Exam 3

Question 1

Monopoly

Answer 1

A firm that is the sole seller of a product without close substitutes

Question 2

Natural Monopoly

Answer 2

Arises because a single firm can supply a good or service to a market at a smaller cost than two or more firms

Question 3

Price Discrimination

Answer 3

Practice of selling the same good at different prices to different customers

Question 4

Microeconomics

Answer 4

Study of how households and firms make decisions and how they interact in markets

Question 5

Macroeconomics

Answer 5

Study of economy wide phenomena, including inflation, unemployment, and economic growth

Question 6

Gross Domestic Product

Answer 6

Market value of all final goods and services produced within a country in a given period of time

Question 7

Consumption

Answer 7

Spending by households on goods and services with the exception of new housing

Question 8

Investment

Answer 8

Spending on capital equipment, inventories, and structures

Question 9

Government purchases

Answer 9

Spending on goods and services by governments

Question 10

Net Exports

Answer 10

Spending on exports minus spending on imports

Question 11

Nominal GDP

Answer 11

Production of goods and services valued at current prices

Question 12

Real GDP

Answer 12

Production of goods and services at constant prices

Question 13

GDP deflator

Answer 13

Nominal GDP / Real GDP * 100

Question 14

Consumer Price Index

Answer 14

Measure of the overall cost of the goods and services bought by a typical consumer

Question 15

Inflation Rate

Answer 15

Percentage change in the price index from the preceding period

Question 16

Producer Price Index

Answer 16

Measure of the cost of a basket of goods and services bought by firms

Question 17

Indexation

Answer 17

Automatic correction by law or contract of a dollar amount for the effects of inflation

Question 18

Nominal Interest Rate

Answer 18

Interest rate as usually reported without a correction for the effects of inflation

Question 19

Real Interest Rate

Answer 19

Nominal interest rate - Inflation rate

Question 20

Labor Force

Answer 20

Total number of workers, including both the employed and unemployed

Question 21

Unemployment Rate

Answer 21

Percentage of the labor force that is unemployed

Question 22

Labor-force Participation Rate

Answer 22

Percentage of adult population in the workforce

Question 23

Natural Rate of Unemployment

Answer 23

Normal rate of unemployment around which the unemployment rate fluctuates

Question 24

Cyclical Unemployment

Answer 24

Deviation of unemployment from its natural rate

Question 25

Discouraged Workers

Answer 25

Individuals who would like to work but have given up looking for a job

Question 26

Frictional Unemployment

Answer 26

Unemployment that results because it takes time for workers to search for the jobs that best suit their tastes and skills

Question 27

Structural Unemployment

Answer 27

Results because the number of jobs available in some labor markets is insufficient to provide jobs for everyone

Question 28

Job Search

Answer 28

Process by which workers find appropriate jobs given their tastes and skills

Question 29

Unemployment Insurance

Answer 29

Government program that partially protects workers' incomes when they become unemployed

Question 30

Union

Answer 30

A worker association that bargains with employers over wages, benefits, and working conditions

Question 31

Collective Bargaining

Answer 31

Process by which unions and firms agree on the terms of employment

Question 32

Strike

Answer 32

Organized withdrawal of labor from a firm by a union

Question 33

Efficiency Wages

Answer 33

Above-equilibrium wages paid by firms to increase worker productivity