Exam 2 Flashcards
What is perfect competition?
when there are many sellers and many buyers.
What is oligopsony?
When there are only a few major buyers.
What is the law of demand?
As price increases, demand falls.
What is the law of supply?
As price increases, production increases.
What is relative price?
The price of one item expressed as the price of another.
What does a price floor do?
Creates a surplus.
What is price elasticity of demand?
How much demand changes when price changes.
When is there a higher demand for substitute goods?
Demand increases when price for another good increases.
What is market failure?
When resources are not allocated efficiently.
What are public goods?
Things that can be used by more than one person at a time.
What is liquidity?
The ease of turning an asset into money?
How does fiat currency get value?
It is given value by declaration of the government.
What is fractional reserve?
When banks loan out most of its money.
What is interest?
The price of money?
What is a bond?
A certificate of indebtedness.
What is a mutual fund?
An investment company.
What is inflation?
A general increase in prices.
What is purchasing power?
The ability to buy goods and services.
What is discount rate?
What banks are charged for loans.
What are open market operations?
Buying and selling Federal securities.
What is the situation in which one producer has a smaller opportunity cost of producing a good or service compared to another producer?
Comparative advantage.
What is the situation in which one person or country can produce goods with a smaller input of resources than another?
Absolute advantage.
What is a restriction on the amount of goods that can be brought into a country for sale?
A quota.
What is an order forbidding citizens from trading with another country?
A sanction.
What is the status in which a nation is given all of the trade advantages that other nations receive?
Preferred Normal Trade Relations.
What will better communication, better transportation, and lower transaction costs do?
increase a country’s international trade.
What happens if an American company builds a factory in another country?
The investment will likely help that other country to grow economically.
What is a general rule of international trade?
If you want to export, you have to import.
What is the price of one country’s currency expressed in terms of another country’s currency?
Currency exchange rate.
What is the rate of exchange for goods and services between one country and another?
Real exchange rate.
What is the most common form of business organization in the U.S.?
Sole proprietorship
What involves a charter, board of directors, and shares of stock?
A corporation.
What creates 60-80% of new jobs in the U.S.?
small businesses.
What is an entrepreneur?
Someone who starts a business, develops a product, or dreams a dreamed.
What is the E-Myth?
That if a person is good at one aspect of business he will be good at all aspects of a business.
What is USP?
Unique Selling Perspective. What your product offers that can’t be found elsewhere.
What is economic profit?
It consideres opportunity cost as a real cost of business.
What is the law of diminishing marginal returns?
The productivity of an input decreases as quantity of input increases.
What is a deadweight loss?
A reduction in efficiency.
What is another term for a business cycle?
Economic fluctuation.
What is the price for labor called?
wages or salary.
What does investment in training and education improve?
The worth or quality of labor capital.
In recent years has the percentage of the work force made up of women increases, decreased, or stayed the same?
increased.
What is the result of a work force organized on the basis of discrimination?
Misallocation of resources.
What are closed shop states?
Where only union members can be hired in some industries.
What has the result of unions been?
To increase wages, but decrease the number of workers hired.
In 2007, how much of national income and individual income tax did the 20% of households with the highest income have?
over half of national income and paid over 80% of individual income tax
The negative effects of minimum wage laws fall hardest on who?
black teen males.
What is frictional unemployment?
people who have not had the time to find a job.
What is the natural rate of unemployment?
1-5%
