Ch1

Question 1

an organization that strives for a profit by providing goods and services desired by its customers

Answer 1

business

Question 2

tangible items manufactured by businesses, such as laptops

Answer 2

goods

Question 3

intangible offerings of businesses that can’t be held, touched, or stored, such as a haircut

Answer 3

services

Question 4

a measure of the output of goods and services people can buy with the money they have

Answer 4

standard of living

Question 5

general level of human happiness based on such things as life expectancy, educational standards, health, sanitation, and leisure time

Answer 5

quality of life

Question 6

the potential to lose time and money or otherwise not be able to accomplish an organization’s goals

Answer 6

risk

Question 7

the money a company receives by providing services or selling goods to customers

Answer 7

revenue

Question 8

expenses such as rent, salaries, supplies, and transportation that the company incurs from creating and selling goods and services

Answer 8

costs

Question 9

the money that is left over when you subtract costs from revenue (when negative, it is a loss)

Answer 9

profit

Question 10

an organization, such as a charity, that exists to achieve some goal other than the usual business goal of profit

Answer 10

not-for-profit organization

Question 11

one of the four factors of production that includes farmland, forests, mineral and oil deposits, and water

Answer 11

natural resources

Question 12

one of the four factors of production that consists of the economic contributions of the human resources working with their minds and muscles

Answer 12

labor

Question 13

one of the four factors of production that includes the tools, machinery, equipment, and buildings used to produce goods and services

Answer 13

capital

Question 14

one of the four factors of production that consists of the people who combine the inputs of natural resources, labor, and capital to produce goods and services

Answer 14

entrepreneurs

Question 15

the new, fifth factor of production that refers to the combined talents and skills of the workforce

Answer 15

knowledge

Question 16

the study of people’s vital statistics, such as their age, gender, race, ethnicity, and location

Answer 16

demography

Question 17

the amount of goods and services one worker can produce

Answer 17

productivity

Question 18

the study of how a society uses scarce resources to produce and distribute goods and services

Answer 18

economics

Question 19

an economic system based on competition in the marketplace and private ownership of the factors of production (resources)

Answer 19

capitalism

Question 20

an economic system in which the government owns virtually all resources and controls all markets

Answer 20

communism

Question 21

an economic system in which the basic industries are owned by the government or by the private sector under strong government control

Answer 21

socialism

Question 22

societies that use more than one economic system (e.g. blending together socialism and capitalism)

Answer 22

mixed economies

Question 23

the study of the economy as a whole

Answer 23

macroeconomics

Question 24

the study of individual parts of the economy, such as households or companies

Answer 24

microeconomics

Question 25

the total market value of all final goods and services produced within a nation’s borders each year; represents the most basic measure of economic growth

Answer 25

gross domestic product (GDP)

Question 26

a decline in GDP that lasts for two consecutive quarters

Answer 26

recession

Question 27

when the average of all prices of goods and services is rising

Answer 27

inflation

Question 28

the value of what money can buy, which is reduced by inflation

Answer 28

purchasing power

Question 29

when the demand for goods and services is greater than the supply

Answer 29

demand-pull inflation

Question 30

when increases in production costs (such as expenses for materials and wages) causes an increase in prices of final goods and services

Answer 30

cost-push inflation

Question 31

an index of the prices of a “market basket” of goods and services purchased by typical urban consumers

Answer 31

consumer price index (CPI)

Question 32

measures the prices paid by producers and wholesalers for various commodities

Answer 32

producer price index (PPI)

Question 33

a government’s programs for controlling the amount of money circulating in the economy and interest rates

Answer 33

monetary policy

Question 34

also known as “the Fed”; the central banking system of the United States that prints money and controls how much of it will be in circulation

Answer 34

Federal Reserve System

Question 35

a type of monetary policy in which the Fed restricts the money supply by selling government securities or raising interest rates

Answer 35

contractionary policy

Question 36

a type of monetary policy in which the Fed increases growth in the money supply and lowers interest rates

Answer 36

expansionary policy

Question 37

a government’s programs for taxation and spending

Answer 37

fiscal policy

Question 38

when the government spends more for programs, such as social services, education, and defense, than it collects in taxes

Answer 38

federal budget deficit

Question 39

the quantity of a good or service that people are willing to buy at various prices; slopes downward because higher price means lower quantity demanded

Answer 39

demand

Question 40

the quantity of a good or service that business will make available at various prices; slopes upward because higher price means higher quantity supplied

Answer 40

supply

Question 41

the point at which there is balance between the quantity consumers will buy and the quantity suppliers make available

Answer 41

equilibrium

Question 42

factors that prevent new firms from competing equally with the existing firm

Answer 42

barriers to entry

Question 43

a market structure in which there are a large number of small firms in the market that sell similar products; price is determined by supply and demand; there are no barriers to entry

Answer 43

perfect competition

Question 44

a market structure in which a single firm accounts for all industry sales of a particular good or service; the firm controls the price; there are often very high barriers to entry

Answer 44

pure monopoly

Question 45

a market structure in which there are many firms in the market that have similar, but differentiated products; price differences result from product differences

Answer 45

monopolistic competition

Question 46

a few firms produce most or all of a good or service; barriers to entry are many

Answer 46

oligopoly