14-15 Economics Set 3 (M-O)

Question 1

additional cost of production associated with a small increase in the quantity produced

Answer 1

marginal cost

Question 2

additional revenue resulting from a small increase in the quantity produced

Answer 2

marginal revenue

Question 3

any situation in which a market does not do what market theorists believe it should

Answer 3

market failure

Question 4

quantity of currency plus bank reserves

Answer 4

monetary base

Question 5

situation in which one firm, or a group of them acting as a cartel, can control prices in a market, often by restricting output

Answer 5

market power

Question 6

ratio of the money supply to the monetary base

Answer 6

money multiplier

Question 7

quantity of money available to the economy

Answer 7

money supply

Question 8

a market in which there is free entry or exit, but every producer supplies a differentiated product and faces a downward sloping demand curve

Answer 8

monopolistic competition

Question 9

a market in which there is a single producer

Answer 9

monopoly

Question 10

a firm operating in an industry where there may be large initial capital costs, but after that, a very small additional cost of expansion, with large economies of scale; in such situations, a single firm may be the efficient solution

Answer 10

natural monopoly

Question 11

level of unemployment that would exist if the economy were producing at its potential output

Answer 11

natural rate of unemployment

Question 12

the difference between the purchases of foreign assets by domestic residents and the purchases of domestic assets by foreign residents

Answer 12

net capital outflow

Question 13

the proposition that in the long run, changes in the quantity of money affects the price level but do not affect any real quantities

Answer 13

neutrality of money

Question 14

the production of goods and services valued at current prices

Answer 14

nominal GDP

Question 15

a good or service for which demand is positively related to the buyer’s income

Answer 15

normal good

Question 16

economic analysis used to guide decisions about what should be as opposed to what is the case

Answer 16

normative economics

Question 17

relationship identified by Arthur Okun between the output gap and the level of cyclical unemployment

Answer 17

Okun’s law

Question 18

a market in which there are just a few producers

Answer 18

oligopoly

Question 19

a tool used by the Federal Reserve to adjust the money supply by buying or selling U. S. government bonds in the financial market

Answer 19

open market operations

Question 20

the cost of any choice is what must be given up by making that choice

Answer 20

opportunity cost

Question 21

the difference between actual output and potential output

Answer 21

output gap