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Midterm Review
Honors
The added benefit received from the
purchase or use of the next unit of a
product
Marginal utility
What does a production possibilities
frontier demonstrate?
Total production combination of any two
products
The opportunity cost of increasing
production of one in terms of the loss of
the other
The arrangement of labor so that each
worker is doing fewer tasks than before:
Division of labor
What does specialization lead to?
Increased productivity
Where is labor bought and sold?
Factor market
What is the key benefit of the free
enterprise system characteristic of private
property rights?
Private property can be used as collateral
for entrepreneurs to qualify for bank loans
to start new businesses
What type of business structure has
unlimited life?
Corporation
The private ownership of the factors of
production:
Capitalism
If the price of a product increased, what
would happen to the demand of those
things considered its compliment?
Shift left
What is the likely elasticity of demand for
cocaine?
Inelastic
Of what business type is double taxation is
a disadvantage?
Corporation
Under what conditions of demand would a
monopoly be the most free to raise prices?
Inelastic demand
What 4 benefits do entrepreneurs
provide?
Jobs, tax receipts, products, philanthropy
Which economic system, has the lowest
standard of living?
Traditional
Which economic system fails most to
provide for the poor and sick?
Market
Why would a person be unwilling to pay
the same price for a second shirt, similar,
but of a different color than the first?
The second shirt provides diminished
marginal utility
A college education is an example of:
Investing in one’s human capital
Specialization
If a company that uses heavy machinery
has to order more machinery to increase
production, the elasticity of supply will
likely be:
Inelastic
The efficient use of the means of
production (also referred to as the rate of
production:
Productivity
An assembly line is an example of:
The division of labor
Explains the Law of Demand in that as the
price increases for a product, many
consumers will purchase similar cheaper
items instead
Substitution effect
When a politician proclaims support for
free universal health care for all, you
should scream:
TINSTAAFL!
What market type is most likely to engage
in acts of collusion?
Oligopoly
In free market systems, individuals are
largely free to buy and sell what they
want. That compromise between buyer
and seller wherein both benefit from the
transaction is called:
Voluntary exchange
What free market characteristic acts as
the economic engine of the economy,
creating a powerful incentive that creates
new entrepreneurs seeking opportunity
and success?
Profit motive
Why are prices relatively low in a
monopolistically competitive market?
Lots of competition with little chances to
collude
Why do market economic systems provide
consumers with the most satisfaction?
They provide a large variety of goods and
services
Competition
What concept does the common retail
slogan, “The customer is always right”
reflect?
Consumer sovereignty
What government role is being played
when Congress passes a bill meant to
reinforce federal Lemon Laws?
Setting legal framework
What role is the govt. playing when it is
enforcing anti-trust laws?
Maintaining competition
Taxing the wealthy at a higher rate is an
example of the govt. engaged in:
Redistributing wealth
What business form accounts for over
70% of all US businesses?
Sole proprietorship
Define the market wherein a differentiated
product with many sellers is sold amid
heavy non-price advertising:
Monopolistic competition
Which business form had the
disadvantage of unlimited liability and
finds it most difficult to attract top
personnel?
Proprietorship
What is the theoretical model economists
use to measure the competitive nature of
real markets?
Perfect competition
One partner in a partnership who’s
protected from unlimited liability because
she helped finance the venture, but does
not take part in managing the firm is
called:
A limited partner
What market structure defines the
women’s shoe market?
Monopolistic competition
What type of monopoly is the newly
created liquid memory market, a new
advancement in computer technology
patented by Econolabco?
Technological monopoly
What happens to the market price of cars
when the recession begins to recover?
Increases
A firm is able to take advantage of
economies-of-scale and lower its prices
below what competitors can afford,
forcing them out of the market. Name the
monopoly type:
Natural monopoly
A lawn mower, a tractor, a factory, a
computer, and a drill press are all
examples of:
Physical capital
Capital goods
Who sets price ceilings?
The government
What business form has the most control
over price?
Monopoly
What will the supply and demand curve
look like for a product whose quantities
cannot be increased?
S
D
Why do oligopolies remain oligopolies?
Huge cost barriers
Why is it easier for corporations to raise
financial capital?
Likelier to get a bank loan
Can issue more shares of stock to the
market
Can sell corporate bonds
What is the most regulated business type?
Corporation
When the price of a product increases, the
demand for its substitute:
Shifts right
D1
D2
What business form is hit with double
taxation?
Corporation
What happens to the market at
equilibrium?
The market is cleared
Surpluses and shortages disappear
What happens when price is set above
equilibrium?
Surpluses are created
Create a demand curve for avocados
showing the change in demand from 1935
to 2009:
P1
Q1
Q2
What would a S&D curve look like that
indicated a minimum wage?
P
S
D
Q
S&D curve for computers when consumer
income falls:
P1
Q2
Q1
Create a S&D curve for desks when wood
becomes more expensive and a new
strand of malaria wipes out 15% of the
world population:
S2
D2
S1
D1
What happens to market price and
quantity for computers when a strike
delays production?
S2
Demand doesn’t change
Supply shifts left
S1
D