Economics Midterm Exam Review – Flashcards

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goods
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Things that can be seen or touched
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resources
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Things that go into the making of goods and services
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macroeconomics
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The study of problems and the impact of changes on the economy as a whole rather than on an individual part
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economics
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The study of why people make one choice rather than another when buying and selling, spending, and saving
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microeconomics
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The study of problems and the effects of economic forces upon individual parts of the economy, such as business firms, households, and workers
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services
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Useful works that cannot be seen or touched
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economists
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Professionals who study the workings of our economic system
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consumers
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Users of goods and services
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trade-off
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The term used to describe the choices made by people, businesses, and government
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entrepreneur
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The individual who organizes a business and assumes the risks and rewards
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natural resources
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The things provided by the world around us
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capital resources
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The machines, tools, and buildings used in the production of goods and services
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producers
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The people who make the goods and services
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private property
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Means privately owned
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Gosplan
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The Soviet agency responsible for preparing and administering the central economic plan
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mixed market economy
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Economies with some free enterprise and some government ownership
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US
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Most closely represents a free market economy
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means of production
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Farms, factories, and machinery used to produce goods and services
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command
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The system where the government makes decisions
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competition
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Other businesses selling the same items or services
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free market economy
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Also known as market systems
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market economy
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A system in which a nation's economic decisions are the result of individual decisions
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traditional economy
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A system in which people's economic roles are the same as those of their parents and grandparents
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economics
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The terms used to describe how a nation is organized for production
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What goods and services should be produced? How will they be produced? Who will receive the goods and services produced?
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The fundamental economic questions
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private property
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A piece of land, building, vehicle, or other things owned by an individual, a family, or a group
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profit motive
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Describes the desire by business owners to earn the greatest profits
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public property
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Property, such as city hall, a park, or a highway, owned by the government
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competition
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The rivalry between sellers in the same field for consumers' dollars
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rule of law
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How our economic system operates within the framework of a government of laws, not of individuals (No one is above the law.)
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wholesalers
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People who supply goods to retailers
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retailers
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The storekeepers
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consumer sovereignty
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The power or freedom of the consumer to have the final say
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surplus
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A situation in which quantity supplied is greater than quantity demanded
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shortage
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A situation in which quantity demanded is greater than quantity supplied
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law of supply and demand
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The claim that the price of any good adjusts to bring the supply and demand for that good into balance
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demand
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The amount of an item that buyers are willing and able to purchase at any and all prices
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law of demand
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The law that states that the quantity of items demanded increases and decreases in the opposite direction from the changes in price
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elasticity of demand
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The percentage change in the quantity of goods and services demanded resulting from a 1% change in price
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equilibrium
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A situation in which supply and demand have been brought into balance
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equilibrium price
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The price that balances supply and demand
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equilibrium quantity
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The quantity supplied and the quantity demanded when the price has adjusted to balance supply and demand
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supply
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The quantity of a good or service that is offered for sale at all prices
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law of supply
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The law that states that supply increases as prices increase, and decreases as prices decrease
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supply schedule
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A table that shows the relationship between the price of a good and the quantity supplied
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supply curve
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A graph of the relationship between the price of a good and the quantity supplied
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price-directed market economy
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Prices play such an important role in economic life that the United States is often described as a ____.
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microeconomics
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The study of economics and the focus is on a small, or micro, section of the economy
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macroeconomics
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The study of economics and the impact of supply and demand on the economy as a whole
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demand curve
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A graph of the relationship between the price of a good and the quantity demanded
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demand schedule
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A table that shows the relationship between the price of a good and the quantity demanded
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normal good
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A good for which, other things equal, and increase in income leads to a increase in demand
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inferior good
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A good for which, other things equal, an increase in income leads to a decrease in demand for the other
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substitutes
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Two goods for which an increase in the price of one leads to a increase in the demand for the other
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compliments
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Two goods for which an increase in the price of one leads to a decrease in the demand for the other
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sole proprietorship
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A business that is owned by one person
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unlimited liability
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Means that there are no limits as to what a person who owns a company can lose
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partnership
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A business or organization that is owned by two or more people
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corporation
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A business or organization that is licensed to operate by a state or the federal government
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charter
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A corporation's license to operate
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stocks
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Certificates representing ownership in a corporation
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stockholders
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People who own shares in a corporation
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dividends
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Profits that are distributed to shareholders
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double taxation
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Means that money has been taxed at the corporate level and at the personal level
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LLC
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The newest form of business organization
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cooperative
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Associations of individuals or organizations
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revenue
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Income from goods and services that the firm sells
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short-term financing
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Applies to loans that need to be repaid in less than a year
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long-term financing
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Applies to loans and other financial strategies that are made for periods of a year or more
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trade credit
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Used by businesses suppliers that frequently give their customers 30 to 60 days to pay for their orders
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promissory note
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A written promise to repay a loan, plus interest, at a specified date
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line of credit
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A loan arrangement in which a bank allows a business to borrow any sum, up to a specified limit, whenever it needs the money
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retained earnings
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Profits that are not distributed to the owners of a business
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collateral
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Any item of value that a lender may seize should the borrower fail to make loan payments as promised
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bankrupt
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When a business is unable to pay its debts
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equity financing
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Refers to the sale by a corporation of shared of its stock as a means of raising capital
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common stock
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entitle their owners to a voice in the selection of the board of directors, and they may also share in the profits of the company
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preferred stock
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Have no voting rights but are entitled to fixed dividends
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investment bank
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A bank that specializes in selling stocks and bonds of corporations
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New York stock exchange
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Created in 1792 to help repay Revolutionary War debt and met on Wall Street
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American stock exchange
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Created in 1953 and is also in New York
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NASDAQ
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Created in 1971; the representatives trade orders through their own computer network
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bull market
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When there is a general rise in stocks
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bear market
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When there is a general fall in stocks
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income statement
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Also known as a profit loss statement and summarizes activities of a firm over a period of time
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liquidation
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When a firm sells its assets and goes out of business
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productivity
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Can be defined as the output per unit of input
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labor productivity
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Expressed as the output per worker per hour
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infrastructure
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Roads, bridges, and airports
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inelastic demand
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Means that demand will not change even though price has changed
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inelastic supply
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Means that supply will not change even though price has changed
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law of diminishing return
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When additional factors of production cause productivity to increase, but eventually we reach a point where the additional inputs has the opposite effect and output per worker or machine begins to decline
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division of labor
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The breakdown of the total production process into a series of simpler tasks
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creative destruction
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Means that capitalism exists in a constant state of change in which innovation destroys established enterprises yields new ones
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marginal revenue
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The income from the production of one more unit
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marginal cost
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The cost of producing one more unit or item
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monopoly
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A situation where there is only one seller
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monopsony
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A situation where there is only one buyer
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price makers
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Happens once suppliers begin to exercise control over prices, an imperfect competition exists
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monopoly
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A firm that controls the entire supply of a good or service
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patents
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Issued by the federal government and give inventors of new products the exclusive right to market their inventions
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copyrights
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Give exclusive rights to authors, musicians, composers, and artists
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public franchises
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Licenses granted by governments to firms that allow them to do business within their jurisdictions
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monopoly power
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Refers to the ability of a group of firms to behave as if they were one big monopoly
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holding company
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a corporation organized for the purpose of owning or holding a controlling interest in other corporations
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pyramiding
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The technique of building up control of corporations through several levels of holding companies
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merger
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When a corporation absorbs another
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