Final

Question 1

Abatement

Answer 1

The ending, reduction, or lessening of something.

Question 2

Absolute Advantage

Answer 2

One country can produce more of a good than another country

Question 3

Antitrust (Law)

Answer 3

Laws designed to maintain competition and prevent monopolies from developing.

Question 4

Autarky

Answer 4

Economic independence or self-sufficiency (Country, state or society that is economically independent).

Question 5

Barriers to entry

Answer 5

The existance of high start-up costs or other obstacles that prevent new competitors from easily entering an industry or area of business.

Question 6

Cartel

Answer 6

An agreement between firms (or countries) in an industry to formally collude

Question 7

Comparative Advantage

Answer 7

One country has a lower opportunity cost of producting a good than another country

Question 8

Economies of Scale

Answer 8

As a firm’s output increases, its LRATC tends to decline.

Question 9

Game Theory

Answer 9

An approach to analyzing oligopoly behavior using mathematics and simulation by making different assumptions about the players, time involved, level of information, strategies, and other aspects of the game.

Question 10

Gini Coefficient

Answer 10

A precise method of measuring the position of the Lorenz curve, defined as the area between the Lorenz curve and the equal distribution line divided by the total area below the equal distribution line.

Question 11

Herfindahl Index (HHI)

Answer 11

A way of measuring industry concentration, equal to the sum of the squares of market shares for all firms in the industry.

Question 12

Lorenz Curve

Answer 12

A graphical method of showing the income distribution by comulating families of various income levels on the horizontal axis and relating this to their comulative share of total income on the vertical axis.

Question 13

Market Power (or monopoly power)

Answer 13

The ability of a firm (or group of firms) to raise and maintain price above the level that would prevail under the competition.

> A firm with monopoly power has some control over price.

Question 14

Market Structure

Answer 14

The number of firms producing identical products which are homogeneous.

Question 15

Monopolistic Competition

Answer 15

Involves a large number of small firms and is similar to competition, with easy entry and exit, but unlike the competative model, the firms have differentiated their products.

Question 16

Monopoly

Answer 16

A one-firm industry with no close product substitutes and with substantial barriers to entry.

Question 17

Monopsony

Answer 17

A labor market with one employer.

Question 18

Natural Monopoly

Answer 18

Large economies of scale mean that the minimum efficient scale of operations is roughly equal to market demand.

Question 19

Oligopoly

Answer 19

A market with just a few firms dominating the industry where (1) each firm recognizes that it must consider its competitors’ reactions when making its own decisions (mutual interdependence), and (2) there are significant barriers to entry into the market

Question 20

Price Discrimination

Answer 20

Charging different consumer groups different prices for the same product.

First Degree: Requires the monopoly seller of a good or service to know the absolute maximum price that every consumer is willing to pay.

Second Degree: Price varies according to quantity demanded. The larger the quantity being purchased, the lower the price.

Third Degree: Means charging a different price to different consumer groups. Ex: Adults and children ticket prices at a movie theater.

Question 21

Prisoner’s Dilemma

Answer 21

A noncooperative game where players cannot communicate or collaborate in making their decisions about whether to confess or not, which results in inferior outcomes for both players. (Oligopoly Decisions).

Question 22

Quota

Answer 22

A gov’t-set limit on the quantity of imports into a country.

Question 23

Tariff

Answer 23

A tax on imported products.

Question 24

Mercosur

Answer 24

Customs union of southern countries:

• Argentina
• Brazil
• Paraguay
• Uruguay

Question 25

NAFTA

Answer 25

North American Free Trade Agreement:

Signed by Canada, Mexico & the USA agreeing to rules-based trade bloc in North America.

Question 26

Non-Tariff Barrier

Answer 26

A form of restrictive trade where barriers to trade are set up and take a form other than a tariff.

Question 27

Perfect Competition

Answer 27

the situation prevailing in a market in which buyers and sellers are so numerous and well informed that all elements of monopoly are absent and the market price of a commodity is beyond the control of individual buyers and sellers.

Question 28

Quintile

Answer 28

A statistical value of a data set that represents 20% of a given population. (Of five equal proportions)

Question 29

Specialization

Answer 29

A method of production where a business or area focuses on the production of a limited scope of products or services in order to gain greater degrees of productive efficiency within the entire system of businesses or areas.

Question 30

WTO

Answer 30

World Trade Organization

The only global international organization dealing with the rules of trade between nations. Negotiated and signed by the bulk of the world’s trading nations.