Economics, Strategy and Globalization

Question 1

Absolute advantage

Answer 1

an advantage a country has over other countries in the production of a good service

Question 2

Business cycle

Answer 2

a fluctuation in aggregate economic output that lasts for several years

Results from technological changes, political events, or governmental monetary policy

Question 3

Comparative advantage

Answer 3

an advantage a country has in producing a good or service because it has no alternative users of its resources that would involve a higher return

Question 4

Consumption function

Answer 4

depicts the relationship between changes in personal disposable income and consumption

Question 5

Cost leadeship

Answer 5

a strategy that involves focusing on reducing the costs and time to produce, sell and distribute a product or service

Question 6

Demand

Answer 6

the quantity of a good or service that a consumer is willing and able to purchase at a given price

Question 7

Deflation

Answer 7

the rate of decline in the price level of goods and services

Question 8

Depression

Answer 8

a deep and long-lasting recession

Question 9

Dumping

Answer 9

a form of predatory pricing in which a manufacturer in one country exports a product at a price that is lower than the priced charged in its home country

Question 10

Economic profit

Answer 10

the amount of profit in excess of normal profit

Question 11

Export subsidies

Answer 11

payments made by a government to encourage the production and export of specific products

Question 12

Government budget surplus (deficit)

Answer 12

the excess (deficit) of government taxes in relation to government transfer payments and purchases

Question 13

Inflation

Answer 13

the rate of increase in the price level of goods and services

Question 14

marginal product

Answer 14

the additional output obtained from employing one additional unit of resource

Question 15

marginal revenue

Answer 15

the additional revenue received from the sale of one additional unit of a product

Question 16

marginal revenue product

Answer 16

the change in total revenue from employing one additional unit of a resource

Question 17

market equilibrium

Answer 17

the price at which all the goods offered for sale will be sold

Question 18

monopolistic competition

Answer 18

a market characterized by many firms selling a differentiated product or service.

Question 19

nominal gross domestic product

Answer 19

the price of all goods and services produced by a domestic economy for a year at current market prices.

Question 20

nominal interest rate

Answer 20

the interest rate in terms of the nation’s currency

Question 21

normal profit

Answer 21

the amount of profit necessary to compensate the owners for their capital and/or managerial skills

Question 22

oligopoly

Answer 22

a market characterized by significant barriers to entry. As a result there are few sellers of the product.

Question 23

Personal disposable income

Answer 23

the amount of income that individuals received and have available to purchase goods and services

Question 24

potential gross domestic product

Answer 24

the maximum amount of production that could take place in an economy without putting pressure on the general level of prices

Question 25

price ceiling

Answer 25

a specified maximum price that may be charged for a good, usually established by a government. a price ceiling will cause good shortages

Question 26

price floor

Answer 26

a specified minimum price that may be charged for a good, usually established by a government. A price floor will cause overproduction of the good

Question 27

product differentiation

Answer 27

a strategy that involves modification of a product to make it more attractive to the target market or to differentiate it from competitors’ products.

Question 28

pure competition

Answer 28

an industry in which there are a large number of sellers of virtually identical products or services. no individual seller is able to affect the market price

Question 29

pure monopoly

Answer 29

a market in which there is a single seller of a product or service for which there are no close substitutes.

Question 30

real gross domestic product

Answer 30

the price of all goods and services produced by a domestic economy at price level adjusted (constant) prices

Question 31

real interest rate

Answer 31

the interest rate adjusted for inflation

Question 32

recession

Answer 32

a period of negative gross domestic product growth

Question 33

substitution effect

Answer 33

the fact that as price of a good or service falls, consumers will use it to replace similar goods or services

Question 34

supply

Answer 34

the quantity of a good or service that will be supplied by producers at a give price

Question 35

unemployment rate

Answer 35

the percentage of the total labor force that is unemployed at a given time