Flashcards About Economics Midterm Review
Unlock all answers in this set
Unlock answersquestion
Scarcity
answer
the condition that results from society not having enough resources to produce all the things people would like to have
question
Factors of Production
answer
resources of land, labor, capital, and entrepreneurship used to produce goods and services
question
Land
answer
the natural resources not created by humans
question
Capital
answer
the tools, equipment, machinery, and factories used in the production of goods and services
question
Financial Capital
answer
the money used to buy the tools and equipment used in production
question
Labor
answer
people with all their efforts, abilities, and skills
question
Entrepreneur
answer
a risk-taker in search of profits who does something new with existing resources
question
Gross Domestic Product
answer
the dollar value of all final goods and services, and structures produced within a country's borders in a 12-month period
question
Consumer Good
answer
a good intended for final use by individuals
question
Capital Good
answer
a good used to produce other goods and services
question
Service
answer
work that is performed for someone
question
Value
answer
a worth that can be expressed in dollars and cents
question
Paradox of Value
answer
The situation where some necessities, such as water, have little monetary value, whereas some non-necessities, such as diamonds, have a much higher value.
question
Utility
answer
the capacity to be useful and provide satisfaction
question
Wealth
answer
the accumulation of those products that are tangible, scarce, useful, and transferable from one person to another
question
Market
answer
a location or other mechanism that allows buyers and sellers to exchange a certain economic product
question
Division of Labor
answer
takes place when work is arranged so that individual workers do fewer tasks than before
question
Specialization
answer
takes place when factors of production perform tasks that they can do relatively more efficiently than others
question
Human Capital
answer
the sum of the skills, abilities, health, and motivation of people
question
Economic Independence
answer
a reliance on others, as they rely on you, to provide goods and services to be consumed
question
Trade-Off
answer
alternative that must be given up when one choice is made rather than another
question
Opportunity Cost
answer
Cost of the next best alternative use of money, time, or resources when one choice is made rather than another
question
Production Possibilities Frontier
answer
a diagram representing various combinations of goods and/or services an economy can produce when all productive resources are fully employed
question
Cost-Benefit Analysis
answer
a way of thinking about a problem that compares the costs of an action to the benefits received
question
Free Enterprise Economy
answer
one in which consumers and privately owned businesses, rather than the government make the majority of the WHAT, HOW, and FOR WHOM decisions
question
Standard of Living
answer
the quality of life based on the possession of necessities and luxuries that make life easier
question
Traditional Economy
answer
Economic system in which the allocation of scarce resources and other economic activity is the result of ritual, habit, or custom.
question
Command Economy
answer
economic system characterized by a central authority that makes most of the major economic decisions
question
Market Economy
answer
economy in which land, labor, and capital are controlled by individual persons
question
Social Security
answer
federal program of disability and retirement benefits that covers most working people
question
Inflation
answer
a rise in the general level of prices
question
Capitalism
answer
economic system in which the means of production are privately owned and operated for profit
question
Free Enterprise
answer
a system in which competition is allowed to flourish with a minimum of government interference
question
Profit
answer
the amount of money left over after expenses are taken out
question
Profit Motive
answer
the force that encourages people and organizations to improve their material well-being
question
Demand
answer
the ability and desire to purchase goods and services
question
Demand Schedule
answer
a listing showing the quantity demanded at all possible prices that might prevail in the market at a given time
question
Demand Curve
answer
a graph showing the quantity demanded at each and every price that might prevail in the market
question
Law of Demand
answer
states that the quantity demanded of a good or service varies inversely with its price
question
Diminishing Marginal Utility
answer
the principle that our additional satisfaction, or our marginal utility, tends to go down as more and more units are consumed
question
Income Effect
answer
the change in quantity demanded because of a change in price that alters consumers' real income
question
Substitute Goods
answer
goods that can be used in place of other goods (Colgate/Crest, Toyota/Honda)
question
Complementary Goods
answer
products that often are used together
question
Elasticity
answer
a measure of responsiveness that tells us how a dependent variable such as quantity responds to a change in an independent variable such as price
question
Elastic
answer
when a given change in price causes a relatively larger change in quantity demanded
question
Inelastic
answer
a given change in price causes a relatively smaller change in the quantity demanded
question
Unit Elastic
answer
a given change in price causes a proportional change in quantity demanded
question
Subsidy
answer
a government payment to an individual, business, or group in exchange for certain actions
question
Supply Elasticity
answer
a measure of the way in which quantity supplied responds to a change in price
question
Theory of Production
answer
deals with the relationship between the factors of production and the output of goods and services
question
Law of Variable Proportions
answer
states that, in the short run, output will change as one input is varied while the others are held constant.
question
Raw Materials
answer
unprocessed natural products used in production
question
Stages of Production
answer
increasing returns, diminishing returns, and negative returns - that are based on the way marginal product changes as the variable input of labor is changed
question
Diminishing Returns
answer
a level of production in which the marginal product of labor decreases as the number of workers increases
question
Fixed Cost
answer
the cost that a business incurs even if the plant is idle and output is zero
question
Overhead
answer
broad category of fixed costs that includes interest, rent, taxes, and executive salaries
question
Variable Cost
answer
a cost that changes when the business rate of operation or output changes
question
Total Cost
answer
the sum of fixed cost and variable cost
question
Marginal Cost
answer
the extra cost incurred when a business produces one additional unit of a product
question
Total Revenue
answer
the number of units sold multiplied by the average price per unit
question
Marginal Revenue
answer
the additional income from selling one more unit of a good
question
Marginal Analysis
answer
a type of cost-benefit decision making that compares the extra benefits to the extra costs of an action
question
Break-Even Point
answer
the total output or total product the business needs to sell in order to cover its total costs
question
Profit Maximizing Quantity of Output
answer
level of production where marginal cost is equal to marginal revenue
question
Price
answer
monetary value of a product as established by supply and demand
question
Rationing
answer
a system under which an agency such as government decides everyone's "fair" share
question
Economic Model
answer
set of assumptions in a table, graph, or equations used to describe or explain economic behavior
question
Market Equilibrium
answer
a situation in which prices are relatively stable, and the quantity of goods or services supplied is equal to the quantity demanded
question
Surplus
answer
a situation in which quantity supplied is greater than quantity demanded
question
Shortage
answer
a situation in which quantity demanded is greater than quantity supplied
question
Equilibrium Price
answer
the price that balances quantity supplied and quantity demanded
question
Price Ceiling
answer
a maximum price that can be legally charged for a good or service
question
Minimum Wage
answer
the lowest legal wage that can be paid to most workers
question
Price Floor
answer
a legal minimum on the price at which a good can be sold
question
Target Price
answer
a price floor for farm products
question
Laissez-Faire
answer
the idea that government should not interfere with or regulate industries and businesses
question
Market Structure
answer
the nature and degree of competition among firms operating in the same industry.
question
Perfect Competition
answer
market structure with many well-informed and independent buyers and sellers who exchange identical products
question
Imperfect Competition
answer
a market structure that does not meet the conditions of perfect competition
question
Monopolistic Competition
answer
the market structure that has all the conditions of perfect competition except for identical products
question
Product Differentiation
answer
real or imagined differences between competing products in the same industry
question
Nonprice Competition
answer
The use of advertising, giveaways, or other promotional campaigns to convince buyers that the product is somehow better than the other brand.
question
Oligopoly
answer
a market structure in which a few very large sellers dominate the industry
question
Collusion
answer
an agreement among firms to charge the same price or otherwise not to compete
question
Price-Fixing
answer
an agreement to charge the same or similar prices for a product
question
Monopoly
answer
a market in which there are many buyers but only one seller
question
Natural Monopoly
answer
a market situation where the costs of production are minimized by having a single firm produce the product
question
Economies of Scale
answer
a situation in which the average cost of production falls as the firm gets larger
question
Geographic Monopoly
answer
a monopoly based on the absence of other sellers in a certain geographic area
question
Technological Monopoly
answer
a monopoly based on a firm's ownership or control of a production method, process, or other scientific advance
question
Government Monopoly
answer
a monopoly the government owns and operates
question
Market Failure
answer
a situation in which a market left on its own fails to allocate resources efficiently
question
Externality
answer
the unintended side effect of an action that affects someone not involved in the action
question
Public Goods
answer
a good that can be consumed by one person without preventing the consumption of the good by another
question
Union
answer
an organization of employees formed to bargain with the employer
question
Strike
answer
a group's refusal to work in protest against low pay or bad work conditions
question
Picket
answer
a parade in front of the employer's business carrying signs about the dispute
question
Boycott
answer
a mass refusal to buy products from targeted employers or companies
question
Unskilled Labor
answer
labor that requires no specialized skills,education, or training
question
Semiskilled Labor
answer
workers with enough mechanical abilities and skills to operate machines that require a minimum amount of training
question
Skilled Labor
answer
workers who are able to operate complex equipment and can perform their tasks with little supervision
question
Professional Labor
answer
those individuals with the highest level of knowledge-based education and managerial skills
question
Noncompeting Labor Grades
answer
broad categories of labor that do not directly compete with one another because of experience, training, education, and other human capital investments
question
Wage Rate
answer
a standard amount of pay given for work performed
question
Traditional Theory of Wage
answer
states that the supply and demand for a worker's skills and services determine the wage or salary
question
Determination
answer
the act of determining the properties of something
question
Equilibrium Wage Rate
answer
the wage rate that leaves neither a surplus nor a shortage in the labor market
question
Theory of Negotiated Wages
answer
states that organized labor's bargaining strength is a factor that helps determines wages
question
Signaling Theory
answer
theory that employers are willing to pay more for people with certificates, diplomas, degrees, and other indicators of superior ability
question
Labor Mobility
answer
the ability and willingness of workers to relocate in markets where wages are higher
question
Giveback
answer
a wage, fringe benefit, or work rule given up when a labor contract is negotiated
question
Glass Ceiling
answer
a ceiling based on attitudinal or organizational bias in the work force that prevents minorities and women from advancing to leadership positions
question
Part-Time Worker
answer
worker who regularly works fewer than 35 hours per week
question
Minimum Wage
answer
the lowest wage that an employer is allowed to pay
question
Current Dollars
answer
dollar amounts or prices that are not adjusted for inflation
question
Real or Constant Dollars
answer
dollars that are adjusted in a way that removes the distortion of inflation
question
Per Capita
answer
per person
question
Public Sector
answer
the part of the economy made up of federal, state, and local governments
question
Private Sector
answer
the part of the economy made up of private individuals and privately owned businesses
question
Distribution of Income
answer
the way in which income is allocated among families, individuals, or other designated groups in the economy
question
Federal Budget
answer
an annual plan outlining proposed revenues and expenditures for the coming year
question
Mandatory Spending
answer
spending authorized by law that continues without the need for annual approvals of Congress
question
Discretionary Spending
answer
spending for federal programs that must receive annual approval
question
Fiscal Year
answer
12-month financial planning period that may not coincide with the calendar year; October 1 to September 30 for the federal government
question
Federal Budget Surplus
answer
an excess of revenues over expenditures
question
Federal Budget Deficit
answer
an excess of expenditures over revenues
question
Appropriations Bill
answer
an act of Congress that allows federal agencies to spend money for specific purposes
question
Balanced Budget Amendment
answer
a constitutional amendment that requires annual spending not exceed revenues
question
Deficit Spending
answer
spending more money than the government receives in revenue
question
Federal Debt
answer
total amount of money the federal government has borrowed from others
question
Balanced Budget
answer
an annual budget in which expenditures equal revenues
question
Trust Fund
answer
special account used to hold revenues designated for a specific expenditure such as a social security, medicare, or highways
question
Crowding Out Effect
answer
the higher-than-normal interest rates that heavy government borrowing causes
question
Pay As You Go Provision (PAYGO)
answer
requirement that new spending proposals or tax cuts must be offset by reductions elsewhere
question
Line-Item Veto
answer
the power to cancel specific budget items without rejecting the entire budget
question
Spending Cap
answer
legal limits on annual discretionary spending
question
Entitlement
answer
social welfare program that people are "entitled to" if they meet certain eligibility requirements
question
Capitalism
answer
economic system in which private citizens own and use the factors of production in order to generate profits
question
Socialism
answer
An economic system in which the government owns the basic means of production and decides how resources should be used
question
Communism
answer
an economic and political system in which the government owns or controls almost all the means of production
question
Collectivization
answer
the forced common ownership of all agricultural, industrial, and trading enterprises
question
Gosplan
answer
the central planning authority that devised the 5 year plans
question
Perestroika
answer
economic restructuring
question
Privatization
answer
To change from government or public ownership or control to private ownership or control.
question
Solidarity
answer
an independent labor union founded in Soviet-controlled Poland in 1980
question
Black Market
answer
an illegal market in which goods or currencies are bought and sold in violation of rationing or controls
question
Great Leap Forward
answer
a five-year economic plan that collectivized farms in China and put them into communism
question
Capital-Intensive
answer
using more capital than labor in the production process
question
Keiretsu
answer
a network of interlocking corporate affiliates.
question
Infrastructure
answer
the stock of basic facilities and capital equipment needed for the functioning of a country or area
question
Collateral
answer
a security pledged for the repayment of a loan
question
Transparency
answer
the process of making business deals more visible to everyone
question
Adam Smith
answer
Economist who wrote Wealth of Nations; Laissez-Faire economics
question
Karl Marx
answer
founder of modern communism
question
Friedrich von Hayek
answer
Austrain Economist/ Rival of John Maynard Keynes
question
John Maynard Keynes
answer
English economist who advocated the use of government monetary and fiscal policy to maintain full employment without inflation (1883-1946)
