exam

Question 1

The monetary value of a product.

Answer 1

Price

Question 2

System of allocating goods and services
without prices.

Answer 2

Rationing

Question 3

A fuel created from living materials.

Answer 3

Biofuels

Question 4

A simplified version of a complex behavior expressed in the form of an equation, graph, or illustration

Answer 4

Economic Model

Question 5

Price where quantity supplied equals quantity demanded

Answer 5

Equilibrium Price

Question 6

Quantity of output supplied that is equal to the quantity demanded at the equilibrium price

Answer 6

Equilibrium Quantity

Question 7

Situation where quantity supplied is
greater than quantity demanded at a
given price.

Answer 7

Surplus

Question 8

Situation where quantity supplied is less
than quantity demanded at a given
price.

Answer 8

Shortages

Question 9

The highest legal price that can be
charged for a product.

Answer 9

Price ceiling

Question 10

The lowest legal price that can be paid
for a product.

Answer 10

Price floor

Question 11

Price floor for agricultural products set
by the government to stabilize farm
prices.

Answer 11

Target price

Question 12

loan that carries neither penalty nor
further obligation to repay.

Answer 12

Nonrecourse Loan

Question 13

Unincorporated business owned and run by a single person who has rights to all profits and unlimited liability for all debts of the firm; most common form of business organization in the United States

Answer 13

Sole proprietorship

Question 14

Requirement that an owner is personally
and fully responsible for all losses and
debts of a business.

Answer 14

Unlimited liability

Question 15

Situation in which a firm legally ceases to
exist when an owner dies or quits or a
new owner is added; applies to sole
proprietorships and partnerships.

Answer 15

Limited life

Question 16

Unincorporated business owned and
operated by two or more people who share
the profits and have unlimited liability for the
debts and obligations of the firm.

Answer 16

Partnership

Question 17

Form of business organization recognized by
law as a separate legal entity with all the
rights and responsibilities of an individual,
including the right to buy and sell property,
enter into legal contracts, and to sue and be
sued.

Answer 17

Corporation

Question 18

Check paid to stockholders, usually quarterly, representing a portion of corporate profits

Answer 18

Dividend

Question 18

Certificate of ownership in a corporation; can be either common or preferred stock

Answer 18

Stock

Question 19

requirement in which a corporation, but not its
owners, is responsible for all losses and debts of the business.

Answer 19

Limited liability

Question 20

Feature of taxation that allows
stockholders’ dividends to be taxed both
as corporate profit and as personal
income.

Answer 20

Double taxation

Question 21

Business investment that involves renting
or leasing another successful business
model.

Answer 21

Franchise

Question 22

A measure of business profits determined buy
substracting all expenses, including taxes, from
revenues.

Answer 22

Net income

Question 23

Gradual wear on capital goods.

Answer 23

Depreciation

Question 24

Total amount of new funds the business generates from operations; broadest measure of profits for a firm because it includes both net income and non-cash charges.

Answer 24

Cash flow

Question 25

Combination of firms producing the same kind of product.

Answer 25

Horizontal merger

Question 26

Combination of firms involved in different steps of manufacturing, marketing, or sales.

Answer 26

Vertical Merger

Question 27

firm with four or more businesses making unrelated products, with no single business responsible for a majority of its sales.

Answer 27

Conglomerate

Question 28

Economic institution that operates like a business but does not seek financial gain; schools, churches, and community- service organizations are examples.

Answer 28

Nonprofit organization

Question 29

Nonprofit association performing some kind of economic activity for the benefit of its members.

Answer 29

COOPERATIVE/CO-OP

Question 30

Nonprofit service cooperative that accepts deposits, makes loans, and provides other financial services.

Answer 30

Credit Union

Question 31

Organization that works for its members interests concerning pay, working hours, health coverage, fringe benefits, and other job-related matters.

Answer 31

Labor Union

Question 32

In a competitive market economy, prices are neutral because they favor neither the producer nor the consumer.

Answer 32

Neutrality

Question 33

Prices in a market economy help provide flexibility. Unforeseen events such as natural disasters and war affect the prices of many items.

Answer 33

Flexibility

Question 34

Most people have known about prices all their lives. As a result, prices are familiar and easy to understand.

Answer 34

Familiarity

Question 35

Prices have no cost of administration. Competitive markets tend to help products find their own prices without outside help or interference.

Answer 35

Efficiency

Question 36

Prices help allocate resources between markets because as prices ___, demand ___

Answer 36

increase, lower

Question 37

Surpluses and shortages help establish the

Answer 37

equilibrium price and quantity of output.

Question 38

Surpluses cause sellers to ____ while shortages cause sellers to ____

Answer 38

lower prices, raise prices

Question 39

Goals of Price Ceilings

Answer 39

To protect buyers from paying overly high prices (price gouging). To save resources for other needs, such as a war.

Question 40

Goals of price floors

Answer 40

To protect business (like farming) during times of difficulty To stabilize prices and incomes for certain businesses

Question 41

Markets are said to "talk" when prices move up or down significantly in reaction to a related event

Answer 41

Gold prices rise Stock prices fall Oil prices rise

Question 42

Advantages of Sole Proprietorships

Answer 42

Easy to start up Ease of management Owner keeps all profits without having to share Not required to pay separate business income taxes Psychological satisfaction of being your own boss Easy to get out of business.

Question 43

Disadvantages of Partnerships

Answer 43

General Partnership: each partner is fully responsible for the acts of all other partners. Limited Partnership: responsible for the debts of the business, but limited to his or her investment in the firm. Limited life Potential for conflict between partners.

Question 44

A dividend is a what?

Answer 44

check that stockholders receive as a portion of the corporate earnings

Question 45

Disadvantages of Corporations

Answer 45

Double taxation of corporate profits Difficulty and expense of getting a charter Owners (shareholders) have little voice in how the business is run Subject to more government regulation than other forms of business.

Question 46

Reasons for merging

Answer 46

Faster growth Synergy Economies of Scale Diversification Elimination of Rivals Change or lose corporate identity

Question 47

If a multinational makes unrelated products, it is a

Answer 47

conglomerate

Question 48

Cooperatives/Co-ops

Answer 48

consumer cooperative Service cooperative Producer cooperative