econ exam

Economics

Study of how people/societies make choices about scarce resources

Scarcity

Occurs when wants exceed available resources

Capital

Goods used to make other goods and services

Land

Natural resources present without human intervention

Goods

Tangible objects that satisfy people's wants

Services

Activities done for other for a fee

Productivity

Ability to produce more goods/services in better ways

Trade-off

Sacrificing one good or service to purchase another

Opportunity cost

Next best alternative given up for the one that was chosen

Microeconomics

Branch of economics, deals with individuals/small businesses

Macroeconomics

Branch of economics that studies the economy as a whole

Economy

Production and distribution of goods and services in a society

Economic model

Simplified representation that helps explain economic behavior

What are the 5 factors of production?

Land, labor, capital, technology, and entrepreneurship

What is the basic problem of economics?

Scarcity

The government controls the economy. It assigns jobs, sets production goals, and decides wages.

Command

By tradition, some of us hunt, fish, and others farm. We are all taken care of.

Traditional

Business is based on competition. Success comes from doing something better or cheaper.

Market

Producers decide what and how much to make based on what people want to buy.

Market

The government has a very small role.

Market

What is the economic system we practice in the US?

Market economy

Protection against things we cannot control is known as...

Economic security

What is the desire to make a profit called?

Profit incentive

What is the material well-being of an individual, group, or nation called?

Standard of living

What is the rivalry among producers of similar goods and services called?

Competition

What is the money left over after taxes have been paid known as?

Disposable income

What is the money left over after necessities have been bought known as?

Discretionary income

What is a person or group that buys or uses goods or services called?

Consumer

Money that is spent on luxury items or entertainment is...

Discretionary income

Consumerism

Movement to educate buyers about products

Rational choice

Choosing the alternative with the greatest value

Competitive ads

State that their product is the best

Informative ads

Give information about a product

Bait and switch ads

Item offered for low price but sold out at the store

Redress

Payment for damages caused by products

A bankruptcy stays on your credit history for how many years?

10 years

The monthly payments on a 5-year loans will be ________ than the payments on a 3-year loan.

Less

Which act requires creditors to fully inform consumers about the costs of credit?

Truth in Lending Act

Interest

Money the borrower must pay for using someone else's money

Principal

Original amount borrowed

Cosigner

Promises to pay the loans if the borrower does not

Credit

Receipt of funds to buy goods with the promise of repaying

APR

Cost of credit expressed as yearly amount

Debt

The amount owed, equal to principal plus interest

Credit check

Investigation of a person's income, debts, etc

Investing savings in several different type of accounts...

Lowers the overall risk

Interest rates on certificates of deposit (CD's) depend on...

Length of maturity

A person who buys a stock for $20 and sells it for $30 has earned $10 in...

Capital gains

The largest stock exchange in the world is the...

NYSE

What government agency regulates the stock market?

Securities and Exchange Commission (SEC)

What happens to savers who cash in a time deposit early?

Pay a penalty

Liquidity

How easily you can change savings into cash

Diversification

Spreading of investments to lessen risk

Maturity

Period of time money must remain in an account to avoid a penalty

CD's

Most common time deposit

Pension plans

Provide retirement income for workers of that company

According to the law of demand, as the price of a good increases, demand...

Decreases

Goods that do not have a lot of substitutes are...

Inelastic

A __________ occurs when the quantity demanded is greater than supply

Shortage

Any price above the equilibrium price will lead to a...

Surplus

Any price below the equilibrium price will lead to a....

Shortage

The law of ___________ states that your first pop will be more satisfying than your second

Diminishing marginal utility

A demand curve that shift to the right indicates that demand has....

Inxreased

A demand curve that shift to the left indicates that demand has...

Decreased

If a person's income increases, what happens to demand?

It increases

If the price of a good stays the same but demand decreases, does that indicate that a good is elastic or inelastic?

Elastic

If the price of a complementary good increases, what happens to the demand for the other good it is normally used with?

It goes down

According to the law of supply, what happens to supply as the price increases?

Quantity increases

As more companies enter an industry, what happened to the supply?

Goes up

Demand

Amount consumers are willing and able to buy

Supply

Amount producers are willing and able to sell

Rationing

Limiting items in short supply

Equilibrium price

Buyers want to buy as much as sellers want to sell

Complimentary

Goods often used together

Sole proprietorship

Business owned by one person

Common stock

Have voting tifjts

Corporation

Business owned by many people

Assets

Items of value

Entrepreneurship

Person who organizes and assumes risks of a business

Unlimited liability

The disadvantage of sole proprietorships and partnerships

Receipts

Income received from the sale of goods/services

Inventory

Extra supply of the items used in a business

Partnership

Business with two or more owners

Preferred wtock

Do not have voting right, but receive a dividend

What type of merger involves companies in the same business?

Horinzontal

What type of market is the US Postal Service an example of?

Monopoly

What type of market is the airline industry an example of?

Oligopoly

In this market, there is nonprice competition, businesses compete through product differentiation.

Oligopoly

Who controlled the Standard Oil Company?

Rockefeller

Obstacles that prevent others from entering are called...

Barriers to entry

What is the exclusive right to manufacture, rent, or sell your invention?

Patent

What is the type of monopoly that exists because of its location?

Geographic

What results when a company buys more than half of another company?

Mergers

Productions the largest amount for the least cost is called...

Economics of scale

Laws that were passed to prevent/break up monopolies are called...

Antitrust

What is the type of monopoly that exists because it is more efficient?

Natural

What organization controls price, production, and/or distribution?

Cartel

An illegal agreement to raise the price is called...

Collusion

What type of market would the ice cream industry be an example of?

Oligopoly

What effect does inflation have on the purchasing power of cash?

Purchasing power goes down with inflation