Midterm Exam Flashcards
In a perfectly competitive market, goods are________ and firms are ______
homogenous; price takers
Economic system that exists in the United States
mixed
Woman who started first franchise
Martha Matilda Harper
an organization owned and operated by members using its services
cooperative
a business owned jointly by two or more people
partnership
a business enterprise owned jointly by two or more people that exists for a limited amount of time or in order to complete a specific project
joint venture
a business that has no more than 100 shareholders and meets strict IRS regulations which allow the taxes to “pass through”
S- Corporation
a cost, or disadvantage of ______ is double taxation of the owners
C- Corporation
what’s the outcome if the cost of production rises?
supply falls
Competition among producers and sellers leads to higher prices while competition among consumers leads to lower prices. TRUE or FALSE?
False
Competition led Henry Ford to produce an efficient production system while it lead Apple to produce an efficient delivery system for music. TRUE or FALSE?
True
Marginal cost is the cost of producing an additional unit of output. TRUE or FALSE?
True
The main motive of a for- profit business organization is to increase its revenue as much as it can. TRUE or FALSE?
False
Collusion is illegal even if the product s a necessity such as water or fuels. TRUE or FALSE?
True
At a given price, the amount of a good or service that a consumer is willing and able to buy is called…
quantity demanded
what is it called when the market demand shifts?
change in demand
3 things that create demand in the marketplace
consumers/households, businesses, governments
All else being equal, the law of demand tells us that when the price of a good or service decreases, the quantity consumers demand will___
increase
what is a shareholder?
someone who holds stock in a corporation
What is it called when quantity supplied and quantity demanded are equal?
market equillibrium
S.W.O.T
strengths
weaknesses
opportunities
threats
When there aren’t many businesses in the competitive market.
Ex. cereal industry
oligopoly
When one company dominates the entire competitive market.
Ex. power companies
monopoly
A lot of companies are competing against each other, but are creating similar goods.
Ex. fast food resturants
monopolistic competition
Business that is owned by a lone individual
Benefits: THE IHO
Costs: limited ways to raise capital, unlimited liability
sole- proprietorship
What sets a LLC apart from the rest of the types of businesses?
the liability does not apply to personal assets of the individual members
business in which there is a relationship between the owner of a trademark and an individual
franchise
Cost vs. Price
price is how much the consumer pays for a good or service
cost is how much spent on inputs
revenue vs. profit
revenue is the income generated by the sale of goods and services
profit is how much the producer makes after all the costs are subtracted
ratio of total cost or revenue or profit to the number of outputs sold
average cost
additional cost or change in total cost when adding an extra output
marginal cost
a good in which all units are the same
homogenous good
a good that performs a similar function but differs in another area
heterogenous goods
an individual or company that is not influential enough to affect the price of an item
price takers
Law of demand states…
that everything else being equal, as the price of a good or service increases, the quantity demanded for that good or service increases
Determinants of demand
income tastes and preferences number of buyers prices of related good or services consumer expectations
Law of supply states…
that if everything else is the same, producers will increase the quantity supplied at higher prices and decrease it at lower prices
Determinants of supply
resource prices production conditions price of related goods expectations number or suppliers
what causes changes in the market equilibrium?
a surplus or shortage
physical capital includes…
tools and machines
In Adam Smith’s “Wealth of Nations,” he finds that…
the role of the govt. should be limited but should provide for public works and protection of private ownership
factors of production
natural
human
capital
Entrepreneurs always accept ___
risks
Factor demand is a ____
derived demand
output per worker per unit of time
productivity
when a country buys goods from another country
imports
when a country sells goods to another country
exports
how many hours of labor a firm is willing to hire
labor demand
Only a few variables such as labor, raw materials and wages can be changed in the ____
short run
All variables can be changed in the _____
long run
when both parties are willing and agree to exchange a product for an agreed upon value
voluntary exchange
The Law of Diminishing Returns states…
there is a point where an additional laborer will decrease average production, and that marginal returns can eventually be negative
a measure of the production inputs based on the production outputs (vice versa)
production function
Households want to maximize their ______ and firms want to maximize their _____.
utility or satisfaction; profit
trade surplus
imports < exports
trade deficit
imports > exports
In factor markets, _____ sell factors of production and ____ purchase them.
Households; firms
Economics is the study of…
how goods and services are allocated when dealing with the issue of scarcity
shows the maximum combination of two goods that can be produced when all resources and the best technology is used
Production Possibilities Frontier
What type of market did Milton Friedman think was best?
free- market
3 basic economic questions
What goods and services should be produced?
How much?
For whom?
2 assumptions economics makes about peoples behavior
people are self- interested
people are rational
PACED
define a Problem list the Alternatives identify Criteria Evaluate make a Decision
the degree to which buyers and sellers respond to price change
elasticity
a legal max on the price at which a good can be sold
price ceiling
a legal minimum on price at which a good can be sold
price floor
