question

Describe the five characteristics of pure competition

answer

a. large number of buyers and sellers exist b. same products c. each buyer and seller acts independently d. buyers and sellers know about the product e. buyers and sellers are free to enter into, conduct, or get out of business

question

Explain the main characteristics of the monopolistic competitor

answer

The characteristic that separates monopolistic competition from pure competition is product differentiation. When a product is differentiated, nonprice competition takes the place of price competition

question

Contrast the oligopolist and the pure competitor

answer

a. US examples of oligopolies include: Pepsi & Coke in the soft drink market, a few airlines, a few car companies, and a few phone service providers. b. oligopolies tend to act together in decision making rather than upset the status quo. c. firms might use collusion, price fixing, or diving up the market even though they're illegal d. Raising prices is risky as is lowering prices and getting into a price war e. the final price in an industry dominated by oligopolies is usually hig

question

Describe the four types of monopolies

answer

a. natural monopoly b. geographic monopoly c. technological monopoly d. government monopoly

question

laissez-faire

answer

the philosophy that government should not interfere with commerce, or trade; translated from the French it means \"allow them to do\"

question

industry

answer

collectively, all firms producing in a market; the supply side of the market

question

market structure

answer

market classification according to number and size of firms, type of product, and type of competition

question

pure competition

answer

market structure characterized by a large number of independent and well- informed buyers and sellers of an identical product-none of which are large enough to influence the price- along with relative ease of entry and exit in the industry

question

imperfect competition

answer

market structure where all conditions of pure competition are not met; monopolistic competition oligopoly, and monopoly for example

question

monopolistic competition

answer

market structure having all conditions of pure competition except for identical products; form of imperfect competition

question

product differentiation

answer

real or imagined difference between competing products in the same industry

question

nonprice competition

answer

competition involving the advertising of a product's appearance, quality, or design rather than its price

question

oligopoly

answer

-a few large sellers dominate -control prices - form of imperfect competition

question

collusion

answer

agreements, usually illegal, among producers to fix prices, limit output or divide markets

question

price-fixing

answer

agreement, usually illegal, by firms to charge a uniform price for a product

question

price war

answer

fierce price competition between sellers, sometimes to the point where the price is below the cost of the product

question

independent pricing

answer

pricing policy by an imperfect competitor that ignores other producers and some market conditions

question

price leadership

answer

independent pricing decisions made by a dominant firm on a regular basis that results in generally uniform industry-wide prices

question

monopoly

answer

market structure characterized by a single producer; form of imperfect competition

question

natural monopoly

answer

market where average costs are lowest when all output is produced by a single firm

question

franchise

answer

exclusive right to produce or sell a certain product in an area or region

question

economies of scale

answer

increasingly efficient use of personnel, plant, and equipment as a firm becomes larger

question

geographic monopoly

answer

market situation where a firm has a monopoly because of its location or the small size of the market

question

patent

answer

exclusive, government-granted right to sell or use any new art, machine, item of manufacture, or composition.

question

copyright

answer

exclusive right given to an author or artist to sell, publish, or reproduce his or her work for their lifetime plus fifty years

question

government monopoly

answer

monopoly created by and/or owned by the government; NASA for example

question

Explain what happens when markets do not have enough competition

answer

a. monopolies deny consumers the benefits of competition which can result in artificial shortages and higher prices b. monopolies may waste or misallocate scarce resources c. large corporations can use its economic weight to influence politics

question

Provide two examples of inadequate information in a market.

answer

a. Consumers need to have product information to allocate resources efficiently. b. Industry needs to have cost and price information to remain competitive.

question

Explain what is meant by resource immobility.

answer

-Resources are immobile or refuse to move and markets do not function as efficiently as they could. -Efficient allocation of resources means capital, entrepreneurs, labor and land are free to move to markets where the returns are the highest.

question

Explain what is meant by positive and negative externalities.

answer

-Externality is when an economic decision affects someone other than the buyer or the seller. -If an uninvolved party is harmed by someone else's transaction it is negative externality -If an uninvolved party benefits from someone else's transaction, it is positive externality

question

Why is the private sector reluctant to produce public goods.

answer

Although the market economy is very successful at satisfying individual wants and needs, it fails to satisfy them on a collective level so things like national defense, highways and flood control are provided by the government not the private sector.

question

market failure

answer

market where any of the requirements for a competitive market-adequate competition, knowledge of prices and opportunities, mobility of resources, and competitive prices-are lacking

question

externality

answer

economic side effect that affects an uninvolved third party; may be negative or positive

question

negative externality

answer

harmful side effect that affects an uninvolved third party; external cost

question

positive externality

answer

beneficial side effect that affects an uninvolved third party

question

public good

answer

economic product that is consumed collectively; highways, national defense, police and fire protection

question

Identify four major antitrust laws

answer

1. Sherman Antitrust Act 1890- Outlawed all contracts \"in restraint of trade\" to halt the growth of trusts and monopolies. 2. Clayton Antitrust Act of 1914- Strengthened the Sherman Antitrust Act by outlawing price discrimination. 3. Federal Trade Commission Act of 1914- Established the FTC to regulate unfair methods of competition in interstate commerce. 4. Robinson-Patman Act of 1936- forbade rebates and discounts on the sale of goods to large buyers unless the rebate and discount were available to all.

question

List 10 major federal government regulatory agencies.

answer

a. FDA-Federal Drug Administration b. FTC-Federal Trade Commission c. FCC-Federal Communications Commission d. SEC-Securities and Exchange Commission e. NLRB-National Labor Relations Board f. FAA-Federal Aviation Administration g. EEOC-Equal Employment Opportunity Association h. EPA-Environmental Protection Agency i. NHTSA-National Highway Traffic Safety Administration j. OSHA-Occupational Safety and Health Administration k. CPSC-Consumer Product Safety Commission l. NRC-Nuclear Regulatory Commission m. FERC-Federal Energy Regulatory Commission

question

Explain how public disclosure is used as a tool to prevent market failures.

answer

-It is a requirement that businesses reveal information to the public. -Businesses are not forced to give up trade secrets -Restrictions are in place not to prevent competition but to bring about a more efficient use of resources.

question

Describe a modified free enterprise economy.

answer

?

question

trust

answer

illegal combination of corporations organized to hinder competition

question

price discrimination

answer

illegal practice of charging customers different prices for the same products

question

cease and desist order

answer

ruling requiring a company to stop unfair business practices that reduce or limit competition

question

public disclosure

answer

the requirement forcing business to reveal info about its products or its operations to the public

question

List the three functions of money.

answer

a medium of exchange b. measure of value c. store of value

question

Describe five types of early money.

answer

a. shells b. dogs teeth c. feathers d. tea leaves e. fish hooks

question

Discuss the major reforms used in the colonial period of the United States history 1607-1776.

answer

Commodity money; gunpowder; musket balls; corn; hemp; tobacco; fiat money; wampum; paper money; continental dollars, specie.

question

Explain the relationship between the Spanish peso, the Austrian taler, and the US dollar.

answer

-Pesos divided into 8 bits -Austrian Talers resembled pesos - \"dollars\" sounds like talers is divided into 10ths.

question

List the four characteristics that give money its value.

answer

a. portable b. durable c. divisible d. limited supply

question

barter economy

answer

moneyless economy that relies on trade or barter

question

money

answer

anything that serves as a medium of exchange, a measure of value or a store of value

question

medium of exchange

answer

money or other substance generally accepted in exchange; one of the three functions of money

question

measure of value

answer

one of the three functions of money that allows it to serve as a common denominator to measure value

question

store of value

answer

one of the three functions of money that allowing people to preserve value for their future

question

commodity money-

answer

money that has an alternative use as a commodity; gunpowder, flour, corn for example

question

fiat money

answer

-money by government decree; has no alternative value or use as a commodity

question

specie-

answer

money in the form of gold or silver coins

question

monetary unit

answer

standard unit of currency in a country's money supply; American dollar, British pound for example

question

Explain the history of privately issued bank notes

answer

Most of the issued after the American Revolution was issued by the four state banks. Most state banks printed money they could back with gold, but some printed large amounts of currency hoping it would be a long time before they were redeemed for gold. These were called wildcat banks. By the Civil War the US had over 1600 banks printing money and few of them backed the currency with gold or silver.

question

List five major types of currencies introduced after the Civil War.

answer

a. Greenback b. national currency c. gold certificates d. silver certificates e. treasury coin notes

question

State two disadvantages of a gold standard.

answer

a. a growing economy requires a growing gold stock to back growing money supply b. if people convert currency to gold, it will drain the government of gold reserves

question

. Understand why the United States has an inconvertible money standard.

answer

In the depression, people felt safer with gold, so they cashed in their dollars. Foreign investors did the same and the government couldn't back the money supply with gold.

question

monetary standard

answer

mechanism the keeps a money supply durable, portable, divisible, and stable in value; gold standard, silver standard, fiat money standard for example

question

state bank

answer

bank that receives its charter from the state in which it operates

question

legal tender-

answer

- fiat currency that must be accepted for payment by decree of the government

question

US note-

answer

paper currency with no backing, first printed by the US government in 1862 to finance the Civil War

question

National bank

answer

commercial bank chartered by the National Banking System, member of the Fed

question

National bank note/national currency

answer

- currency backed by government bonds, issued by national banks starting from 1863 and generally disappearing from circulation in the 1930s

question

gold certificate

answer

paper currency backed by gold; issued in 1863 and popular until recalled in 1934

question

silver certificate-

answer

paper currency backed by and redeemable for silver from 1886 to 1968

question

treasury coin note

answer

currency printed from 1890 to 1893, redeemable in both gold and silver

question

gold standard

answer

- monetary standard under which a country's currency is equivalent to and can be exchanged for a specific amount of gold

question

inconvertible fiat money standard

answer

- fiat money that cannot be exchanged for gold or silver; Federal Reserve notes today for example

question

List three requirements for joining the National Banking System

answer

t three requirements for joining the National Banking System. a. have the word \"National\" or N.A. in their name/title b. pass inspection by the Comptroller of Currency, a Treasury Department official c. the banks are required to purchase government bonds to back the national currency

question

Describe the main difference between the Federal Reserve System and the National Banking System.

answer

-The National Banking System charters and regulates state banks. -The Federal Reserve System is the nation's central bank which includes all national banks

question

Explain why many banks failed during the Great Depression.

answer

In 1929, banks didn't have deposit insurance and they were overextended. When people were concerned for the safety of their money, they rushed to withdraw the money before the bank failed, a run on the bank, and suddenly there were no reserves.

question

List three other depository institutions in addition to commercial banks

answer

a. thrift institutions b. mutual savings banks c. saving and loan associations d. credit unions

question

dual banking system

answer

Allows banks to choose federal or state charters

question

Federal Reserve System

answer

privately owned, publicly controlled central bank of the US

question

central bank

answer

- bank that can lend to other banks in times of need, a \"banker's bank\"

question

Federal Reserve note

answer

currency issued by the Fed that eventually replaced all other types of federal currency

question

run on the bank

answer

sudden rush by depositors to withdraw all deposited funds, generally in anticipation of a bank closure or failure

question

bank holiday

answer

brief period during which during which all banks and depository institutions are closed to prevent bank runs

question

commercial bank

answer

- depository institution that, until the mid-1970s, had the exclusive right to offer checking accounts

question

demand deposit account DDA

answer

account whose funds can be removed by writing a check without having to gain prior approval from the depository institution

question

thrift institution

answer

depository institutions historically catering to savers

question

mutual savings bank MSB

answer

savings bank- savings institution owned by stockholders rather than depositors

question

NOW accounts

answer

Negotiable Order of Withdrawal, type of checking account that pays interest

question

savings and loan association S&L

answer

depository institution that historically invested the majority of its funds in home mortgages

question

credit union-

answer

- nonprofit service corporation that accepts deposits, makes loans, and provides other financial services

question

share draft account

answer

checking account offered by a credit union

ECON 7&11

Unlock all answers in this set

Haven't found what you were looking for?

Search for samples, answers to your questions and flashcards