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Midterm Review
Honors

The added benefit received from the
purchase or use of the next unit of a
product

Marginal utility

What does a production possibilities
frontier demonstrate?
Total production combination of any two
products
 The opportunity cost of increasing
production of one in terms of the loss of
the other


The arrangement of labor so that each
worker is doing fewer tasks than before:

Division of labor

What does specialization lead to?

Increased productivity

Where is labor bought and sold?

Factor market

What is the key benefit of the free
enterprise system characteristic of private
property rights?

Private property can be used as collateral
for entrepreneurs to qualify for bank loans
to start new businesses

What type of business structure has
unlimited life?

Corporation

The private ownership of the factors of
production:

Capitalism

If the price of a product increased, what
would happen to the demand of those
things considered its compliment?

Shift left

What is the likely elasticity of demand for
cocaine?

Inelastic

Of what business type is double taxation is
a disadvantage?

Corporation

Under what conditions of demand would a
monopoly be the most free to raise prices?

Inelastic demand

What 4 benefits do entrepreneurs
provide?

Jobs, tax receipts, products, philanthropy

Which economic system, has the lowest
standard of living?

Traditional

Which economic system fails most to
provide for the poor and sick?

Market

Why would a person be unwilling to pay
the same price for a second shirt, similar,
but of a different color than the first?

The second shirt provides diminished
marginal utility

A college education is an example of:
Investing in one’s human capital
 Specialization


If a company that uses heavy machinery
has to order more machinery to increase
production, the elasticity of supply will
likely be:

Inelastic

The efficient use of the means of
production (also referred to as the rate of
production:

Productivity

An assembly line is an example of:

The division of labor

Explains the Law of Demand in that as the
price increases for a product, many
consumers will purchase similar cheaper
items instead

Substitution effect

When a politician proclaims support for
free universal health care for all, you
should scream:

TINSTAAFL!

What market type is most likely to engage
in acts of collusion?

Oligopoly

In free market systems, individuals are
largely free to buy and sell what they
want. That compromise between buyer
and seller wherein both benefit from the
transaction is called:

Voluntary exchange

What free market characteristic acts as
the economic engine of the economy,
creating a powerful incentive that creates
new entrepreneurs seeking opportunity
and success?

Profit motive

Why are prices relatively low in a
monopolistically competitive market?

Lots of competition with little chances to
collude

Why do market economic systems provide
consumers with the most satisfaction?
They provide a large variety of goods and
services
 Competition


What concept does the common retail
slogan, “The customer is always right”
reflect?

Consumer sovereignty

What government role is being played
when Congress passes a bill meant to
reinforce federal Lemon Laws?

Setting legal framework

What role is the govt. playing when it is
enforcing anti-trust laws?

Maintaining competition

Taxing the wealthy at a higher rate is an
example of the govt. engaged in:

Redistributing wealth

What business form accounts for over
70% of all US businesses?

Sole proprietorship

Define the market wherein a differentiated
product with many sellers is sold amid
heavy non-price advertising:

Monopolistic competition

Which business form had the
disadvantage of unlimited liability and
finds it most difficult to attract top
personnel?

Proprietorship

What is the theoretical model economists
use to measure the competitive nature of
real markets?

Perfect competition

One partner in a partnership who’s
protected from unlimited liability because
she helped finance the venture, but does
not take part in managing the firm is
called:

A limited partner

What market structure defines the
women’s shoe market?

Monopolistic competition

What type of monopoly is the newly
created liquid memory market, a new
advancement in computer technology
patented by Econolabco?

Technological monopoly

What happens to the market price of cars
when the recession begins to recover?

Increases

A firm is able to take advantage of
economies-of-scale and lower its prices
below what competitors can afford,
forcing them out of the market. Name the
monopoly type:

Natural monopoly

A lawn mower, a tractor, a factory, a
computer, and a drill press are all
examples of:
Physical capital
 Capital goods


Who sets price ceilings?

The government

What business form has the most control
over price?

Monopoly

What will the supply and demand curve
look like for a product whose quantities
cannot be increased?
S
D

Why do oligopolies remain oligopolies?

Huge cost barriers

Why is it easier for corporations to raise
financial capital?
Likelier to get a bank loan
 Can issue more shares of stock to the
market
 Can sell corporate bonds


What is the most regulated business type?

Corporation

When the price of a product increases, the
demand for its substitute:
Shifts right
D1
D2

What business form is hit with double
taxation?

Corporation

What happens to the market at
equilibrium?
The market is cleared
 Surpluses and shortages disappear


What happens when price is set above
equilibrium?

Surpluses are created

Create a demand curve for avocados
showing the change in demand from 1935
to 2009:
P1
Q1
Q2

What would a S&D curve look like that
indicated a minimum wage?
P
S
D
Q

S&D curve for computers when consumer
income falls:
P1
Q2
Q1

Create a S&D curve for desks when wood
becomes more expensive and a new
strand of malaria wipes out 15% of the
world population:
S2
D2
S1
D1

What happens to market price and
quantity for computers when a strike
delays production?
S2
Demand doesn’t change
Supply shifts left
S1
D