economics final review chapter 7,10, 12 – Flashcards
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perfect competition
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the simplest market structure. a market with a large number of firms all producing essentially 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 the market.
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imperfect competition
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a market structure that does not meet the conditions of perfect competition
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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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economies of scale
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factors that cause a producer's 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 government
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patent
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a license that gives the inventor of a product the exclusive right to sell it for a short 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 issued 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 or a good.
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market power
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the ability of a company to change prices and output like a monopoly.
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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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nonprice competition
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a way to attract customers 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 the 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 firms 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 competition 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 controls over the market.
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money
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anything that serves as a medium of exchange, a unit of account, and a store of value.
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medium of exchange
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anything that is used to determine value during the exchange of goods and services.
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barter
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the direct exchange of one set of goods or services for another.
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unit of account
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a means for comparing the values of goods and services.
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store of value
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something that keeps its value if it is stored rather than used.
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currency
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coins and paper bills used as money.
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commodity money
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objects that have value in themselves and that are also used as money.
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representative money
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objects that have value because the holder can exchange them for something else of value.
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fiat money
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money that has value because the government has ordered that is is an acceptable means to pay debts.
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bank
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an institution for receiving, keeping, and lending money.
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national bank
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a bank chartered, or licensed by the national government.
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bank run
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widespread panic in which great numbers of people try to redeem their paper money.
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greenback
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paper currency issued during the civil war
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gold standard
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a monetary system in which paper money and coins are equal to the value of a certain amount of gold.
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Federal Reserve System
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the nation's banking sytem
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central bank
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bank that lends to others in times of need.
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member bank
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bank that belongs to the Federal Reserve system.
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Federal Reserve Note
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the national currency we use today in the United States.
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Great Depression
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the severe economic decline that began in 1929 and lasted for a decade.
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Federal Deposit Insurance Corporation
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the government agency that insures customer deposits if a bank fails.
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money supply
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all the money available in the United States economy
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liquidity
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the ability to be used as, or directly converted to cash.
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demand deposit
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the money in checking accounts.
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money market mutual fund
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a fund that pools money from small savers to purchase short-term government and corporate securities.
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fractional reserve banking
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a banking system that keeps only a fraction of funds on hand and lends out the remainder.
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default
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failure to pay back a loan.
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mortgage
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a specific type of loan that is used to buy real estate.
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credit card
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a card entitling its holder to buy goods and service based on the holder's promise to pay for these goods and services.
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interest
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the price paid for the use of borrowed money.
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principal
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the amount of money borrowed.
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debit card
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a card used to withdraw money
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creditor
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person or institution to whom money is owed.
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national income accounting
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a system that collects macroeconomic statistics on production, income, investment, and savings.
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gross domestic product
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the dollar value of all final goods and services produced within a country's borders in a given year.
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intermediate goods
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goods used in the production of final goods.
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durable goods
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goods that last for a relatively long time
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nondurable goods
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goods that last a short period of time, such as food, light bulbs, and sneakers.
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nominal GDP
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GDP measured in current prices
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real GDP
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GDP expressed in constant or unchanging prices.
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gross national product
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the annual income earned by U.S. owned firms and U.S. citizens
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depreciation
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the loss of the value of equipment that results from normal wear and tear.
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price level
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the average of all prices in the economy
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aggregate supply
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the total amount of goods and services in the economy available at all possible levels.
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aggregate demand
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the total amount of services in the economy that will be purchased at all possible levels.
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business cycle
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a period of macroeconomic expansion followed by a period of contraction
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expansion
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a period of economic growth as measured by a rise in real GDP
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economic growth
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a steady long term increase in real GDP
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peak
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the height of an economic expansion, when real GDP stops rising.
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contraction
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a period of economic decline marked by falling real GDP.
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trough
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the lowest point in an economic contraction, when real GDP stops falling.
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recession
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a prolonged economic contraction
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depression
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a recession that is especially long and severe.
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stagflation
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a decline in real GDP combined with a rise in the price level.
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leading indicators
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key economic variables that economists use to predict a new phase of a business cycle.
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real GDP per capita
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real GDP divided by the total population
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capital deepening
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process of increasing the amount of capital per worker.
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saving
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income not used for consumption
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savings rate
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the proportion of disposable income that is saved.
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technological progress
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an increase in efficiency gained by producing more out put without using more inputs.
