Unit Test 2

Question 1

Law of Demand

Answer 1

• as price increases, quantity demand goes down

Question 2

Substitutes

Answer 2

• two competing goods

Question 3

Complements

Answer 3

• two goods that are bought together

Question 4

Elasticity of Demand

Answer 4

• a measurement of how consumers react to a change in price

Question 5

Elastic

Answer 5

• responsive to price changes
• Qd changes more than prices
• Elasticity > 1

Question 6

Inelastic

Answer 6

• unresponsive to price changes
• Qd changes less than price
• Inelasticity < 1

Question 7

How to calculate Elasticity

Answer 7

• /(Qo-Q1/Qo)/(Po-P1/Po)/

Question 8

Normal Goods

Answer 8

• any product where as income increases demand increases

Question 9

Inferior Goods

Answer 9

• products where demand decreases as income increases

Question 10

Ceteris Paribus

Answer 10

• all else held constant

Question 11

What causes a shift in the demand curve

Answer 11

• population
• income
• popularity
• substitutes
• complements
• future price

Question 12

Supply

Answer 12

• a prediction of what quantity supplied will be at all prices
• (not ever a number)

Question 13

Law of Supply

Answer 13

• as Price Increases, Quantity increases

Question 14

Elasticity of Supply

Answer 14

• measurement of how producers react to a change in price

Question 15

Subsidy

Answer 15

• gov. payment to encourage production

Question 16

Excise Tax

Answer 16

• tax on sale or production of a good

Question 17

What causes a shift in the supply curve

Answer 17

• change in cost of inputs
• change in excise taxes
• change in subsidies
• technology
• # of suppliers
• future price

Question 18

Marginal Product of Labor

Answer 18

• change in output from hiring 1 more worker

Question 19

Specialization

Answer 19

• focusing labor on one task

Question 20

Equilibrium

Answer 20

• the point where quantity supplied = quantity demanded

Question 21

Price Ceiling

Answer 21

• max price

Question 22

Price Floor

Answer 22

• minimum price (minimum wage)

Question 23

Surplus

Answer 23

• excess supply

Question 24

Shortage

Answer 24

• excess demand

Question 25

Oligopoly

Answer 25

• a small handful of firms control most of the output

Question 26

Monopoly

Answer 26

• market structure dominated by a single seller

Question 27

Nonprice Competition

Answer 27

• competing by changing some aspect of the product, such as quality, shape, branding, location, or service, but not changing price.

Question 28

Perfect Competition

Answer 28

• market structure with many firms selling identical products
• little to no control over price

Question 29

Natural Monopoly

Answer 29

• market that is most efficient with only one seller

Question 30

Monopolistic Competition

Answer 30

• many firms selling similar, not identical products

- firms have some market power

Question 31

Demand

Answer 31

• the relationship between price and Qd

Question 32

Quantity Demanded

Answer 32

• the amount of a product that all consumers would buy at one particular price
• (Qd is always a number)

Question 33

Quantity Supplied

Answer 33

• amount of a product that sellers (firms) would be willing to sell at a given price

Question 34

Diminishing Marginal Returns

Answer 34

• MPL is shrinking

Question 35

Negative Marginal Returns

Answer 35

• MPL is negative

Question 36

Marginal Revenue

Answer 36

• change in income from producing one more unit

Question 37

Marginal Cost

Answer 37

• change in cost from producing one more unit

Question 38

Role of Price

Answer 38

• determines how society allocates (distributes) resources

Question 39

Collusion

Answer 39

• illegal agreement by firms to not compete

Question 40

Regulation

Answer 40

• government rules limiting production (regulation)