Economics Concepts

Question 1

Characteristic of monopolistic competition.

Answer 1

1. A large number of sellers.
2. Close substitutes for the product or service.
3. Ease of entry into or exit from the market.

Question 2

Five factors used in determining the operating attractiveness of an industry.

Answer 2

1. Bargaining power of customers.
2. Threat of new competition.
3. Intensity of rivalry.

Question 3

Multiplier Effect Eq

Answer 3

$ Multiplier Effect = $ Initial Change in Spending × [1/(1− MPC)].

Question 4

A shift in the supply curve may result from

Answer 4

(1) changes in production technology, (2) changes or expected changes in resource prices, (3) changes in the prices of other goods, (4) changes in taxes or subsidies, (5) changes in the number of sellers in the market, and (6) expectations about the future price of the product. This item identifies changes in production taxes, which will alter the supply curve.

Question 5

Structural unemployment.

Answer 5

Structural unemployment measures the workforce that is unemployed due to a mismatch in job skills. Significant amounts of structural unemployment can drag down the economy.

Question 6

Cyclical unemployment.

Answer 6

Cyclical unemployment measures the workforce that is unemployed due to economic conditions.

Question 7

Frictional unemployment.

Answer 7

Frictional unemployment measures the temporary unemployment that always exists as workers change jobs or new workers enter the workforce.

Question 8

Overall unemployment.

Answer 8

Overall unemployment includes the workforce that is unemployed for all reasons.