Section 4 Ch. 4-7

Question 0

the cheaper something is, the more of it we will buy

Answer 0

Law of demand

Question 1

is the desire to own something and the ability to pay for it.

Answer 1

Demand

Question 2

The law of demand is the result of two separate patterns of behavior that overlap

Answer 2

Substitution and income effect

Question 3

takes place when a consumer reacts to a rise in the price of one good by consuming less of that good and more of a substitute good.

Answer 3

Substitution effect

Question 4

occurs when the change in consumption results from a change in income.

Answer 4

Income effect

Question 5

is a table that lists the quantity of a good that a person will purchase at each price in a market.

Answer 5

Demand schedule

Question 6

is a table that lists the quantity of a good all consumers in a market will buy at each different price.

Answer 6

Market demand schedule

Question 7

a graphic representation of a demand schedule.

Answer 7

Demand curve

Question 8

a Latin phrase that means “all other things held constant”

Answer 8

Ceteris paribus

Question 9

a good that consumers demand more of when their incomes increase.

Answer 9

Normal good

Question 10

a good that consumers demand less of when their income increases.

Answer 10

Inferior good

Question 11

two goods that are bought and used together.

Answer 11

Compliments

Question 12

goods used in place of one another.

Answer 12

Substitutes

Question 13

a measure of how consumers react to a change in price.

Answer 13

Elasticity of demand

Question 14

not very sensitive to price change

Answer 14

Inelastic

Question 15

sensitive to price change

Answer 15

Elastic

Question 16

take the percentage change in the demand of a good, and divide this number by the percentage change in the price of the good.

Answer 16

Elasticity formula

Question 17

describes demand whose elasticity is exactly equal to one.

Answer 17

Unitary elastic

Question 18

the total amount of money a firm receives by selling goods or services.

Answer 18

Total revenue

Question 19

Elastic demand comes from one or more of these factors:

Answer 19

1. availability of substitute goods
2. a limited budget that does not allow price changes
3. the perception of the good as a luxury item

Question 20

Supply: the amount of goods available.

Answer 20

Supply

Question 21

the tendency of suppliers to offer more of a good at a higher price.

Answer 21

Law of supply

Question 22

is used to described how much of a good is offered for sale.

Answer 22

Quantity supplied

Question 23

shows the relationship between price and quantity supplied for a specific good.

Answer 23

Supply schedule

Question 24

is all of the supply schedules of individual firms in a market.

Answer 24

Market supply schedule

Question 25

is a measure of the way suppliers respond to a change in price.

Answer 25

Elasticity of supply

Question 26

the change in output from hiring one additional unit of labor.

Answer 26

Marginal product of labor

Question 27

is a level of production in which the marginal product of labor increases as the number of workers increase.

Answer 27

Increasing marginal returns

Question 28

is a level of production in which the marginal product of labor decreases as the number of workers increases.

Answer 28

Diminishing marginal returns

Question 29

a cost that does change, no matter how much of a good is produced.

Answer 29

Fixed costs

Question 30

a cost that rises or falls depending on how much is produced

Answer 30

Variable costs

Question 31

is the total of the fixed and variable costs added together

Answer 31

Total costs

Question 32

The additional cost of producing one more unit

Answer 32

Marginal costs

Question 33

the cost of operating a facility.

Answer 33

Operating cost

Question 34

is a government payment that supports a business or market

Answer 34

Subsidy

Question 35

is a tax on the production or sale of a good.

Answer 35

Excise tax

Question 36

are interventions in a market that affects the production of a good.

Answer 36

Regulations

Question 37

is the point of balance between price and quantity.

Answer 37

Equilibrium

Question 38

occurs when quantity supplied is not equal to quantity demanded in a market.

Answer 38

Disequilibrium

Question 39

occurs when quantity demanded is more than quantity supplied.

Answer 39

Excess demand

Question 40

occurs when quantity supplied exceeds quantity demanded.

Answer 40

Excess supply

Question 41

when the quantity supplied is greater than the quantity demanded.

Answer 41

Surplus

Question 42

occurs when the quantity demanded is greater than the quantity supplied.

Answer 42

Shortage

Question 43

the costs consumers pay to find the good.

Answer 43

Search costs

Question 44

is a sudden shortage of a good.

Answer 44

Supply shock

Question 45

is when goods are allocated using criteria other than price

Answer 45

Rationing

Question 46

is a forum for illegal goods

Answer 46

Black market

Question 47

is a market structure in which a large number of firms all produce the same product.

Answer 47

Perfect competition

Question 48

Four Conditions for Perfect Competition

Answer 48

1. Many buyers and sellers participate in the market. 2. Sellers offer identical products. 3. Buyers and sellers are well informed about products. 4. Sellers are able to enter and exit the market freely.

Question 49

A product that is considered the same regardless of who makes or sells it

Answer 49

Commodity

Question 50

are factors that make it difficult for a new firm to enter a market.

Answer 50

Barriers to entry

Question 51

are expenses that a firm must pay before it can begin to produce and sell goods.

Answer 51

Start up costs

Question 52

forms when barriers prevent firms from entering a market that has a single supplier.

Answer 52

Monopoly

Question 53

factors that cause a producer’s average cost per unit to fall as output rises.

Answer 53

Economies of scale

Question 54

An industry that enjoys economies of scale can easily become a

Answer 54

Natural monopoly

Question 55

is a monopoly created by the government.

Answer 55

Government monopoly

Question 56

issued by the government may turn a market into a monopoly

Answer 56

Patent

Question 57

is a contract that gives a single firm rights to sell goods in an exclusive market

Answer 57

Franchise

Question 58

gives firms the right to operate a business.

Answer 58

License

Question 59

monopolist will charge different prices to different groups of consumers

Answer 59

Price discrimination

Question 60

For price discrimination to work, a market must meet three conditions:

Answer 60

1. Some market power. 2. Distinct customer groups. 3. Difficult resale.

Question 61

is a market structure in which many companies sell products that are similar but not identical.

Answer 61

Monopolist competition

Question 62

enables a monopolistically competitive seller to profit from the differences between his or her products and competitors’ products.

Answer 62

Differentiation

Question 63

Nonprice Competition takes several forms:

Answer 63

1. Physical characteristics. 2. Location. 3. Service label. 4. Advertising, image, or status.

Question 64

describes a market dominated by a few large, profitable firms.

Answer 64

Oligopoly

Question 65

is when firms in an oligopoly agree to set prices and production.

Answer 65

Collusion

Question 66

is stronger than a collusive agreement.

Answer 66

Cartel

Question 67

selling a product below cost to drive out competition.

Answer 67

Predatory pricing

Question 68

are laws that encourage healthy competition in the market.

Answer 68

Antitrust laws

Question 69

means that the government no longer decides what role each company can play in a market and how much it can charge its customers.

Answer 69

Deregulations