Unit 12: Supply & Market Structures

Question 1

Negative Externalities (AKA: Resulting Harm)

Answer 1

the uncompensated harm, cost, or incovenience suffered by a third party because of others actions

Question 2

Supply

Answer 2

the quantity of a product or service a producer would be willing to offer for sale at all possible prices in a market at a given point in time

Question 3

Supply Schedule

Answer 3

a table that shows the various quantities of a particular product that a producer would supply at all possible prices in the market at a given point in time

Question 4

Individual Supply Curve

Answer 4

a graphic representation that shows the quantities supplied of a particular good or service at each and every possible price in the market at a given time

Question 5

Law of Supply

Answer 5

the principle that more will be offered for sale at higher prices than at lower prices

Question 6

Market Supply Curve

Answer 6

the supply curve that shows the quantities offered at various prices by all producers that offer the same product for sale in a given market

Question 7

Change in Quantity Supplied

Answer 7

is the change in the amount offered for sale in response to a change in price

Question 8

Change in Supply

Answer 8

a situation where suppliers offer different amounts of a product for sale at all possible prices in the market

Question 9

Supply Elasticity

Answer 9

a measure of the measure of the degree to which the quantity supplied responds to a change in price

three cases: elastic, inelastic, and unit elastic

Question 10

Elastic Supply

Answer 10

when a change in price causes a proportionally LARGER change in quantity supplied

Question 11

Inelastic Supply

Answer 11

when a change in price causes a proportionally SMALLER change in quantity supplied

Question 12

Unit Elastic Supply

Answer 12

when a change in price causes a proportionate change in quantity demanded

Question 13

Profit

Answer 13

the money a business has left over after it covers its cost

Question 14

Marginal Cost

Answer 14

the extra cost incurred when producing one more unit of output

Question 15

Marginal Revenue

Answer 15

the extra revenue a business receives from the production and sale of one additional unit of output

Question 16

Break-Even Point

Answer 16

the level of production that generates just enough revenue to cover its total opening costs

Question 17

Prices

Answer 17

act as a system of signals that help us make economic decisions

they function as incentives that affect the behavior of individuals, businesses, markets, and even industries

Question 18

Equilibrium Price (AKA: Market Clearing Price)

Answer 18

the price at which the quantity supplied equals the quantity demanded

Question 19

Surplus

Answer 19

a situation in which the quantity supplied is greater than the quantity demanded at a given price

quantity demanded at $$ < quantity supplied

Question 20

Shortage

Answer 20

a situation in which the quantity demanded is greater than the quantity supplied at a given price

quantity demanded > quantity supplied at $$

Question 21

Price Ceiling

Answer 21

the maximum legal price that can be charged for a product

Question 22

Price Floor

Answer 22

the minimum legal price that a seller can change

Question 23

Market Structure

Answer 23

a classification that describes the nature and degree of competition among firms in the same industry

Question 24

Four Characteristics that Define the Market Structure of an Industry:

Answer 24

1. number of producers
2. similarity of producers
3. ease of entry
4. control over prices

Question 25

Pure Competition

Answer 25

a theoretical market structure with 3 necessary conditions:
1. very large numbers
2. identical products
3. freedom of entry and exit from the market

Question 26

Monopolistic Competition

Answer 26

the market structure that has all of the conditions of pure competition except for identical products

Question 27

Oligopoly

Answer 27

a market structure in which a few very large sellers dominate the industry

Question 28

Monopoly

Answer 28

a market structure with only one seller of a particular product (opposite of pure competition)

Question 29

Market Failures

Answer 29

occurs whenever a flaw in the market system prevents an efficient allocation of resources (too much or too little production)

Question 30

Five Main Causes of Market Failures:

Answer 30

1. not enough competition
2. not enough information
3. resources that can’t/won’t move
4. too few public goods
5. externalities (spillover effects)

Question 31

Externalities (AKA: Spillover Effects)

Answer 31

are side effects that either benefit or harm a third party not involved in the activity that caused it

Question 32

Positive Externalities (AKA: resulting benefit)

Answer 32

an unreimbursed benefit received by someone who was not involved in the activity that generated the benefit

Question 33

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```Negative Externalities (AKA: Resulting Harm)

Answer 33

the uncompensated harm, cost, or inconvenience suffered by a third party because of others actions