Chapter 11-15

Question 1

perfect competition

Answer 1

a market in which there are many firms, each selling an identical product; many buyers; no barriers to the entry of of new firms into the industry; no advantage to established firms; and buyers and sellers are well informed

Question 2

Monopoly

Answer 2

A market in which one firm sells a good or service that has no close substitues and a barrier blocks the entry of new firms

Question 3

Monopolistic competition

Answer 3

a market in which a large number of firms compete by making similar but slightly different products

Question 4

Oligopoly

Answer 4

A market in which a small number of interdependent firms compete

Question 5

Price taker

Answer 5

a firm that cannot influence the price of the good or service that it produces

Question 6

Marginal revenue

Answer 6

the change in total revenue that results from a one unit increase in the quantity sold

Question 7

shutdown point

Answer 7

the point at which price equals minimum average variable cost and the quantity produced is that at which average variable cost is at its minimum

Question 8

Regulation

Answer 8

rules administered by a government agency to influence prices, quntities, entry and other aspects of economic activity in a firm or industry

Question 9

deregulation

Answer 9

the proces or removing regulation of prices, quantities, entry, and other aspects of economic activity in a firm or industry

Question 10

social interest theory

Answer 10

the theory that regulation achieves and efficient allocation of resource

Question 11

Capture theory

Answer 11

the theory that the regulation serves the self interest of the producer and results in max profit, underproduction, and deadweight loss

Question 12

Marginal cost pricing rule

Answer 12

a rule that sets price equal to marginal cost to achieve and efficient output

Question 13

Average cost pricing rule

Answer 13

a rule that sets price equal to average total cost to enable a regulated firm to avoid economic loss

Question 14

Rate of return regulation

Answer 14

a regulation that sets the price at a level that enables a firm to earn a specified target rate of return on its capital

Question 15

Price cap regulation

Answer 15

a rule that specifies the highest price that a firm is permitted to set, a price ceiling

Question 16

earnings sharing regulation

Answer 16

a regulation that requires firms to make refunds to customers when profits rise above target level

Question 17

Gross Domestic Product

Answer 17

the market value of all the final goods and services produced within a country in a given time period

Question 18

Final good or service

Answer 18

a good or service that is produced for its final user and not as a component of another good or service

Question 19

Intermediate good or service

Answer 19

a good or service that is used as a component of a final good or service

Question 20

consumption expenditure

Answer 20

the expenditure by households on consumption goods and services

Question 21

Investment

Answer 21

the purchase of new capital goods and additions to inventories

Question 22

government expenditure on goods and services

Answer 22

the expenditure by all levels of governemtn on goods and services

Question 23

net exports of goods and services

Answer 23

he value of exports of goods and services minus the value of imports of goods and services

Question 24

Exports of goods and services

Answer 24

items that firs in the united states produce and sell to the rest of the world

Question 25

imports of goods and services

Answer 25

items that households firms and governments in the US buy from the rest of the world

Question 26

Net taxes

Answer 26

taxes paid minus cash benefits recieved from governments

Question 27

saving

Answer 27

the amount of income that is not paid in net taxes or spent on consumption goods and services

Question 28

Net domestic product at factor cost

Answer 28

the sum of the wages interest rent and profit

Question 29

depreciation

Answer 29

the decrease in the value of capital that results from its use and from obsolenscence

Question 30

statistical discrepancy

Answer 30

the discrepancy between the expenditure approach and the income approach estimates of GDP calculated as the GDP expenditure total - the GDP income total

Question 31

Gross National product

Answer 31

the market value of all the final goods and services produced anywhere in the world in a given time period by the factors of production supplied by the residents of the country

Question 32

disposable personal income

Answer 32

income received by households-personal income taxes paid

Question 33

Real GDP

Answer 33

the value of the final gods and services produced in a given year expressed in terms of the prices in a base year

Question 34

Nominal GDP

Answer 34

The value of final goods and services produced in a given year expressed in terms of the prices of that same year

Question 35

Standard of living

Answer 35

The level of consumption of goods and services that people enjoy on average

Question 36

Real GDP per person

Answer 36

Real GPD divided by the population

Question 37

Potential GDP

Answer 37

The value of real GDP when all the economies factors of production are fully employed

Question 38

Business cycle

Answer 38

a periodic byt irregular up and down movement of total production and other measures of economic activity

Question 39

Recession

Answer 39

A period during which real GPD decreases for at least 2 successive quarters or defined by the NBER as a period of significant decline in total output, income, employment and trade usually lasting 6 months to a year and marked by contractions in many secotrs of the economy

Question 40

household production

Answer 40

the production of goods and services in the home

Question 41

Working age population

Answer 41

the total number of people aged 16 years and over who are not in jail, hospital, or other form of institutional care or are in the US armed forces

Question 42

Labor

Answer 42

the number of people employed plus the number of unemployed

Question 43

Unemployment rate

Answer 43

The percentage of the people in the labor force who are unemployed

Question 44

Labor force participation rate

Answer 44

LFPR=labor force/working age population

Question 45

Marginally attached worker

Answer 45

A person who does not have a job, is available and willing to work, has not made specific

Question 46

Discouraged worker

Answer 46

a marginally attached worker who has not made specific effort to find a job within the past 4 weeks because previous unsuccessful attempts were discouraging

Question 47

Full time workers

Answer 47

people who usually work 35 hours or more a week

Question 48

Part time workers

Answer 48

people who usually work less than 35 hours a week

Question 49

Part time for economic reasons

Answer 49

people who work 1-34 hours per week but are looking for full time work and cannot find it because of unfavorable business conditions

Question 50

Frictional unemployment

Answer 50

the unemployment that arises from people entering and leaving the labor force from quitting jobs to finding better ones and from the ongoing creation and destructive of jobs from normal labor turnover

Question 51

structural unemployment

Answer 51

the unemployment that arises when changes in technology or international competition change the skills needed to perform jobs or change the location of jobs

Question 52

cyclical unemployment

Answer 52

the fluctuating unemployment over the business cycle that increases during a recession and decreases during an expansion

Question 53

Natural unemployment rate

Answer 53

the unemployment rate when the economy is at full employment

Question 54

Full employment

Answer 54

when there is no cyclical unemployment or equivalently, when all the unemployment is frictional or structural

Question 55

potential GDP

Answer 55

the value of real GDP when the economy is at full employment, all the economies factors of production are employed

Question 56

output gap

Answer 56

real GDP- portential GDP expressed as a percentage of potential GDP