Econ chapter 7,8,17, & 18 test review – Flashcards
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Perfect competition
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A market structure in which a large number of firms all produce the same product
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Commodity
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A product that is the same no matter who produces it
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Barrier to entry
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Any factor that makes it difficult for a new firm to enter a market
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Start up costs
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The expenses a firm must pay before it can begin to produce and sell goods
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Monopoly
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A market dominated by a single seller
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Monopolistic competition
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A market structure in which many companies sell products that are similar but not identical
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Differentiation
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Making a product different from other similar products
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Oligopoly
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A market structure in which a few large firms dominate a market
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Price war
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A series of competitive price cuts that lowers the market price below the price of production
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Collusion
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An agreement among firms to divide the market, set prices, or limit production
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Cartel
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A FORMAL organization of producers that agree to coordinate prices and production
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Business organization
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An establishment formed to carry on commercial enterprise
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Sole proprietorship
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A business owned and managed by a SINGLE individual
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Business license
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An authorization to start a business issued by the local government
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Liability
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The legally bound obligation to pay debts
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Partnership
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A business organization owned by two or more persons who agree on a specific division of responsibilities and profits
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General partnership
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Most common type of partnership. Share equally in both responsibility and liability
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Limited partnership
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Only one partner has the control and liability. (Only one partner is required to be a general partner)
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Limited liability partnership (LLP)
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Partnership in which all partners are limited partners
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Assets
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Money and other valuables belonging to an individual or business
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Corporation
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A legal entity owned by individual stockholders
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Closely held corporation
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also known as privately held corporations. These stockholders rarely trade their stock, but pass it on within families.
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Publicly held corporations
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Has many shareholders who can buy or sell stock on the open market.
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Certificate of incorporation
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License to form a corporation issued by state government
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Horizontal merger
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Join two or more firms competing in the same market with the same good or service.
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Vertical merger
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Join two or more firms involved in different stages of producing the same good or service.
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Conglomerate
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Business combination merging more than three businesses that make unrelated products
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Multinational corporation
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Large corporation that produces and sells its good and services throughout the world
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Business franchise
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A semi-independent business that pays fees to a parent company
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Royalty
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Share of earnings given as payment
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Cooperative
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A business organization owned and operated by a group of individuals for their mutual benefit
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Consumer cooperative
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Retail outlet owned and operated by consumers
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Service cooperative
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Cooperative that provides a service, rather than a good
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Nonprofit organization
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Institution that functions much like a business, but does not operate for the purpose of generating profits
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Business association
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Promote the collective business interests of a city, state, or other geographical area or of a group of similar businesses
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Trade association
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Nonprofit organizations that promote the interests of particular industries.
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Absolute advantage
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The ability to produce more of a given product using a given amount of resources
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Comparative advantage
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The ability to produce a product most efficiently given all the other products that could be produced
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Law of Comparative advantage
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The idea that a nation is better off when it produces goods and services for which it has a comparative advantage
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Export
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A good that is sent to another country for sale
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Import
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A good that is brought in from another country for sale
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Trader barrier
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A means of preventing a foreign product or service from freely entering a nation's territory
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Import quota
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A limit on the amount of a good that can be imported
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Tariff
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A tax on imported goods
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Protectionism
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The use of trade barriers to PROTECT a nation's industries from foreign competition
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International free trade agreement
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Agreement that results from cooperation between at least two countries to reduce trade barriers and tariffs and to trade with each other
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European Union
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A regional trade organization made up of European nations
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Euro
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A single currency that replaces individual currencies among members of the European union
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Free-trade zone
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A region where a group of countries agrees to reduce or eliminate trade barriers
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NAFTA
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Agreement that will eliminate all tariffs and other trade barriers between Canada, Mexico, and the United States
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Exchange rate
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The value of a foreign nation's currency in terms of the home nation's currency
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Appreciation
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An increase in the value of a currency
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Depreciation
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A decrease in the value of a currency
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Foreign exchange market
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The banks and other financial institutions that facilitate the buying and selling of foreign currencies
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Fixed exchange-rate system
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A currency system in which governments try to keep the values of their currencies constant against one another
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Trade surplus
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The result of a nation exporting more than it imports
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Trade deficit
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The result of a nation importing more than it exports
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Balance of trade
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The relationship between a nation's imports and its exports
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Development
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The process by which a nation improves the economic, political, and social well-being of its people
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Developed nation
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Nation with a higher average level of material well-being
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Less developed country
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Nation with a low level of material well-being
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Per capita gross domestic product
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A nation's gross domestic product (GDP) divided by its total population
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Industrialization
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The extensive organization of an economy for the purpose of manufacture
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Infant morality rate
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The number of deaths that occur in the first year of life per 1,000 live births
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Infrastructure
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The services and facilities necessary for an economy to function
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Newly industrialized country
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Less developed country that has shown significant improvement in the measures of development
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Population growth rate
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The increase in a country's population in a given year, expressed as a percentage of the population figure at the start of the year
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Natural rate of population increase
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The difference between the birth rate and death rate
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Internal financing
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Financing derived from the savings of a country's citizens
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Foreign investment
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Investment originating from other countries
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World bank
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The largest provider of development assistance
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United Nations Development Program (UNDP)
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United Nations program dedicated to elimination of poverty through development
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International Monetary Fund (IMF)
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Organization formed to stabilize international exchange rates and facilitate development
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Debt rescheduling
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Lengthening the time of debt repayment and forgiving, or dismissing, part of the loan
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Stabilization program
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An agreement between a debtor nation and the IMF in which the nation agrees to revise its economic policy
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Privatization
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The sale or transfer or state-owned businesses to individuals
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Glasnot
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A policy of political "openness" introduced into the Soviet Union in the late 1980s
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Perestroika
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Soviet leader Gorbachev's plan for economic restructuring
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Special economic zone
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Designed regions in China where foreign investment is encouraged, businesses can make most of their own investment and production decisions, and foreign companies are allowed to operate
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1. Authorization 2. Site permit 3. Name
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What are the 3 typical minimum requirements that a sole proprietor must meet?
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Business licences are key to sole proprietorship's because it the authorization to run the business zoning laws are where a city/town will let the business be located if they prohibit the business being ran from home.
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What role do business license and zoning laws play in sole proprietorship?
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-Spells out each partner's rights and responsibilities -Outlines how partners will share profits with losses -also addresses details such as the ways how partners can join the firms duration of the partnerships and tax responsibilities
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What issues are addressed in articles of partnership?
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Because all partners are limited in certain situations, such as another partners mistake
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Why might accountants and physicians find limited liability partnerships attractive?
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Horizontal mergers join two or more firms in the same market Vertical mergers joins two or more firms involved in different stages Conglomerates merge more than three businesses that produce unrelated products
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How do horizontal mergers, vertical mergers, and conglomerates differ?
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Trade surplus is the result of a nation exporting more than it imports Trade deficit is the result of a nation exporting more than it exports
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What is the difference between trade surplus and trade deficit?
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Developed nations are those with a higher average level of material well-being Less developed nations are low levels of material well-being
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What is the difference between developed nations and less developed nations?
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Per capita Gross Domestic Product
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What is the main factor used in measuring development?
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A nation's GDP divided by the population
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Per capita GDP
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Privatization
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How is transition achieved?
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Production costs vary from country to country because of differences in: -natural forces -climate -labor force -capital
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Why is trade necessary?
