Economics Chapter 7 Vocab. Test Questions

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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, such as petroleum, notebook paper, or milk
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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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Imperfect Competition
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a merket structure that does not meet the conditions of perfect competition
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Start-up cost
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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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Patent
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a license the gives the inventor of a new product the exclusive right to sell it for a certain period of time
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Franchise
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the right to sell a good or service within an exclusive market
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License
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a government issues right to operate a business
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Price discrimination
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division of customers into groups based on how much they will pay for a good
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Market Power
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the ability of a company to change its prices and output like a monopolist
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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 form other similar products
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Non-price competition
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a way to attract customer through style, service, or location, but not a lower price
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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 cost 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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Price Fixing
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an agreement among firm to charge one price for the same good
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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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Predatory Pricing
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selling a product below cost to drive competitors out of the market
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Antitrust laws
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laws that encourage competition in the marketplace
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Trust
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like a cartel, an illegal grouping of companies that discourages competition
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Merger
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combination of two or more companies into a single firm
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Deregulation
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the removal of some government control over a market
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Economies of scale
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factors that cause a producers’ average cost per unit to fall as output rises
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Natural Monopoly
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a market that runs most efficiently when one large firm supplies all of the output
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government Monopoly
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a monopoly created by the for government
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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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authorization to start a business issued by the local government
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Zoning Law
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law in a city or town that designates separate areas for residency and for business
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Liability
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the legally bound obligation to pay debts
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Fringe Benefit
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payment other than wages or salaries
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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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partnership in which partners share equally in both responsibility and liability
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Limited partnership
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partnership in which 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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Articles of Partnership
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a partnership agreement
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Uniform Partnership Act (UPA)
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act ordering common ownership interests, profit and loss sharing, and shared management responsibilities in a partnership
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Assets
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money and other valuables belonging to an individual or business
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Economics of scale
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a producer’s average cost drops as production rises
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Bond
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certificare issued by a corporation promising to repay the amount it has borrowed
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Dividend
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portion of corporate profits paid out to stockholders
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Stock
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share representing a portion of ownership in a company
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Conglomerate
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combination of more than three businesses that make unrelated products
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Horizontal Merger
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joining of two or more firms competing in the same market with the same good or service
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Business Franchise
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a semi-independent business that pays fees to a parent company for exclusive rights to do business in a certain area

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