Brainscape's Knowledge GenomeTM

Browse over 1 million classes created by top students, professors, publishers, and experts.


See full index

CFA EXAM Level 1 > Economics > Flashcards

Economics Flashcards

You may prefer our related Brainscape-certified flashcards:
CFA flashcards
1
Q

Law of Supply

A

When the selling price does not provide revenues sufficient to cover all costs and provide a profit, the item is not supplied.

This leads us to the law of supply, which states that as the price of a product moves higher, more of that product will be supplied. The higher price will make it more attractive for producers to produce and deliver more of the product.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Cross-price elasticity is positive:

A

Goods are substitutes

As one good’s price goes up, the other good’s quantity demanded goes down

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

Cross-price elasticities is negative:

A

Good are compliments

As one good’s price goes up, the other good’s quantity demanded goes down

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

Positive substitution effect & Positive income effect

A

Normal goods

the substitution and the income effects reinforce one another to cause the demand curve to be negatively sloped

When price decreases, consumption increases, leading to increases levels of unspent income

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

A decrease in the price of a good that a consumer purchases, leaving consumer with unspent income:

A

Income Effect

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

Giggen Good

A

The positive substitution effect < negative income effect, causing a positively sloped demand curve, where a drop in prices decreases consumption

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

When the positive substitution effect < negative income effect , consumption:

A

Consumption will decrese

Giffen good

When prices decrease, consumption is not pushed towards the good

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

A normal profit is best described as:

A

Zero economic profit;
Normal profit is the level of accounting profit such that implicit opportunity costs are just covered; thus, it is equal to a level of accounting profit such that economic profit is zero

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

A company will stay in the market in the long term if:
A company will stay in the market in the short term if:

A

Total revenue (price) >= total costs
the company is exceeding it’s variable costs
Revenue > variable costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

Profit is maximized when:

A

marginal revenue = marginal cost

Total revenue - total cost = is maximized

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

Output increases in the same proportion as input increases occur at:

A

Constant returns to scale

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Demand and Supply: The Demand Curve

A

QDX = f (Px, I, Py,…)

Quantity demanded is a function of:

Price of Px
Individuals income i
Price of related products (Py)
Many other factors may be added
Law of Demand: Typically, quantity increases as price decreases

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Demand and Supply: The Supply Function

A

QSX = f (Px, Cx, …)

Quantity supplied is a function of:

Price of good Px
Cost of production Cx
Labor cost
Material cost
Production overheads
Technology
Many other factors may be added

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Demand and Supply: Types of Market

A

Factor markets: Factors of production
Raw materials, labor, etc.
Firms are buyers
Product Markets: Services and Finished Goods
Firms are Sellers
Intermediate Markets: One firm’s finished products (components) used in the production of another firm’s output.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

Demand and Supply: Shifts and Movements

A

Changes in price (Px) cause movements along the supply and demand curves.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

Demand and Supply: Aggregating Demand and Supply Curves

A

Market supply = aggregate of the supply functions of the firms in the market

The same approach can be used to formulate market demand

Example: 50 firms in the market

Supply function: Qs = -250 +2.5Px
Market supply = Qs = -(50 x 250) + (50 x 2.5 Px)
Qs = -12,50 + 125Px
Invert function: Px = 0.008Qs + 100
0.008 = slope coefficient of supply curve

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

Inferior good

A

Positive substitution effect > negative income effect:

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q
A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

Occurs when a business charges the maximum possible price a consumer is willing to pay

A

First-degree price discrimination (perfect price discrimination)

Second degree: invovles using the quantity purchased as the basis for the pricing of a particular good

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Economic profits is different from accounting because it includes:

A

Opportunity Cost
Economic Profit = accounting profit - opportunity costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

Oligopoly firms are said to be:

A

Interdependent

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

All firms will increase output when:

A

MR > MC

MR= Market price (perfect competition) & will stop production when Price = MR = MC

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

For all firms, profits are maximized where:

A

MR = MC

(Maximizes profits, not revenue)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

Int’l Trade/Cap Flows: GNP & GDP

A

Gross Domestic Product (GDP): Value of goods and servies produced in a country
Gross National Product (GNP): Value of good and servies produced by a country’s citizens
Differences:
Income of citizens working abroad, non-citizens working in country
Income to capital owned by foreigners, foreign capital owned by citizens
GDP is better for measuring domestic activity

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

Int’l Trade/Cap Flows: Benefits/Costs of International Trade

A

Benefits:

Lower cost to consumers of imports
Higher employment, wages, and profits in export industries
Costs:

Displacement of workers and lost profit in industries competing with imported goods

Economists: Benefits outweigh costs

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Aggregate Output: GDP

A

Market value of all final goods and services produced in a country/economy.

Produced during the period
Only goods that are valued in the market
Final goods and services only (not intermediate)
Rental value for owner occupied housing (estimated)
Government services (at cost)-not transfers

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

Int’l Trade/Cap Flows: Absolute vs. Comparative Advantage

A

Absolute advantage refers to lower cost in terms of resources used

Comparative advantage refers to lower opportunity cost to produce a product

Law of comparative advantage:

Trade makes all countries better off
Each country specializes in goods they produce most efficiently and trades for other goods
Outcome: Increased worldwide output and wealth with no country being worse off

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Aggregate Output: Calculating GDP - Income Approach

A

Earnings of all households + businesses + government

Expenditures Approach

Sum the market values of all final goods and services produced in the economy

OR

Sum all the increases in value at each stage of the production process.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Absolute Advantage

A

A country’s ability to produce a good or service at a lower absolute cost than its trading partner.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Aggregate Demand

A

The total quantity of goods and services demanded within an economy.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Aggregate demand curve

A

Shows the relationship between the total quantity of goods and services demanded in an economy and the overall price level. It represents the total spending or demand for all goods and services in an economy at different price levels.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

Aggregate income

A

The value of all the payments earned by the suppliers of factors used in the production of goods and services.

Aggregate outcome and aggregate income must be equal

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Aggregate output

A

The value of all the goods and services produced in a period of time.

Aggregate outcome and aggregate income must be equal

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

Aggregate supply

A

The quantity of goods and services produced at any given level of price.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Aggregate supply curve

A

The level of domestic output produced at each price leve

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

Balance of payments

A

Summarizes a country’s economic transactions with the rest of the world over a period of time.

Double-entry bookkeeping

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

Balance of trade deficit

A

When an economy is spending more on foreign goods and services than foreign economies are spending on the domestic country’s goods and services.

It is like the domestic country is “spending more than it’s making”

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

Balanced Budget

A

Government budget where spending = revenue

Revenue primarily from taxation

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Capital account

A

The capital account is one of the major components of a country’s balance of payments, alongside the current account and financial account. It tracks the flow of capital* between a country and the rest of the world.

*includes debt forgiveness, migrant transfers and assets, and the sale of non produced/non financial assets like natural resources or intangible assets.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

Capital market expectations

A

Expectations regarding the risk and return prospects of asset classes.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Capital restrictions

A

Controls placed on movement of capital in or out of a coutry. May impact foreigners’ ability to own domestic assets and/or domestic residents’ ability to own foreign assets.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

Closed economy

A

An economy that is self sufficient and does not trade with other countries.

aka autarkic economy

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Comparative advantage

A

A country’s ability to produce a good or service at a lower relative cost (opportunity cost) than its trading partner.

as opposed to an absolute advantage

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

Complements

A

The downswing of a business cycle after the peak and before the trough

Recession or depression

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Contractionary fiscal policy

A

Fiscal policy with the objective being a contraction of the real economy. Government spending may be reduced and taxes raised.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

Cost-push

A

Inflation caused by rising costs (wages).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Core inflation

A

The inflation rate based on a price index of goods and services except food and energy.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

Cross-price elasticity of demand

A

% Change in Quantity Demanded / % Change in the Price of a different good

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

theory of the consumer

A

deals with consumption (the demand for goods and services) by utility-maximizing individuals (i.e., individuals who make decisions that maximize the satisfaction received from present and future consumption).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

theory of the firm

A

deals with the supply of goods and services by profit-maximizing firms. The theory of the consumer and the theory of the firm are important because they help us understand the foundations of demand and supply. Subsequent readings will focus on the theory of the consumer and the theory of the firm.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

Os mercados podem dividir-se em :

A

Factor Markets are markets for the purchase and sale of factors of production. In capitalist private enterprise economies, households own the factors of production (the land, labor, physical capital, and materials used in production)

Good Markets are markets for the output of production. From an economics perspective, firms, which ultimately are owned by individuals either singly or in some corporate form, are organizations that buy the services of those factors. Firms then transform those services into intermediate or final goods and services.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

when the quantity that buyers are willing and able to purchase at a given price is just equal to the quantity that sellers are willing to offer at that same price, we say the market has discovered ….

A

the equilibrium price

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

If, at a given quantity, the highest price that buyers are willing to pay is equal to the lowest price that sellers are willing to accept

A

the quantity is at equilibrium

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q
A
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

Qdx=f(Px,I,Py,…)

o que representam as variáveis?

A

where Qdx

represents the quantity demanded of some good X (such as per household demand for gasoline in gallons per week), Px is the price per unit of good X (such as $ per gallon), I is consumers’ income (as in $1,000s per household annually), and Py is the price of another good, Y. (There can be many other goods, not just one, and they can be complements or substitutes.) Equation 1 may be read, “Quantity demanded of good X depends on (is a function of) the price of good X, consumers’ income, the price of good Y, and so on.”

41
Q

Supply Function and the Supply Curve

A

Qsx=f(Px,W,…)

where Qsx

is the quantity supplied of some good X, such as gasoline, Px is the price per unit of good X, and W is the wage rate of labor in, say, dollars per hour. It would be read, “The quantity supplied of good X depends on (is a function of) the price of X (its “own” price), the wage rate paid to labor, etc.”

Equation (8) 

Qsx=−175+250Px−5W

Notice that this supply function says that for every increase in price of $1, this seller would be willing to supply an additional 250 units of the good. Additionally, for every $1 increase in wage rate that it must pay its laborers, this seller would experience an increase in marginal cost and would be willing to supply five fewer units of the good.
We might be interested in the relationship between only two of these variables, price and quantity supplied. Just as we did in the case of the demand function, we use the assumption of ceteris paribus and hold everything except own-price and quantity constant. In our example, we accomplish this by setting W to some value, say, $15. The result is Equation 9:

Equation (9) 

Qsx=−175+250Px−5(15)=−250+250Px

42
Q

Decreasing returns to scale

A

When increases in output are proportionately smaller than the increase in inputs.

43
Q

Demand curve

A

A graph showing the relationship between quantity demanded and price paid.

44
Q

Demand-pull

A

Type of inflation where increasing demand raises prices generally (demand outpaces supply).

Workers demand wage hikes to catch up to cost of living.

26
Q
Define:

Demand function

A

45
Q

Demand function

A

A mathematical representation that describes the relationship between the quantity demanded of a particular good or service and the factors that influence that demand.

46
Q

Demand shock

A

An unexpected disruption to demand.

Can be caused by things like transportation disruption, trade disputes, etc. (ex. Ever Given suez canal disruption of 2021 + port backlogs)

46
Q

Diminishing marginal productivity

A

Diminishing marginal productivity

47
Q

Discouraged worker

A

A person who has given up seeking employment.

48
Q

Diseconomies of scale

A

When the cost per unit of production increases as a result of the growth of the company and overall production.

Typically results in declining profit margins

49
Q

Domestic content provisions

A

When a percentage of the value added (or components used) in production should be of domestic origin.

50
Q

Economic costs

A

Total accounting costs + implicit opportunity costs

51
Q

Economies of scale

A

Reduction in cost per unit resulting from increased production.

52
Q

Economic indicator

A

Variable providing insight into the state of the overall economy.

53
Q

Economic union

A

A common market + common economic institutions and coordination of economic policies among members.

Common fiscal and monetary policy

Level of economic integration

54
Q

Elasticity

A

General measure of how sensitive one variable is to a change in another variable.

55
Q

Elasticity of supply

A

Sensitivity of quantity supplied / change in price.

%∆QSupplied/%∆P

56
Q

Expansion

A

Upward swing of a business cycle after the trough and before the peak.

56
Q

Elasticity of demand

A

Sensitivity of quantity demanded / change in a product’s own price.

%∆QDemanded/%∆P

57
Q

Exports

A

Goods and services an economy sells to other countries.

57
Q

Expansionary

A

Causing the real economy to grow/expand.

58
Q

Externality

A

Effect of a market transaction that is borne by parties other than those who transacted.

Cost or benefit caused by a producer but which does not financially impact that producer.

59
Q

Fed funds rate

A

US interbank lending rate on overnight reserves.

A central bank policy rate

60
Q

Fiat money

A

Money that is not backed by (convertible into) a commodity.

61
Q

Financial account

A

One of the major components of a country’s balance of payments, alongside the current account and capital account. It tracks the investment flows* between a country and the rest of the world.

*financial assets abroad + foreign-owned financial assets within

62
Q

First-degree price discrimination

A

Monopolist can charge each customer the highest price that customer is willing to pay.

62
Q

Fiscal multiplier

A

Change in national income / Change in government spending

63
Q

Fiscal policy

A

The use of taxes and government spending to influence the economy.

63
Q

Foreign currency reserves

A

When a central bank holds non-domestic currency deposits and non-domestic bonds in reserve.

63
Q

Fisher effect

A

The thesis that the real rate of interest in an economy is stable over time, therefore changes in nominal interest rates are due to changes in expected inflation.

64
Q

Foreign exchange gains or losses

A

Specifically when changes in the exchange rate between an investor’s currency and the local currency of the security results in a gain or loss in value.

when the relative strength of the currencies involved changes

65
Q

Foreign direct investment

A

Direct investment by a firm (in the source country) in productive assets in a foreign country (the host country).

66
Q

Free trade

A

No government restrictions on a country’s ability to trade.

ex. no tariffs or quotas

67
Q

Free trade areas

FTA

A

When barriers to the flow of goods and services among members have been reduced or eliminated. Trade between members is treaded very favourably.

for ex. reducing tariffs.

Level of economic integration

68
Q

Bilateralism

A

Cooperation between two countries.

69
Q

Giffen goods

A

Goods that are consumed more as the price of the good rises.
An inferior good whose income effect overwhelms its substitution effect when price changes (can no longer afford more expensive substitutes so deman increase for the inferior good, even as price is rising).

Often arise in cases of limited choice (substitutions) and income constraints.

70
Q

Gross domestic product

GDP

A

The market value of all goods and services produced in the economy in a given time period.

or the aggregate income earned by households, companies, and the government in an economy in a given time period.

71
Q

Human capital

A

Accumulated knowledge and skill which a worker acquires via education, training, and experience.

72
Q

Imports

A

Goods and services that a domestic economy (i.e., house-holds, firms, and government) purchases from other countries.

73
Q

When demand for a good is inelastic, a higher price will:

A) have no impact on the demand for the good.
B) lead to an increase in total expenditures for the good.
C) fail to reduce the quantity demanded for the good.

A

B
When demand is relatively inelastic, consumers do not reduce their quantity demanded very much when the price increases. That is, a given percentage increase in price results in a smaller percentage reduction in quantity demanded. Thus, total expenditures on the good increase. “Fail to reduce the quantity demanded for the good” is inaccurate because that would only be true if demand was perfectly inelastic.

74
Q

own price elasticity = ?

A

% change in quantity demanded / % change in own price

75
Q

cross price elasticity = ?

A

% change in quantity demanded / % change in price of other goods

76
Q

income elasticity = ?

A

% change in quantity demanded / % change in income

77
Q

what is the formula for?

% change in quantity demanded / % change in own price

A

A

own price elasticity

77
Q

when demand is elastic, |own price elasticity|____

A

> 1

78
Q

when demand is inelastic, |own price elasticity|____

A

<1

79
Q

cross price elasticity > 0: related good is _______

A

a substitute

80
Q

cross price elasticity _____: related good is a substitute

A

> 0

81
Q

cross price elasticity ____ related good is a complement income

A

<0

82
Q

cross price elasticity < 0: related good is _____

A

a compliment

83
Q

income elasticity > 0: good is an ___ good

A

normal

83
Q

elasticity < 0: good is an____ good

A

inferior

83
Q

_____: good is an inferior good

A

elasticity < 0

83
Q

Expenditure Approah

A

Considers total spending on all final goods and services produced during the year

84
Q

How is expenditure approach measured

A

By summing the following expenditure items:

  • Personal Consumption
  • Gross Private Investment (expenditures of business)
  • Government Consumption and Gross Investment
  • Net Exports of Goods and Services
85
Q

National Income

A

The sum of Employee Compensation, Proprietor’s Income, Rents, Corporate Profits, Interest Income.

86
Q

Nominal GDP

A

Gross domestic product measured at current prices

87
Q

Income Approach

A

A supply (i.e., production) oriented approach that measures GDP by summing the following components:
Employee Compensation
Proprietor’s Income
Rents
Corporate Profits
Interest Income
Indirect Business Taxes
Depreciation
Net income of foreigners (the income foreigners earn domestically minus the income that domestic citizens earn aboard).

87
Q

Real GDP

A

Measure of the increase of actual production

88
Q

What is not included in the GDP?

A

*Household Goods and Services - domestic chores such as cleaning, washing the car, or gardening are not captured in GDP unless someone is paid to do them. This may distort historical GDP comparisons if, for example, over time more households employ outsiders to perform these tasks.
*Black Market Activities - Goods and services sold in illegal markets
*Quality of Life - GDP does not reflect productivity or the quality of goods produced and sold.
*Pollution - GDP does not adjust output for any damaging side effects, such as air or water pollution. Cleaning up will add to GDP as it occurs, but there is no adjustment to current GDP for creating the problem in the first place.

89
Q

Inflation

A

The continuing rise in the general level of prices of goods and services. The purchasing power of the monetary unit, such as the American dollar, declines when inflation is present.

89
Q

Consumer Price Index (CPI)

A

Inflation is measured and tracked using the CPI. The CPI is a basket of consumer goods and services, the total price of which is recorded across time.

89
Q

GDP deflator

A

A price index that corresponds to the price change exhibited by all final goods and services produced.

90
Q

Frictional Unemployment

A

The results of employers not being aware of qualified workers and workers not being aware of available jobs

91
Q

Structural Unemployment

A

When the structural characteristics of the economy change

92
Q

Cyclical Unemployment

A

a type of unemployment that occurs when the economy experiences business cycles or fluctuations, such as economic upturns or downturns. Derives its name from the business cycle, is due to decreases in the aggregate demand for goods and services.

93
Q

Full Employment

A

The rate of employment resulting from the efficient utilization of the total labor force

94
Q

Natural Rate of Unemployment

A

The long-run average unemployment rate caused by structural and frictional factors

95
Q

Fiscal Policy

A

The government’s use of taxation and spending polices to achieve various macroeconomic goals.

96
Q

Expansionary Fiscal Policy

A

A macroeconomic policy that aims to increase aggregate demand in the economy by increasing government spending or cutting taxes. Attempts to stimulate the economy by either reducing taxes or increasing expenditures.

97
Q

Restrictive Fiscal Policy

A

Also known as a contractionary fiscal policy, is a government’s tax and spending policy that aims to slow the economy’s growth to combat inflation. Restrictive Fiscal Policy attempts to restrain (slow) the economy by increasing taxes or reducing government expenditures.

98
Q

Monetary Policy

A

Used by the central bank to help achieve macroeconomic goals by changing the amount of money in circulation

99
Q

Expansionary Monetary Policy

A

Seeks to stimulate the economy by increasing the money supply

100
Q

Restrictive Monetary Policy

A

Seeks to slow the economy by decreasing the money suppy

101
Q

Marginal Propensity to Consume (MPC)

A

The proportion of each additional dollar of income spent on personal consumption

MPC = additional consumption / additional income

102
Q

Classical economics

A

The leading ideas of classical economics are free trade, a free marketplace, and the ability of individuals to pursue their own success at their own risk.

103
Q

Keynesian Economics

A

The idea that governments should play an active role in their countries’ economies, instead of just letting the free market reign. Keynesians believe that, because prices are somewhat rigid, fluctuations in any component of spending—consumption, investment, or government expenditures—cause output to change. If government spending increases, for example, and all other spending components remain constant, then output will increase.

104
Q

Microeconomics

A

The part of economics concerned with single factors and the effects of individual decisions. Deals with the decisions made by the individual firm.
Microeconomics is the study of individual and business economic activity. Two examples are: an individual creating a budget to put themselves in a better financial position; and a business cutting costs in order to maximize profit.

105
Q

Law of Diminishing Returns

A

A principle stating that profits or benefits gained from something will represent a proportionally smaller gain as more money or energy is invested in it. that as more and more resources (e.g., labor) are devoted to the production process, they increase output, but at a decreasing rate.

106
Q

Price Searcher Market

A

A price searcher market is a market where firms have some pricing power because they sell differentiated products. In these markets, firms can set their own prices and often adjust them based on demand.

107
Q

Entry Barriers

A

obstacles that make it difficult for a firm to enter a given market.

108
Q

Entry Barriers Examples

A

*Economies of Scale
* Government licens

109
Q
  1. Which of the following statements most accurately reflects the law of supply?
    A. Businesses will produce only the quantity of goods they believe consumers will buy
    B. Consumers will buy more of a good as the price that good declines
    C. As the price of a good increases, more of that good will be supplied
    D. As more inputs are devoted to production, output increases at an ever decreasing rate
A

As price increases, quantity supplied increases.

The law of supply describes the relationship between price and quantity si[upp;l

CFA EXAM Level 1 (11 decks)

Brainscape helps you reach your goals faster, through stronger study habits.
© 2024 Bold Learning Solutions. Terms and Conditions