Economics for Managers Chapter 1

Question 0

Managerial Economics

Answer 0

Microeconomics applied to business decision making.

Question 1

Microeconomics

Answer 1

The branch of economics that analyzes the decisions that individual consumers, firm, and industries make as they produce, buy, and sell goods and services.

Question 2

Prices

Answer 2

The amounts of money that are charged for goods and services in a market economy. These act as signals that influence the behavior of both consumers and producers of these goods and services.

Question 3

Outputs

Answer 3

The final goods and services produced and sold by firms in a market economy.

Question 4

Inputs

Answer 4

The factors of production, such as land, labor, capital, raw materials, and entrepreneurship, that are used to produce the outputs, or final goods and services, that are bought and sold in a market economy.

Question 5

Macroeconomics

Answer 5

The branch of economics that focuses on the overall level of economic activity, changes in the price level, and the amount of unemployment by analyzing group or aggregate behavior in different sectors of the economy.

Question 6

Relative Prices

Answer 6

The price of one good in relation to the price of another, similar good, which is the way prices are defined in microeconomics.

Question 7

Markets

Answer 7

The institutions and mechanisms used for the buying and selling of goods and services. The four major types of markets in microeconomic analysis are perfect competition, monopolistic competition, oligopoly, and monopoly.

Question 8

Perfect Competition

Answer 8

A market structure characterized by a large number of firms in an industry, an undifferentiated product, ease of entry into the market, and complete information available to participants.

Question 9

Price-Taker

Answer 9

A characteristic of a perfectly competitive firm in which the firm cannot influence the price of its product, but can sell any amount of its output at the price established by the market.

Question 10

Profit

Answer 10

The difference between the total revenue that a firm receives for selling its product and the total cost of producing that product.

Question 11

Market Power

Answer 11

The ability of a firm to influence the prices of its products and develop other competitive strategies that enable it to earn large profits over longer periods of time.

Question 12

Imperfect Competition

Answer 12

Market structures of monopolistic competition, oligopoly, and monopoly, in which firms have some degree of market power.

Question 13

Monopoly

Answer 13

A market structure characterized by a single firm producing a product with no close substitutes.

Question 14

Barriers to Entry

Answer 14

Structural, legal, or regulatory characteristics of a firm and its market that keep other firms from easily producing the same or similar products at the same cost.

Question 15

Monopolistic Competition

Answer 15

A market structure characterized by a large number of small firms that have some market power as a result of producing differentiated products. This market power can be competed away over time.

Question 16

Oligopoly

Answer 16

A market structure characterized by competition among a small number of large firm that have market power, but that must take their rivals’ actions into account when developing their own competitive strategies.

Question 17

Profit Maximization

Answer 17

The assumed goal of firms, which is to develop strategies to earn the largest amount of profit possible. This can be accomplished by focusing on revenues, costs, or both.

Question 18

Circular Flow Model

Answer 18

The macroeconomic model that portrays the level of economic activity as a flow of expenditures from consumers to firms, or producers, as consumers purchase goods and services produced by these firms. This flow then returns to consumers as income received from the production process.

Question 19

Absolute Price Level

Answer 19

A measure of the overall level of prices in the economy.

Question 20

Personal Consumption Expenditures (C)

Answer 20

The total amount of spending by households on durable goods, nondurable goods, and services in a given period of time.

Question 21

Gross Private Domestic Investment Spending (I)

Answer 21

The total amount of spending on nonresidential structures, equipment, software, residential structures, and business inventories in a given period of time.

Question 22

Government Consumption Expenditures and Gross Investment (G)

Answer 22

The total amount of spending by federal, state, and local governments on consumption outlays for goods and services, depreciation charges for existing structures and equipment, and investment capital outlays for newly acquired structures and equipment in a given period of time.

Question 23

Net Export Spending (F)

Answer 23

The total amount of spending on exports (X) minus the total amount of spending on imports (M) or (F=X-M) in a given period of time.

Question 24

Export Spending (X)

Answer 24

The total amount of spending on goods and services currently produced in one country and sold abroad to residents of other countries in a given period of time.

Question 25

Import Spending (M)

Answer 25

The total amount of spending on goods and services currently produced in other countries and sold to residents of a given country in a given period of time.

Question 26

Gross Domestic Product (GDP)

Answer 26

The comprehensive measure of the total market value of all currently produced final goods and services within a country in a given period of time by domestic and foreign-supplied resources.

Question 27

Monetary Policies

Answer 27

Policies adopted by a country’s central bank that influence the money supply, interest rates, and the amount of funds available for lans, which, in turn, influence consumer and business spending.

Question 28

Fiscal Policy

Answer 28

Changes in taxing and spending by the executive and legislative branches of a country’s national government that can be used to either stimulate or restrain the economy.