Economic 3

Front 1

vocab

Back 1

incentive something that motivates someone to act in a certain way
regulations rules that govern behavior

Front 2

`vocab

Back 2

efficiency using resources effectively, without wasting them
personal income money that a person has to buy goods and services
rent control maximum amount that a property owner can charge a renter
shortage when buyers want to purchase more than the producers want to sell at the given price

Front 3

vocab

Back 3

efficiency using resources effectively, without wasting them
equilibrium price price at which quantity supplied equals quantity demanded
shortage when buyers want to purchase more than the producers want to sell at the given price
surplus when producers want to sell more than buyers want to buy at the given price

Front 4

In an economy without price controls, market pressures _____ increase or decrease prices.

Back 4

Can

Front 5

Market pressures tend to move prices toward a(n) _____.

Back 5

equilibrium price

Front 6

Select the situation that will occur when a shortage of bread exists, and consumers pressure producers to change their actions.

Back 6

Producers respond by supplying more bread.

Front 7

Select all the items that occur at the equilibrium price.

Back 7

Producers earn revenue to cover costs.
There are no shortages or surpluses.
Consumers buy all the goods that are supplied.

Front 8

Select the situation that describes an efficient use of resources.

Back 8

producing the same number of cell phones that consumers demand

Front 9

In 3 or 4 sentences, explain the relationship between the equilibrium price and efficiency.

Back 9

If these markets are in equilibrium, then the economy is functioning efficiently. This happens because producers in many markets do not waste their resources. Instead, they use them to make goods and services that consumers will demand.

Front 10

NOTES

Back 10

In this lesson, you've learned about market pressures that arise from the buying and sales decisions of consumers and producers. When a market has too many (surplus) or too few (shortage) goods and services, these pressures move prices and quantities toward equilibrium levels.

When there is a surplus of goods, consumers do not demand the available goods and pressure the market to supply fewer goods. This pressure eventually decreases the price and quantity of the good until it reaches the equilibrium level.

When there is a shortage of goods, consumers pressure producers to increase their supply. This pressure eventually raises the quantity and price of the good until it reaches the equilibrium level.

You also learned about the advantages of being at the equilibrium price:

Producers supply enough goods and services for consumers.
Producers earn revenue that is used to cover costs.
Consumers have enough goods and services, at the given price.
There are no shortages or surpluses.
Producers are u

Front 11

vocab

Back 11

inefficient using resources in a wasteful way
minimum wage lowest amount of money that an employer can pay a person for working
personal income money that a person has to buy goods and services
price control government limit on the maximum or minimum price of a good or service
rent control maximum amount that a property owner can charge a renter

Front 12

Select the items that are kinds of price controls.

Back 12

rent control
minimum wage

Front 13

Price controls can cause _____.

Back 13

shortages and surpluses

Front 14

Select the items that increase personal income.

Back 14

Earned Income Tax Credit
rent subsidy

Front 15

Supporters of minimum wage believe that it provides _____.

Back 15

fewer jobs

Front 16

Opponents of rent control believe that it causes _____.

Back 16

housing shortages

Front 17

In 1 or 2 sentences, describe why some people support rent control.

Back 17

Supporters of rent control believe that it makes housing more affordable. More people are able to rent a place to live, because the cost of renting is lower. So rent control can make it possible for more people with low-paying jobs to have shelter.

Front 18

NOTES

Back 18

In this lesson, you've learned that price controls exist in the economy. Sometimes a government may view other goals (such as providing affordable housing or higher wages) as more important than an efficient economy.

You learned about the advantages and disadvantages of two kinds of price controls that the government uses:

minimum wage (a price floor): provides higher wages for minimum wage earners, but creates a job shortage; and
rent control (a price ceiling): provides lower rents, but creates a housing shortage.
You also learned about other ways to provide affordable housing and higher wages, such as rent subsidies and the Earned Income Tax Credit. These other options can achieve the same goals and allow the economy to be efficient.

Finally, you took a look at how price controls affect personal income and efficiency. For example, both minimum wage and rent control increase personal income, but they also decrease market efficiency. In this problem set, you'll be asked to answer questions on thes

Front 19

vocab

Back 19

fixed cost costs that does not change as output changes
market share part of total sales held by one seller
price setter seller that determines a product's price
price taker seller that cannot affect a product's price
variable cost cost that changes as output changes

Front 20

Select all the items that describe the role of a producer.

Back 20

You want to charge a price that earns profits.
You want to charge a price that covers variable costs.
You want to have a large market share.

Front 21

You are more likely to sell your goods at very high prices if you are in a _____ market.

Back 21

single seller

Front 22

As a market moves from a single seller to a competitive one, a product's price _____.

Back 22

decreases

Front 23

A person who charges a price that is determined by buying and sales decisions is a _____.

Back 23

price setter

Front 24

Rockin' Radio has one hundred percent of the market share in the music industry. This means that this music business also has a lot of _____.

Back 24

market power

Front 25

NOTES

Back 25

at a price lower than the cost, the supplier is losing money;
at a price equal to the cost, the supplier is covering the cost, but not earning a profit; and
at a price higher than the cost, the supplier is covering the cost and earning a profit.

Summing It Up:
Producers supply goods and services because they hope to earn money (the incentive).
Producers want to earn enough money to cover their costs and, they hope, earn profits (the reward).
Suppose a good costs $25 to produce. If the producer sold the good for $100, then she would earn a $75 profit and $100 in marginal revenue.
Producers use their money to pay both fixed costs and variable costs.
Producers pay fixed costs, even if they sell zero goods. But variable costs depend on the number of goods and services sold.
Producers can earn more money by making more sales and by charging higher prices. But they only earn money by charging higher prices if they can sell their goods.

Profit earned on each shoe sale = (Price of the shoe) – (Cost of

Front 26

vocab

Back 26

marginal cost cost of producing an extra unit of output
marginal revenue money earned from producing an extra unit of output
maximizes makes as big as possible
monopoly market structure with one single seller, who produces a good or service with no close substitutes
natural monopoly business that has large economies of scale and can make a product more efficiently than other sellers

Front 27

A monopoly exists when _____ provides a good or service.

Back 27

a single seller

Front 28

A monopolist's goal is to maximize _____.

Back 28

profits

Front 29

To find the quantity chosen by a monopolist, find the point at which marginal revenue equals _____.

Back 29

marginal cost

Front 30

To find the price, a monopolist looks at the price _____ at the chosen quantity.

Back 30

demanded

Front 31

A natural monopoly can occur when the average cost of making a good _____ a lot as output increases.

Back 31

decreases

Front 32

In 1 or 2 sentences, explain whether a monopolist uses resources efficiently.

Back 32

the price and quantity chosen by the monopolist are not equilibrium levels. Therefore, resources are not being used efficiently.

Front 33

NOTES

Back 33

A monopolist is a single seller who produces a product with no close substitutes. A monopolist wants to maximize his or her profits.

A monopolist maximizes his or her profits when marginal cost equals marginal revenue.

Steps for a monopolist in choosing quantity and price:
Find the point at which marginal revenue equals marginal cost.
Choose the quantity at which marginal revenue equals marginal cost.
Look at the demand for the product, using a demand table or demand curve.
Find the price that matches the quantity you chose on the demand table or demand curve.
Select this price and quantity pair.

The price set by the monopolist is not the equilibrium price.
The quantity set by the monopolist is not the equilibrium price level.
Resources are not used efficiently in a monopolist's world because the market is not in equilibrium.

Natural monopolies can happen in markets in which production costs decrease a lot as output increases (economies of scale).

In this lesson, you learned about a mon

Front 34

vocab

Back 34

imperfect competition when individual sellers have some control over the price of a product in a market
monopolistic competition market structure with large number of sellers who produce differentiated products
monopoly market structure with a single seller who produces a product with no close substitutes
oligopoly market structure with a few sellers who produce either identical or differentiated products
perfect competition market structure with many sellers who produce identical products

Front 35

Select the items that describe perfect competition.

Back 35

identical products
many sellers

Front 36

A monopoly has _____ seller(s), but perfect competition has _____ seller(s).

Back 36

one, many

Front 37

Select the kinds of market structures in which sellers have some (including complete) control over price.

Back 37

monopoly
oligopoly

Front 38

The ice cream market is an example of _____ because it has many sellers who offer differentiated products.

Back 38

monopolistic competition

Front 39

The car market is an example of _____ because it has few sellers who offer differentiated products.

Back 39

oligopoly

Front 40

In 1 or 2 sentences, explain the similarities between monopolistic competition and oligopoly.

Back 40

monopoly to perfect competition and discovered that they are "opposite market structures." They consist of a different number of sellers, have different price methods, and even offer different types of products. Monopolies and perfect competition are also different in the areas of market entry/exit and market efficiency.

Front 41

NOTES

Back 41

Perfect competition exists when there are many sellers who produce identical products. Did you notice that perfect competition is the opposite of a monopoly?

Perfect competition has many sellers, but a monopoly has just one.
Perfect competition has identical products, but a monopoly has products with no close substitutes.

Having many sellers in perfect competition also affects the price in another way. Take a look:

Sellers enter a perfectly competitive market to make money.
Sellers will continue to enter the market while there is still money to be earned.
Sellers will not enter the market if other producers are losing money.
This means that sellers will enter the market until price equals marginal cost, or until the money earned from each sale (marginal revenue) is the same as the cost of making another good or service.
Why does this happen? Think about it this way:

At a price higher than marginal cost, sellers can still make money. If it costs $30 to make a shoe and the shoe price is $35, t

Front 42

vocab

Back 42

collective bargaining process of negotiating work-related terms between workers' representatives and businesses
division of labor when the production of a good or service is broken down into several separate tasks, with different people performing each task
economic specialization when people concentrate their production on fewer kinds of goods and services than they consume
gross pay full amount of wages or salary that you earn
net pay gross pay minus deductions, such as income taxes and Social Security contributions

Front 43

Your _____ is the full amount of money that you earn without anything taken out for items such as taxes and Social Security.

Back 43

gross pay

Front 44

If you earned $10 per hour and worked 40 hours a week, your gross pay would be _____.

Back 44

$400

Front 45

Select the items that can help you earn higher wages.

Back 45

more education
more training
more skills

Front 46

Division of labor can lead to higher wages because it increases _____.

Back 46

labor productivity

Front 47

Select the items that describe how labor unions try to increase the wages of workers.

Back 47

reducing the supply of labor
increasing the demand for labor

Front 48

In 1 or 2 sentences, describe which is greater: gross pay or net pay.

Back 48

Gross pay is greater because gross pay is the amount that you earn and the net pay is what you earn minus the taxes.

Front 49

NOTES

Back 49

In this lesson, you learned about calculating wages and salaries. You found out that there was a difference between gross pay and net pay. Workers have incentives to earn higher pay in exchange for their labor. They also have some control over what they earn, because their levels of education, training, skills, and career choices make a difference.

Next, you learned that both division of labor and economic specialization affect wages. Both can increase labor productivity. This increase makes workers more valuable to their employers and can lead to higher wages.

Finally, you explored labor unions, which negotiate for better wages. They represent the workers who exist in an imperfect labor market. Unions negotiate with businesses that can behave like monopolies

Front 50

Vocab

Back 50

commission money earned as a percentage of sales revenue
price discrimination when producers sell identical goods or services to different buyers at different prices
salary range scope (or range) of earnings
wage discrimination when people receive different wages based on factors such as race and gender
wage structure levels of jobs and earning ranges

Front 51

You start your own company and decide that administrative assistants will earn between $30,000 and $40,000 each year. This scope refers to the administrative assistant's _____.

Back 51

salary range

Front 52

You work as a salesperson in an electronics store. You earn an hourly wage plus a commission based on a percentage of your _____.

Back 52

sales revenue

Front 53

Producers _____ labor, and workers _____ labor.

Back 53

demand, supply

Front 54

Suppose that Susan does the same job as Joe but receives a lower salary. This is an example of _____.

Back 54

wage discrimination

Front 55

Joshua pays a higher concert ticket price than Raffi because Joshua buys his ticket on the day of the concert. This is an example of _____.

Back 55

price discrimination

Front 56

In 1-2 sentences, explain how wage discrimination results in unequal pay.

Back 56

Wage discrimination results in unequal pay because based on race and gender. For example, if one is working the same thing as another and gets payed less.

Front 57

NOTES

Back 57

The United States government tries to prevent wage discrimination. It also tries to prevent other forms of employment discrimination, such as not hiring someone based on race or gender. Since 1963, several federal laws have been passed in an attempt to keep employment discrimination out of the workplace:

The Equal Pay Act of 1963 prohibits (does not allow) employers to engage in wage discrimination based on gender. This means that men and women with the same work experience, same position, and working in the same place should receive the same pay.
Title VII of the Civil Rights Act of 1964 prohibits discrimination in the workplace based on race, color, religion, gender, or national origin.
The Age Discrimination in Employment Act of 1967, prohibits discrimination from happening to people 40 years or older.
Title I and Title V of the Americans Disabilities Act of 1990 prohibits employment discrimination against people with disabilities.

In this lesson, you learned more about what goes on in the market

Front 58

vocab

Back 58

antitrust laws laws that prevent anticompetitive behavior in the marketplace
exports goods and services sold to foreign countries
externalities unintended consequences
imports goods and services bought from foreign countries
regulations rules that govern behavior
tariff tax on imported goods

Front 59

Pollution from a factory that produces cleaning products is a(n) _____.

Back 59

externality

Front 60

Governments use _____ to make companies take responsibility for unintended effects.

Back 60

regulations

Front 61

Antitrust laws are designed to create _____ competition in the marketplace.

Back 61

More

Front 62

When Americans buy Japanese-made cars, Americans are _____ these cars.

Back 62

importing

Front 63

Suppose the United States government imposes a tax on each Japanese-made car that is sold in the United States. This is called a(n) _____.

Back 63

tariff

Front 64

In 1 or 2 sentences, explain if a country would rather have a trade surplus or a trade deficit.

Back 64

A country wants to have trade surpluses, because a trade surplus means more money is flowing into the country. For example, China has a trade surplus with the United States. So China is selling more goods to the United States (exports) than it is buying from the United States (imports).

Front 65

NOTES

Back 65

In this lesson, you learned about government regulations in different areas of the economy. First, you looked at how government regulations affect the environment. Specifically, you learned about negative externalities and how a government can make companies take responsibility for these unintended consequences.

Next, you looked at antitrust laws. The government uses these laws to create more competition in the marketplace. This can benefit the consumers, but also have costs for the producer.

Finally, you explored trade and tariffs. You learned about imports, exports, trade surpluses, and trade deficits. You also took a look at how a government can earn money and protect domestic companies by imposing a tariff. But this tax also has costs, such as reducing competition in the marketplace.

Front 66

vocab

Back 66

incentive something that motivates someone to act in a certain way
patent a grant by the government to make, use, and sell an invention for a certain amount of time
property right the right to decide how a resource is used

Front 67

The government imposes regulations that reduce pollution. Its incentive is to _____.

Back 67

protect the environment

Front 68

The government wants to ensure that emergency exits are accessible in office buildings. Its incentive is to _____.

Back 68

provide safe workplaces

Front 69

People who think that businesses should decide everything about their production also believe that the government _____ impose regulations that tell businesses what to do.

Back 69

should not

Front 70

The government has antitrust laws, which _____ competition and offer patents which _____ competition.

Back 70

increase, decrease

Front 71

Externalities can distort the true _____ and _____ of goods and services.

Back 71

costs, benefits

Front 72

NOTES

Back 72

In this lesson, you learned more about why governments regulate the economy. First, you explored government incentives for regulations, such as ensuring the safety of products and the workplace. Incentives also include protecting both the environment and human health, and increasing competition.

Next, you explored what happens when price signals fail. This can lead to the government providing public goods. It can also cause the government to hold businesses accountable for externalities.

Finally, you took a look at situations that involve ineffective resource allocation. You saw that antitrust laws and property rights are government actions that help allocate resources more effectively.

Front 73

Vocab

Back 73

equilibrium price price at which quantity supplied equals quantity demanded
externalities unintended consequences
market share part of total sales held by one seller
minimum wage lowest amount of money that an employer can pay a person for working
monopoly market structure with one single seller, who produces a good or service with no close substitutes
oligopoly market structure with a few sellers who produce either identical or differentiated products
perfect competition market structure with many sellers who produce identical products
price control government limit on the maximum or minimum price of a good or service
price discrimination when producers sell identical goods or services to different buyers at different prices
regulations rules that govern behavior
rent control maximum amount that a property owner can charge a renter
tariff tax on imported goods
wage discrimination when people receive different wages based on factors such as race and gender
wage structure levels of j

Front 74

Select the items that can describe a market with price controls.

Back 74

government limits on price levels
minimum wage
rent control

Front 75

_____ describes a market structure with a single seller that produces goods with no close substitutes.

Back 75

Monopoly

Front 76

_____ describes a market structure with many sellers that produce identical products (think: "price takers").

Back 76

Perfect competition

Front 77

_____ try to increase wages through collective bargaining, reducing the labor supply, or increasing labor demand. These groups of workers advocate for better wages, benefits, and working conditions.

Back 77

Labor unions

Front 78

The government creates _____ that govern the ways others behave. For example, safety rules make employers provide safer workplaces.

Back 78

regulations

Front 79

In 1-2 sentences, explain international trade.

Back 79

International trade is when goods and services is sold foreign countries.

Front 80

NOTES
REVIEW

Back 80

In Unit 4 you learned what happens when people do not like the way the market works. For example, what happens when there is no competition in the marketplace? What if no one wants to provide goods such as roads? What happens if producers provide unsafe workplaces in an attempt to lower their production costs? You also learned that the government usually gets involved because it believes that the benefits of its actions outweigh the costs. Often, the government's actions include creating regulations.

Unit 4 also looked at another way that the government intervenes in the marketplace—price controls. You studied a market without price controls. Then you compared this kind of economy to a market with price controls. You learned that price controls affect the prices and quantities of goods and services in the marketplace. They also have an impact on whether the market is in equilibrium and using its resources efficiently.

This Unit reviewed market structures, too. You began with market power and competitio