happens to the market price of What happens to the market price of cars when the recession begins to cars when the recession begins to recover?recover?

IncreasesIncreases

A firm is able to take advantage of A firm is able to take advantage of economies-of-scale and lower its economies-of-scale and lower its prices below what competitors can prices below what competitors can afford, forcing them out of the afford, forcing them out of the market. Name the monopoly type:market. Name the monopoly type:

Natural monopolyNatural monopoly

A lawn mower, a tractor, a factory, a A lawn mower, a tractor, a factory, a computer, and a drill press are all computer, and a drill press are all examples of:examples of:

Physical capitalPhysical capitalCapital goodsCapital goods

Who sets price ceilings?Who sets price ceilings?

The governmentThe government

What business form has the most What business form has the most control over price?control over price?

MonopolyMonopoly

What will the supply and demand What will the supply and demand curve look like for a product whose curve look like for a product whose quantities cannot be increased?quantities cannot be increased?

D

S

Why do oligopolies remain Why do oligopolies remain oligopolies?oligopolies?

Huge cost barriersHuge cost barriers

Why is it easier for corporations to Why is it easier for corporations to raise financial capital?raise financial capital?

Likelier to get a bank loanLikelier to get a bank loanCan issue more shares of stock to the Can issue more shares of stock to the

marketmarketCan sell corporate bondsCan sell corporate bonds

What is the most regulated business What is the most regulated business type?type?

CorporationCorporation

When the price of a product When the price of a product increases, the demand for its increases, the demand for its substitute:substitute:

Shifts right

D1 D2

What business form is hit with double What business form is hit with double taxation?taxation?

CorporationCorporation

What happens to the market at What happens to the market at equilibrium?equilibrium?

The market is clearedThe market is clearedSurpluses and shortages disappearSurpluses and shortages disappear

What happens when price is set What happens when price is set above equilibrium?above equilibrium?

Surpluses are createdSurpluses are created

Create a demand curve for avocados Create a demand curve for avocados showing the change in demand from showing the change in demand from 1935 to 2009:1935 to 2009:

P1

Q1 Q2

What would a S&D curve look like What would a S&D curve look like that indicated a minimum wage?that indicated a minimum wage?

S

D

P

Q

S&D curve for computers when S&D curve for computers when consumer income falls:consumer income falls:

P1

Q2 Q1

Create a S&D curve for desks when Create a S&D curve for desks when wood becomes more expensive and wood becomes more expensive and a new strand of malaria wipes out a new strand of malaria wipes out 15% of the world population:15% of the world population:

S1S2

D1D2

What happens to market price and What happens to market price and quantity for computers when a strike quantity for computers when a strike delays production?delays production?

Demand doesn’t changeSupply shifts left

D

S1S2