module 2

Question 1

consumer

Answer 1

a person who purchases goods and services for personal use. (can also be referred to buyer)

Question 2

goods

Answer 2

tangible items that can be touched

Question 3

service

Answer 3

an action that a person does for someone else.

Question 4

utility

Answer 4

total utility is the amount of satisfaction received from consuming a good or service.

Question 5

marginal utility

Answer 5

additional utility from consuming an additional unit of good or service

Question 6

law of diminishing marginal utility

Answer 6

as you consume more and more of a good or service, the additional satisfaction (utility) from consuming additional units goes down.

Question 7

product and factor markets

Answer 7

Consumers purchase goods and services in product markets. Consumers receive income from selling their resources (such as labor) in factor markets.

Question 8

consumer sovereignty

Answer 8

occurs in an economy when the choices of consumers influence the output of producers.

Question 9

consumer choices

Answer 9

consumers make their choices in the economy based utility, prices, and income.

Question 10

consumer spending

Answer 10

affects the health of the overall economy.

Question 11

human capital

Answer 11

refers to a worker’s experience, skills, and knowledge.

Question 12

what are some examples of human capital?

Answer 12

Earning a college degree, gaining experience in a job, attending conferences related to your occupation, attending workshops related to your occupation

Question 13

hard skills

Answer 13

specific, teachable ability that can be defined and measured and are often listed on a job applicant’s resume.

Question 14

soft skills

Answer 14

the traits that make a person a good employee, such as arriving to work on time, communication, teamwork, problem solving, and getting along well with others.

Question 15

investment in human capital

Answer 15

when people improve their knowledge and skills through education and/or experience, investing in their human capital.

Question 16

income

Answer 16

reflects on a person’s choices they have made about education, training, skill, development, and careers.

Question 17

signals

Answer 17

a college education signals a person has soft skills like time management, dependability, team work, and social skills.

Question 18

sheepskin effect

Answer 18

occurs when completing a college degree is a requirement for obtaining a job and even someone with the same skills who does not have a degree is not eligible for the job.

Question 19

productivity

Answer 19

investment in human capital also affects the productivity and earnings of firms and the overall economy.

Question 20

educational attainment

Answer 20

Human capital explains about 20 percent of the growth in U.S. productivity from 1950 to 2007.

Question 21

producers

Answer 21

producers use scarce resources (labor, land, capital) to produce goods and services that they sell to consumers.

Question 22

what is the main goal for a producer?

Answer 22

The main goal of producers is to maximize their profit.

Question 23

how many types of business structures are there?

Answer 23

5

Question 24

what are the five types of business structures?

Answer 24

sole proprietorship, partnership, corporation, franchise, cooperative

Question 25

sole proprietorship

Answer 25

a business owned by one person and is relatively easy to form. All business decisions, whether good or bad, are the responsibility of the individual owner.

Question 26

what are the benefits of sole proprietorship?

Answer 26

the owner makes all decisions and keeps all profits, and the owner may not need to follow as many government regulations as other types of businesses.

Question 27

what are the costs of sole proprietorship?

Answer 27

the owner generally has limited financial resources, also faces unlimited liability, meaning that if the company fails, the wonder can lose personal assets along with business assets, and the life of a sole proprietorship is limited to the time that the owner is able to operate the business.

Question 28

partnership

Answer 28

a business with two or more owners who share the firm’s profits and losses. Relatively easy to form, the income granted is only taxed once, partners have unlimited liability.

Question 29

what are the benefits of partnership?

Answer 29

owners make decisions and keep the profits, they share responsibilities, and each owner has a unique set of skills and expertise.

Question 30

what are the costs of partnership?

Answer 30

owners face limited liability, limited financial resources, and potential conflict with partners.

Question 31

corporation

Answer 31

provides limited liability for its investors. Designed as a way to raise money by involving a greater number of owners (stockholders).

Question 32

benefits of corporation

Answer 32

corporations are able to accumulate sufficient financial capital to make large-scale investments and achieve economies of scale (bringing down cost of production by producing in volume). They also have limited liability, which means that shareholder risk is limited to their share of ownership in the corporation. The corporation transcends the lives of those persons who created it.

Question 33

what are the costs of corporation?

Answer 33

face tax implications (double taxation--profits are taxed at the corporate level and again when distributed to shareholders as dividends). Corporations are more expensive to establish and are governed by more regulations.

Question 34

franchise

Answer 34

a form of business in which one owner uses the model, methods and trademarks of another. A franchise is a hybrid, and can take the form of a sole proprietorship, partnership, or corporation, depending upon the legal formation.

Question 35

what are the benefits of franchise?

Answer 35

marketing and training is provided by the franchisor, the franchisee gains the exclusive right to sell in an area and benefits from product development.

Question 36

what are the costs of franchise?

Answer 36

the franchisee pays high franchise fees, enjoys a limited product line, and operates under strict guidelines and standards.

Question 37

cooperative

Answer 37

a legal form of business owned by the people who use its services or by the people who work there, cooperatives are also multi-owner and limited liability firms.

Question 38

what are the benefits of cooperative?

Answer 38

member-owned and operated for members’ benefit (credit unions, agricultural cooperatives). Members enjoy discounted products and/or services, may receive refunds at the end of the year, face no personal liability, have a vote in how the business is run, and have interests similar to other members.

Question 39

what are the costs of cooperative?

Answer 39

decisions made by the group may not suit all members, and the decisions-making process may be more complicated and slower than in other organizations.

Question 40

what are the four types of characteristics market structures are classified?

Answer 40

1. The number of consumers and producers in the market 2. The type of good sold 3. The control a producer has over setting their price 4. How easy it is for producers enter and exit in the market

Question 41

perfect competition

Answer 41

a perfectly competitive market has many consumers and producers, all selling a homogenous product.

Question 42

zero economic profit

Answer 42

profit is an incentive for producers to enter a market.

Question 43

commodities

Answer 43

the best example of perfectly competitive markets in the real world, they are basic goods that are used as inputs in the production of other goods or services, they may differ slightly, but they are essentially homogeneous.

Question 44

what are examples of commodities?

Answer 44

agricultural products and metals

Question 45

benefits of perfect competition

Answer 45

production of a higher quantity, a lower price for goods and services, efficiency

Question 46

monopoly

Answer 46

-single producer -producer has some control over price -barriers to entry

Question 47

example of monopoly

Answer 47

local electricity market

Question 48

oligopoly

Answer 48

-few producers -control over price -differentiated product -barriers to entry

Question 49

example of oligopoly

Answer 49

automobile product

Question 50

monopolistic competition

Answer 50

-many producers and consumers -differentiated products -little control over price -easy entry and exitex

Question 51

example of monopolistic competition

Answer 51

retail clothing market

Question 52

costs of imperfect competition

Answer 52

-lower quantity -higher price -inefficiency

Question 53

benefits of imperfect competition

Answer 53

variety and innocation

Question 54

patent

Answer 54

a right granted by the government to the owner of an invention.

Question 55

collusion

Answer 55

a collaborative agreement to prevent competition, it allows firms to behave like a monopoly to increase prices and profits, creating inefficiency in a market.

Question 56

cartel

Answer 56

a formal agreement among firms to collude, cartels are illegal and difficult to maintain because of cheating.

Question 57

circular flow

Answer 57

households (consumers) and firms (producers) are the participants in the circular flow of economic activity.

Question 58

households and firms

Answer 58

households and firms interact in product markets and resource/factor markets.

Question 59

households

Answer 59

buy goods and services in product markets and sell resources in factor markets.

Question 60

firms

Answer 60

sell goods and services in product markets and buy resources in factor markets.

Question 61

government (CFM)

Answer 61

in the expanded circular flow model, the government adds spending into the flow and takes taxes out of the flow.

Question 62

financial institutions (CFM)

Answer 62

in the expanded circular flow model, financial institutions (like banks) put loans into the flow and take savings out of the flow.

Question 63

other countries (CFM)

Answer 63

in the expanded circular flow model, other countries put money into the flow when they buy exports and take money out of the flow when they sell imports.

Question 64

leakages from the circular flow

Answer 64

flow, taxes, savings, value of imports

Question 65

injections into the circular flow

Answer 65

government spending, borrowing, value of exports

Question 66

if injections > leakages--

Answer 66

the economy grows

Question 67

if leakages > injections

Answer 67

the economy shrinks