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78 Cards in this Set
- Front
- Back
Free Market |
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 |
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entrepreneur |
someone who operates a business, bringing together the factors of production (labor,captical, and natural resources) to produce goods and services |
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property rights |
the rights individuals or firms have to the exclusive use of their property, including the right to buy or sell it |
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Comparative |
To achieve gains from trade, a nation should specialize in producing the good for which it has a __________ advantage |
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True |
in a simple economy in which only two goods are produced, a country can have an absolute advantage in the production of both goods |
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False. A country can have a comparative advantage in one good or the other, but not both |
IN a simple economy in which only two goods are produced, a country can have a comparative advantage in the production of both goods. |
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Perfectly competitive market |
a market that has many buyers and sellers, who sell identical products, and for which there are no barriers to entry |
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demand curve |
a curve that shows the relationship between the price of a product and the quantity of the product demanded |
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law of demand |
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 |
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substitution effect |
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 |
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income effect |
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. |
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ceteris paribus |
the requirement that when analyzing the relationship between two variables (such as price and quantity demanded) all other variables must be held constant |
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False. A change in the price of a good causes a movement along its demand curve, not a shift of the demand curve |
a change in the price of a good causes the demand curve to shift |
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right |
an increase in income causes the demand for a normal good to shift _______ |
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left |
an increase in income causes the demand for an inferior good to shift _________ |
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right |
An increase in the price of a substitute causes the demand for a good to shift ___________ |
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left |
An increase in the price of a complement causes the demand for a good to shift ___________ |
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right |
a positive change in tastes or preferences cause the demand for a good to shift _________ |
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right |
An increase in the size of the relevant population causes the demand for a good to shift _________ |
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right |
If buyers come to expect that the price of a good will be high next week, the demand for the good shifts ________ today. |
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causes a movement along the demand curve |
An increase in the price of a good causes its demand curve to shift |
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left |
An increase in the price of a major input causes the supply curve to shift |
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right |
An improvement in the technology used to produce a good causes the supply curve to shift _______ |
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left |
An increase in the price of a substitute in production causes the supply curve to shift __________ |
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right |
An increase in the price of a complement in production causes the supply curve to shift |
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right |
an increase in the number of sellers of a good causes the supply curve for the good to shift to the |
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movement along the supply curve |
An increase in the price of a good causes its supply curve to |
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left |
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 |
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normal good |
a good for which the demand increases as income rises and decreases as income falls |
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inferior good |
a good for which the demand increases as income falls and decreases as income rises |
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substitutes |
goods and services that can be used for the same purpose |
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complements |
goods and services that are used together |
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substitutes in production |
goods that can be produced using the same inputs |
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circular-flow diagram |
a model that illustrates how participants in markets are linked |
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factors of production |
the inputs used to make goods and services |
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product market |
a market for goods and servies |
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market |
a group of buyers and sellers of a good or service and the instititon or arrangement by which they come together to trade |
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attainable but production inefficient |
Points that lie within the PPF are |
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unattainable |
Points that lie outside the PPF are __________ |
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attainable and production efficient |
Points that lie along the PPF are __________ |
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Comparative advantage |
The ability of an individual, a firm, or a country to produce a good or service at a lower opportunity cost than competitors |
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absolute advantage |
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 |
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trade |
the act of buying and selling |
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economic growht |
the ability of an economy to increase the production of goods and services |
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opportunity cost |
the highest-valued alternative that must be given up to engage in an activity |
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Production possibilities frontier (PPF) |
A curve showing the maximum attainable combinations of two products that may be produced with available resources and current technology |
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scarcity |
a situation in which unlimited wants exceed the limited resources available to fulfill those wants |
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club good |
a good that is non-rival and excludable (e.g., an iTunes download) |
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common property good |
a good that is rival and non-excludable (e.g., fish in the ocean) |
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public good |
a good that is non-rival and non- excludable (e.g., AM/FM radio signals) |
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private good |
a good that is rival and excludable (e.g., computers) |
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price |
What is the most importation rationing mechanism in the U.S. economy? |
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there are mechanisms that determine who gets to consume it and who does not get to consume it |
A good is excludable in consumption when |
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one person's consumption of it prevents others from consuming it |
A good is rival in consumption when________ |
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economic "bads" |
goods and services that make people worse off when consumed |
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economic "goods" |
goods and services that make people better off when consumed |
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complements in production |
goods that are naturally produced together, usually when one good is a byproduct of the production of the other |
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supply curve |
A curve that shows the relationship between the price of a product and the quantity of the product supplied |
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law of supply |
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 |
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technological change |
a positive or negative change in the ability of a firm to produce a given level of output with a given quantity of inputs. |
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market equilibrium |
a situation in which quantity demanded equals quantity supplied |
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surplus |
a situation in which the quantity supplied is greater than the quantity demanded |
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shortage |
a situation in which the quantity demanded is greater than the quantity supplied |
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below |
A shortage exists at prices ___________ equilibrium |
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above |
A surplus exists at prices ____________ equilibrium |
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price ceiling |
a legally determined maximum price that sellers may charge |
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price floor |
a legally determined minimum price that sellers may receive |
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consumer surplus |
the difference between the highest price a consumer is willing to pay for a good or service and the price the consumer actually pays |
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marginal benefit |
the additional benefit to a consumer from consuming one more unit of a good or service |
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marginal cost |
the additional cost to a firm of producing one more unit of a good or service |
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producer surplus |
the difference between the lowest price a firm would be willing to accept for a good or service and the price it actually receives |
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economic surplus |
the sum of consumer and producer surplus |
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deadweight loss |
the reduction in economic surplus resulting from a market not being in competitive equilibrium |
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economic efficiency |
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 |
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black market |
a market in which buying and selling take place at prices that violate government price regulation |
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tax incidence |
the actual division of the burden of a tax between buyers and sellers in a market |
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specific tax |
a tax that is applied as a fixed amount for each unit of a good or service sold |
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ad valorem tax |
a tax based on the value of what is being taxed |