FBLA Economics 2

In terms of number, most firms are corporations.

False

In competitive market structures, economic profits are always greater than zero in the long run.

False

Progressive Tax

...

Most air pollution is in lower developed countries which do not have pollution control laws.

False

Which of the following approaches to pollution control have had the most dramatic results in decreasing pollution?

Markets for pollution rights and regulation

Which of the following market structures have economic profits competed away by new firms entering the industry in the long run?

Monopolistic competition and pure competition

Consumers expect a surplus for a product to develop in a market. What is the likely effect on consumers' demand for this product today?

Decrease

Aggregate Demand

...

What is the correct fiscal policy when a recession is caused by a decrease in aggregate demand?

Increase government spending and decrease taxes

Firms maximize profit when

Marginal revenue=marginal cost

Price Inelastic

The change in price doesnt not cause a substantial change in supply or demand

Elasticity of Supply

The change in price causes a large change in supply

Comparative Advantage

When a person has lesser opportunity cost in creating something than someone else

Absolute Advantage

When a person can create more of something

In the long run, economic profits are possible in which market structures?

Monopoly and oligopoly

The optimal level of pollution for society is when

The marginal benefits of pollution equal the marginal costs of pollution

Expansionary fiscal policy will likely cause a

Budget deficit

Normal profit

...

Proportional tax

Tax rate stays the same no matter what income level

Entitlement spending is that portion of budget referred to as

Mandatory spending

Which market structure is a price taker?

Pure competition

Monetary Policy

An attempt to achieve broad economic goals by the regulation of the supply of money.

Fiscal Policy

a government policy for dealing with the budget (especially with taxation and borrowing)

Factors of Production

Factors of production fall into three main groups - land, labor, and capital - and sometimes include entrepreneurship.

Law of Demand

buyers purchase more at lower prices than higher prices

Wage

Pay by the hour

Salary

Pay by the week or month

Limited Liability

A fundamental feature of corporations, whereby investors are liable only up to the amount of their investment.

GDP: Gross Domestic Product

The monetary value of all of a nation's goods and services produced within a nation's borders and within a particular period of time, such as a year. It became the official measure of the U.S. economy in 1991. It replaced "gross national product," which covered all goods and services produced by U.S. residents regardless of where they were working.

Antitrust Law

Laws that seek to make sure businesses compete fairly, and prevent unfair partnerships

Trade Barriers

Trade barriers are usually protectionist; that is, they are erected to protect domestic producers who would not be able to compete successfully with foreign producers in a free market or in free trade.

Iron Law of Wages

the doctrine or theory that wages tend toward a level sufficient only to maintain a subsistence standard of living.

Balance of Trade

the difference between the values of exports and imports of a country, said to be favorable or unfavorable as exports are greater or less than imports.

Surplus Value

(in Marxian economics) the part of the value of a commodity that exceeds the cost of labor, regarded as the profit of the capitalist.

Corporate Profits

The dollars that exceed the costs of the corporation

Socialism

Large Government involvement in the economy

Market economy

No government involvement in the economy

Mixed Market economy

Limtited, but some, government involvement in the economy

Labor force

the amount of people in that currently have the ability to work

Real Take Home Pay

Salary that includes what is lost to inflation

Standard of Living

Illustrates what opportunities are expected for a certain person

Unions

Labor coming together to make sure they interests and rights are heard and respected.

Voluntary Exchange

Both traders expect to benefit as a result of an exchange between the two.

Production Possibilities Curve

Shows the maximum level of efficiency based on what resources are allocated where

Capital Resources

Actual hard equipment like factories and tractors

Inelastic

Demand does not change much if prices go up or down.

Axes

The fixed lines on a graph which carry the scales against which the coordinates are plotted

Balance of trade

A record of a country's exports and imports of goods and services

Board of directors

Individuals chosen by shareholders in a corporation to administer the affairs of the business

Capital

Usually used in the "real" sense in economics to refer to machinery and equipment, structures and inventories, that is, produced goods for use in further production Distinguished from "financial capital", meaning funds which are available to finance the production or acquisition of real capital

Capital account

That part of the balance of payments accounts which records a country's lending and borrowing transactions

Capital goods

Unlike goods intended to be consumed, capital goods are used to produce other goods Machinery in a factory would be an example of capital goods

Capitalism

A system of economic organization characterized by the private ownership of the means of production, private property, and largely market-based control over the production and distribution of goods and services

Central bank

An agency empowered by a government to manage a country's monetary and financial institutions, issue and maintain the domestic currency, and handle the official reserves of foreign exchange Primarily a "bank for banks."

Ceteris paribus

The Latin for "other things being equal."

Change in demand

An increase or decrease in the quantity demanded over a range of prices. Shown by a shift of the demand curve

Choice

Because wants are unlimited and resources are limited, all economies must choose which goods and services should be produced and in what quantities

Competition

In the general sense, a contest among sellers or buyers for control over the use of productive resources. Sometimes used as a shorthand way of referring to perfect competition, a market condition in which no individual buyer or seller has any significant influence over price

Competitive firm

A firm operating under conditions of perfect competition, a market condition in which no individual buyer or seller has any significant influence over price. A competitive firm is a price taker, responding to whatever price is established in the market for its output

Constant dollars

Sometimes called "real dollars," to refer to price data which have been adjusted to remove the effect of changes in the general level of prices

Consumption

Spending to acquire consumer goods and services, or using up those goods and services to satisfy wants

Corporation

A legal entity formed to conduct business and possessing certain privileges not available to single proprietorships or partnerships, notably limited liability which confines the shareholder's possible losses to the amount paid to purchase shares in the business

Current dollar

Values which have not been adjusted to remove the influence of changes in the general price level.

Deflation

A fall in the general level of all prices. The opposite of inflation

Depreciation

The using up or wearing out of capital goods

Deregulation

Reducing or eliminating government intervention to control particular market activities, especially of private firms. For example, removing price controls or monopoly privileges

Diminishing returns

The tendency for additional units of a productive factor to add less and less to total output when combined with other inputs which are to some degree fixed in quantity Combining more of a variable input, such as labour, with a given amount of some other input, such as capital in the form of a machine, will eventually result in the marginal product for labour declining

Disposable income

The income a person or household has left to dispose of after income tax has been deducted from personal income. Disposable income may either be spent on consumption or saved

Dissaving

If individuals or households spend more than their current income they are said to be dissaving

Entrepreneurship

The ability and willingness to undertake the organization and management of production As well as making the usual business decisions, entrepreneurship is often associated with the functions of innovating and bearing risks

Equity

May be used in either of two unrelated senses. In the context of income distribution theory, refers to an objective, goal or principle implying "fairness." In a financial context may refer to a share or portion of ownership

Exchange rate

The price of one country's currency in terms of another's

Firms

Economic entities which buy or employ factors of production and organize them to create goods and services for sale

Fiscal policy

The use by a government of its expenditures on goods and services and/or tax collections to influence the level of national income

Government spending

The total outlays by government on goods and services during some accounting period, usually a year. Government outlays such as welfare benefits to households, for example, are normally excluded from this amount on the grounds that they are merely transfers of income from taxpayers to the beneficiaries of such programs

Graph

A visual representation of a relationship between two variables, usually drawn to some specified scale

Gross Domestic Product (GDP)

The value of all the goods and services produced in an economy during some accounting period, usually a year

Gross National Expenditure (GNE)

The sum of all spending on consumption and investment plus government spending on goods and services and net exports (total exports minus imports) It is equivalent in value to GDP

Human capital

The stock of knowledge and acquired skills embodied in individuals

Indirect taxes

Taxes levied on a producer which the producer then passes on to the consumer as part of the price of a good Distinguished from direct taxes, such as sales taxes which are visible to the person who pays them

Inferior good

A good for which the demand decreases when income increases When a household's income goes up, it will buy a smaller quantity of such a good

Inflation

A general rise in the average level of all prices

Interest rate

The percentage rate which must be paid for the use of investable funds

Interest

The payment made for the use of funds to create capital goods with

Inventories

Stocks of goods in the hands of producers These stocks are included in the definition of capital and an increase in inventories is considered to be investment

Investing

Creating capital goods. Acquiring or producing structures, machinery and equipment or inventories

Involuntary unemployment

Unemployment caused by a deficiency in aggregate demand

Labor

The economically productive capabilities of humans, their physical and mental talents as applied to the production of goods and services

Laissez-faire

A doctrine advocating a minimum role for government in the economy, such as providing for defence against external enemies, a system of law to protect individuals and their property, and production of such goods and services which for some reason are needed, but would not be produced by private firms

Land

All natural resources The "gifts of nature" which are economically useful

Law of demand

The inverse relationship between price and quantity of a good or service demanded

Liabilities

In general, debts owed by individuals or firms. In the case of commercial banks, their liabilities are largely in the form of what they owe their customers, that is, the total amount of deposits held

Macroeconomics

The branch of economic theory concerned with the economy as a whole. It deals with large aggregates such as total output, rather than with the behaviour of individual consumers and firms

Market demand

The relationship between the total quantity of a good demanded and its price

Market failure

Instances of a free market being unable to achieve an optimum allocation of resources

Markets

Any coming together of buyers and sellers of produced goods and services or the services of productive factors

Mercantilism

A body of policy recommendations designed to promote the development of the early nation states of western Europe in the 17th and 18th centuries. The emphasis was on utilizing trade to increase national wealth at the expense of the countries being traded with through fostering a "favourable balance of trade", by which was meant an excess of exports over imports

Monetary base

The same as "high-powered money": cash in commercial banks, plus cash in circulation and deposits of the commercial bank at the central bank

Monetary policy

The use of the central bank's power to control the domestic money supply to influence the supply of credit, interest rates and ultimately the level of real economic activity

Money

Anything generally acceptable in exchange Money serves a number of functions: it is a medium of exchange, it is used as a unit of account, and it can be used as a store of value In its latter use, it is an alternative to holding value in the form of goods or other types of financial assets such as stocks or bonds