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Principles of Microeconomics > Chapter 3: Economic Decision Makers > Flashcards

Chapter 3: Economic Decision Makers Flashcards

1
Q

Households, firms, governments, and the rest of the world

A

Who are the 4 economic decision makers?

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2
Q

Agricultural

A

In earlier times, the economy was primarily _________

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3
Q

Self-sufficient, consumed

A

Because of the agrarian nature of the economy in early times, the house hold was largely __________ and ___________ what it produced

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4
Q

Better farming techniques and technology

A

What reduced the number of farmers and caused a shift in the economy

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5
Q

specialization, less

A

The rise of the two-earner household reduced __________ in household production and caused them to produce ______ for themselves and demand more from the market

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6
Q

level of satisfaction, sense of well-being, happiness, and overall welfare

A

Economists assume that people try to maximize their _________________

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7
Q

Utility

A

Households attempt to maximize __________

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8
Q

Utility

A

the satisfaction received from consumption; sense of well-being

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9
Q

limited resources, unlimited wants

A

Households use their ____________ —labor, capital, natural resources, and entrepreneurial ability—to satisfy their ________

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10
Q

labor earnings

A

More than two-thirds of personal income in the United States comes from ______ rather than from the ownership of other resources such as capital or natural resources

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11
Q

transfer payments

A

cash or in-kind benefits given to individuals by the government

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12
Q

cash transfers

A

monetary payments, such as welfare benefits, social security, unemployment compensation,and disability benefits

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13
Q

In kind transfers

A

giving actual goods like food, health care, and housing to people in place of money

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14
Q

Durable goods, nondurable goods, and services

A

Most of personal income goes to personal consumption in three broad spending categories:

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15
Q

durable goods

A

goods expected to last three or more years such as automobiles or refrigerator

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16
Q

nondurable goods

A

items such as food, clothing, and gasoline

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17
Q

services

A

things like haircuts, air travel, and medical care

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18
Q

no longer self-sufficient

A

Specialization and comparative advantage explain why households are ____________

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19
Q

to reduce the transaction costs

A

An entrepreneur, by contracting for many sweaters rather than just one, is able ______________

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20
Q

Cottage industry system

A

a system where profit seeking entrepreneurs relied on putting out raw materials like wool and cotton to rural households that turned this into finished products

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21
Q
  • promoted a more efficient division of labor
  • allowed for the direct supervision of production
  • reduced transportation costs
  • facilitated the use of machines far bigger than anything used in the home
A

The production process became organized in large, centrally powered factories that

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22
Q

Industrial Revolution

A

development of large-scale factory production that began in Great Britain around 1750 and spread to the rest of Europe, North America, and Australia

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23
Q

Firms

A

economic units formed by profit-seeking entrepreneurs who employ resources to produce goods and services for sale

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24
Q

maximize profit

A

We assume firms are trying to _____________

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25
Q

as a sole proprietorship, as a partnership, or as a corporation

A

A firm is organized in one of three ways:

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26
Q

Sole Proprietorship

A

a firm with a single owner who has the right to all profits but who also bears unlimited liability for the firm’s losses and debts

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27
Q

See sole proprietorship, partnership, and corporation notes in Chapter 3

A

See other side

28
Q

Partnerships

A

a firm with multiple owners who share the profits and bear unlimited liability for the firm’s losses and debts

29
Q

Corporations

A

a legal entity owned by stockholders whose lability is limited to the value of their stock

30
Q

S corporation

A

provides owners with limited liability, but profits are taxed only once-as income on each shareholder’s personal income tax return

31
Q

Cooperative

A

an organization consisting of people who pool their resources to buy and sell more efficiently than they could individually

32
Q

Consumer Cooperative

A

a retail business owned and operated by some or all of its customers in order to reduce costs

33
Q

Producer Cooperative

A

producers join forces to buy supplies and equipment and market their output

34
Q

Not-for-profit Organizations

A

groups that do not pursue profit as a goal; they engage in charitable, educational, humanitarian, cultural, professional, or other activities, often with a social purpose

35
Q

performs that task

A

If a household’s opportunity cost of performing a task is below the market price, then the household usually ________________

36
Q

Information Revolution

A

technological change spawned by the microchip and the Internet that enhanced the acquisition analysis, and transmission of information

37
Q

Market failure

A

a condition that arises when the unregulated operation of markets yields socially undesirable results

38
Q

Antitrust laws

A

prohibitions against price fixing and other anticompetitive practices

39
Q

collusion

A

an agreement among firms to fix the price and carve up the market

40
Q

Monopoly

A

a sole supplier of a product with no close substitutes

41
Q

Natural monopoly

A

one firm that can supply the entire market at a lower per-unit cost than could two or more firms

42
Q

Rival, exclusive

A

private goods are _____ and ______ in consumption

43
Q

Rival

A

the amount consumed by owner person is unavailable for others to consume

44
Q

Private goods

A

a good, such as pizza, that is both rival in consumption and exclusive

45
Q

Public goods

A

a good that, once produced, is available for all to consume, regardless of who pays and who doesn’t;such a good is nonrival and nonexclusive, such as a safer community

46
Q

Externality

A

a cost or a benefit that affects neither the buyer nor the seller, but instead affects people not involved in the market transaction

47
Q

external cost such as factory pollution

A

A negative externality imposes an

48
Q

external benefit such as getting inoculated against a disease (lowers the possibility of infecting others)

A

A positive externality confers an

49
Q

Fiscal Policy

A

borrowing to influence economy-wide variables such as inflation, employment, and economic growth

50
Q

Monetary Policy

A

regulation of the money supply to influence economy wide variables such as inflation, employment, and economic growth

51
Q

GDP

A

the total value of all final goods and services produced in the US

52
Q

Bulk

A

Taxes provide the ______ of revenue at all levels of government

53
Q

Ability-to-pay tax

A

those with a greater ability to pay, such as those earning higher incomes or those owning more property, should pay more taxes

54
Q

Benefits-received tax principle

A

those who get more benefits from the government program should pay more taxes

55
Q

Tax incidence

A

the distribution of tax burden among taxpayers; who ultimately pays the tax

56
Q

Proportional taxation

A

the tax as a percentage of income remains constant as income increases; (also called a flat tax)

57
Q

Progressive taxation

A

the tax as a percentage of income increases as income increases

58
Q

Marginal tax rate

A

the percentage of each additional dollar of income that goes to the tax

59
Q

Regressive taxation

A

the tax as a percentage of income decrease as income increases

60
Q

the opportunity costs of producing specific goods differs across countries

A

International trade occurs because ______________

61
Q

Merchandise trade balance

A

the value during a given period of a country’s exported goods minus the value of its imported goods

62
Q

Balance of payments

A

a record of all economic transaction during a given period between residents of one country and residents of the rest of the world

63
Q

Foreign exchange

A

foreign money needed to carry out international transactions

64
Q

Tariffs

A

a tax on imports

65
Q

Quotas

A

a legal limit on the quantity of a particular product that can be imported or exported

Principles of Microeconomics (4 decks)

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