Exam 2

Question 1

What is perfect competition?

Answer 1

when there are many sellers and many buyers.

Question 2

What is oligopsony?

Answer 2

When there are only a few major buyers.

Question 3

What is the law of demand?

Answer 3

As price increases, demand falls.

Question 4

What is the law of supply?

Answer 4

As price increases, production increases.

Question 5

What is relative price?

Answer 5

The price of one item expressed as the price of another.

Question 6

What does a price floor do?

Answer 6

Creates a surplus.

Question 7

What is price elasticity of demand?

Answer 7

How much demand changes when price changes.

Question 8

When is there a higher demand for substitute goods?

Answer 8

Demand increases when price for another good increases.

Question 9

What is market failure?

Answer 9

When resources are not allocated efficiently.

Question 10

What are public goods?

Answer 10

Things that can be used by more than one person at a time.

Question 11

What is liquidity?

Answer 11

The ease of turning an asset into money?

Question 12

How does fiat currency get value?

Answer 12

It is given value by declaration of the government.

Question 13

What is fractional reserve?

Answer 13

When banks loan out most of its money.

Question 14

What is interest?

Answer 14

The price of money?

Question 15

What is a bond?

Answer 15

A certificate of indebtedness.

Question 16

What is a mutual fund?

Answer 16

An investment company.

Question 17

What is inflation?

Answer 17

A general increase in prices.

Question 18

What is purchasing power?

Answer 18

The ability to buy goods and services.

Question 19

What is discount rate?

Answer 19

What banks are charged for loans.

Question 20

What are open market operations?

Answer 20

Buying and selling Federal securities.

Question 21

What is the situation in which one producer has a smaller opportunity cost of producing a good or service compared to another producer?

Answer 21

Comparative advantage.

Question 22

What is the situation in which one person or country can produce goods with a smaller input of resources than another?

Answer 22

Absolute advantage.

Question 23

What is a restriction on the amount of goods that can be brought into a country for sale?

Answer 23

A quota.

Question 24

What is an order forbidding citizens from trading with another country?

Answer 24

A sanction.

Question 25

What is the status in which a nation is given all of the trade advantages that other nations receive?

Answer 25

Preferred Normal Trade Relations.

Question 26

What will better communication, better transportation, and lower transaction costs do?

Answer 26

increase a country's international trade.

Question 27

What happens if an American company builds a factory in another country?

Answer 27

The investment will likely help that other country to grow economically.

Question 28

What is a general rule of international trade?

Answer 28

If you want to export, you have to import.

Question 29

What is the price of one country's currency expressed in terms of another country's currency?

Answer 29

Currency exchange rate.

Question 30

What is the rate of exchange for goods and services between one country and another?

Answer 30

Real exchange rate.

Question 31

What is the most common form of business organization in the U.S.?

Answer 31

Sole proprietorship

Question 32

What involves a charter, board of directors, and shares of stock?

Answer 32

A corporation.

Question 33

What creates 60-80% of new jobs in the U.S.?

Answer 33

small businesses.

Question 34

What is an entrepreneur?

Answer 34

Someone who starts a business, develops a product, or dreams a dreamed.

Question 35

What is the E-Myth?

Answer 35

That if a person is good at one aspect of business he will be good at all aspects of a business.

Question 36

What is USP?

Answer 36

Unique Selling Perspective. What your product offers that can't be found elsewhere.

Question 37

What is economic profit?

Answer 37

It consideres opportunity cost as a real cost of business.

Question 38

What is the law of diminishing marginal returns?

Answer 38

The productivity of an input decreases as quantity of input increases.

Question 39

What is a deadweight loss?

Answer 39

A reduction in efficiency.

Question 40

What is another term for a business cycle?

Answer 40

Economic fluctuation.

Question 41

What is the price for labor called?

Answer 41

wages or salary.

Question 42

What does investment in training and education improve?

Answer 42

The worth or quality of labor capital.

Question 43

In recent years has the percentage of the work force made up of women increases, decreased, or stayed the same?

Answer 43

increased.

Question 44

What is the result of a work force organized on the basis of discrimination?

Answer 44

Misallocation of resources.

Question 45

What are closed shop states?

Answer 45

Where only union members can be hired in some industries.

Question 46

What has the result of unions been?

Answer 46

To increase wages, but decrease the number of workers hired.

Question 47

In 2007, how much of national income and individual income tax did the 20% of households with the highest income have?

Answer 47

over half of national income and paid over 80% of individual income tax

Question 48

The negative effects of minimum wage laws fall hardest on who?

Answer 48

black teen males.

Question 49

What is frictional unemployment?

Answer 49

people who have not had the time to find a job.

Question 50

What is the natural rate of unemployment?

Answer 50

1-5%