Eco Exam 1 Flash Cards

Front 1

Free Market

Back 1

a market with few government restrictions on how a good or service can be produced or sold or on how a factor of production can be employed

Front 2

entrepreneur

Back 2

someone who operates a business, bringing together the factors of production (labor,captical, and natural resources) to produce goods and services

Front 3

property rights

Back 3

the rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it

Front 4

Comparative

Back 4

To achieve gains from trade, a nation should specialize in producing the good for which it has a __________ advantage

Front 5

True

Back 5

in a simple economy in which only two goods are produced, a country can have an absolute advantage in the production of both goods

Front 6

False. A country can have a comparative advantage in one good or the other, but not both

Back 6

IN a simple economy in which only two goods are produced, a country can have a comparative advantage in the production of both goods.

Front 7

Perfectly competitive market

Back 7

a market that has many buyers and sellers, who sell identical products, and for which there are no barriers to entry

Front 8

demand curve

Back 8

a curve that shows the relationship between the price of a product and the quantity of the product demanded

Front 9

law of demand

Back 9

the rule that, holding everything else constant, when the price of a product falls, the quantity demanded will increase, and when the price of the product rises, the quantity of the product will decrease

Front 10

substitution effect

Back 10

the change in the quantity demanded of a godo that results from a change in price, making the good more or less expensive relative to other goods that are substitutes

Front 11

income effect

Back 11

the change in the quantity demanded of the good that results from the effect of a change in the good's price on consumers' purchasing power.

Front 12

ceteris paribus

Back 12

the requirement that when analyzing the relationship between two variables (such as price and quantity demanded) all other variables must be held constant

Front 13

False. A change in the price of a good causes a movement along its demand curve, not a shift of the demand curve

Back 13

a change in the price of a good causes the demand curve to shift

Front 14

right

Back 14

an increase in income causes the demand for a normal good to shift _______

Front 15

left

Back 15

an increase in income causes the demand for an inferior good to shift _________

Front 16

right

Back 16

An increase in the price of a substitute causes the demand for a good to shift ___________

Front 17

left

Back 17

An increase in the price of a complement causes the demand for a good to shift ___________

Front 18

right

Back 18

a positive change in tastes or preferences cause the demand for a good to shift _________

Front 19

right

Back 19

An increase in the size of the relevant population causes the demand for a good to shift _________

Front 20

right

Back 20

If buyers come to expect that the price of a good will be high next week, the demand for the good shifts ________ today.

Front 21

causes a movement along the demand curve

Back 21

An increase in the price of a good causes its demand curve to shift

Front 22

left

Back 22

An increase in the price of a major input causes the supply curve to shift

Front 23

right

Back 23

An improvement in the technology used to produce a good causes the supply curve to shift _______

Front 24

left

Back 24

An increase in the price of a substitute in production causes the supply curve to shift __________

Front 25

right

Back 25

An increase in the price of a complement in production causes the supply curve to shift

Front 26

right

Back 26

an increase in the number of sellers of a good causes the supply curve for the good to shift to the

Front 27

movement along the supply curve

Back 27

An increase in the price of a good causes its supply curve to

Front 28

left

Back 28

If sellers come to expect that the price of the good will be higher next week, the supply curve for that good will shift ________ today

Front 29

normal good

Back 29

a good for which the demand increases as income rises and decreases as income falls

Front 30

inferior good

Back 30

a good for which the demand increases as income falls and decreases as income rises

Front 31

substitutes

Back 31

goods and services that can be used for the same purpose

Front 32

complements

Back 32

goods and services that are used together

Front 33

substitutes in production

Back 33

goods that can be produced using the same inputs

Front 34

circular-flow diagram

Back 34

a model that illustrates how participants in markets are linked

Front 35

factors of production

Back 35

the inputs used to make goods and services

Front 36

product market

Back 36

a market for goods and servies

Front 37

market

Back 37

a group of buyers and sellers of a good or service and the instititon or arrangement by which they come together to trade

Front 38

attainable but production inefficient

Back 38

Points that lie within the PPF are

Front 39

unattainable

Back 39

Points that lie outside the PPF are __________

Front 40

attainable and production efficient

Back 40

Points that lie along the PPF are __________

Front 41

Comparative advantage

Back 41

The ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors

Front 42

absolute advantage

Back 42

the ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources

Front 43

trade

Back 43

the act of buying and selling

Front 44

economic growht

Back 44

the ability of an economy to increase the production of goods and services

Front 45

opportunity cost

Back 45

the highest-valued alternative that must be given up to engage in an activity

Front 46

Production possibilities frontier (PPF)

Back 46

A curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology

Front 47

scarcity

Back 47

a situation in which unlimited wants exceed the limited resources available to fulfill those wants

Front 48

club good

Back 48

a good that is non-rival and excludable (e.g., an iTunes download)

Front 49

common property good

Back 49

a good that is rival and non-excludable (e.g., fish in the ocean)

Front 50

public good

Back 50

a good that is non-rival and non- excludable (e.g., AM/FM radio signals)

Front 51

private good

Back 51

a good that is rival and excludable (e.g., computers)

Front 52

price

Back 52

What is the most importation rationing mechanism in the U.S. economy?

Front 53

there are mechanisms that determine who gets to consume it and who does not get to consume it

Back 53

A good is excludable in consumption when

Front 54

one person's consumption of it prevents others from consuming it

Back 54

A good is rival in consumption when________

Front 55

economic "bads"

Back 55

goods and services that make people worse off when consumed

Front 56

economic "goods"

Back 56

goods and services that make people better off when consumed

Front 57

complements in production

Back 57

goods that are naturally produced together, usually when one good is a byproduct of the production of the other

Front 58

supply curve

Back 58

A curve that shows the relationship between the price of a product and the quantity of the product supplied

Front 59

law of supply

Back 59

the rule that, holding everything else constant, increases the prices cause increases in the quantity supplied, and decreases in price cause decreases in the quantity supplied

Front 60

technological change

Back 60

a positive or negative change in the ability of a firm to produce a given level of output with a given quantity of inputs.

Front 61

market equilibrium

Back 61

a situation in which quantity demanded equals quantity supplied

Front 62

surplus

Back 62

a situation in which the quantity supplied is greater than the quantity demanded

Front 63

shortage

Back 63

a situation in which the quantity demanded is greater than the quantity supplied

Front 64

below

Back 64

A shortage exists at prices ___________ equilibrium

Front 65

above

Back 65

A surplus exists at prices ____________ equilibrium

Front 66

price ceiling

Back 66

a legally determined maximum price that sellers may charge

Front 67

price floor

Back 67

a legally determined minimum price that sellers may receive

Front 68

consumer surplus

Back 68

the difference between the highest price a consumer is willing to pay for a good or service and the price the consumer actually pays

Front 69

marginal benefit

Back 69

the additional benefit to a consumer from consuming one more unit of a good or service

Front 70

marginal cost

Back 70

the additional cost to a firm of producing one more unit of a good or service

Front 71

producer surplus

Back 71

the difference between the lowest price a firm would be willing to accept for a good or service and the price it actually receives

Front 72

economic surplus

Back 72

the sum of consumer and producer surplus

Front 73

deadweight loss

Back 73

the reduction in economic surplus resulting from a market not being in competitive equilibrium

Front 74

economic efficiency

Back 74

a market outcome in which the marginal benefit to consumers of the last unit produced is equal to its marginal cost of production and in which the sum of consumer surplus and producer surplus is at its maximum

Front 75

black market

Back 75

a market in which buying and selling take place at prices that violate government price regulation

Front 76

tax incidence

Back 76

the actual division of the burden of a tax between buyers and sellers in a market

Front 77

specific tax

Back 77

a tax that is applied as a fixed amount for each unit of a good or service sold

Front 78

ad valorem tax

Back 78

a tax based on the value of what is being taxed