Econ final set
venture capital
financial investments in new companies that are still relatively small in size, but that have potential to grow substantially
The "Poverty Trap" occurs when:
Anti-poverty programs set up so that government benefits decline substantially as people earn more income - as a result, working at relatively low wage rates provides little financial gain.
The problem of "Asymmetric Information" occurs when there is:
A situation where the seller or the buyer has more information than the other regarding quality of the item being sold.
As shown below, the federal government has enacted a price floor for corn at P f from the equilibrium price of corn at P e. The will, other things being equal, result in:
A surplus of corn
A negative externality describes a situation in which:
A third party suffers a loss from a transaction by others.
The Herfindahl-Hirschman Index is an approach of measuring market concentration by:
Adding the square of the market share of each firm in the industry.
In the theory of a perfect competition marketplace, the long-run equilibrium occurs when:
All firms earn zero economic profit.
Based on the theory of "rational ignorance", what should we expect to happen to voter turnout as the Internet makes information about public affairs easier to obtain?
All other things being equal, voter turnout should increase as the cost of casting an informed vote decreases.
A "Deductible" is:
An amount that the insurance policyholder must pay out of their own pocket before the insurance coverage pays anything.
Predatory pricing occurs when:
An existing firm uses sharp but temporary price cuts to eliminate new competition and then later raises its prices after the competition has been eliminated.
If a new technology in a perfectly competitive market brings about a substantial reduction in costs of production, this will cause:
An increase in the supply curve for the individual firms and market and higher profits for the firms until additional firms enter the market and drive economic profit back to zero.
When economists and policymakers use the general term "market" they defined as
An institution that brings together buyers and sellers of goods or services, who may be either individuals or businesses.
An "Health Maintenance Organization (HMO)" is:
An organization that pays a medical provider a fixed amount per person regardless of how many services are provided to the patient.
As seen below, the Demand Curve for Gasoline shows that:
As the price for gasoline rises, the quantity demanded decreases.
As seen below, the Supply Curve for Gasoline shows that:
As the price of gasoline increases, the quantity supplied by producers rises.
"Venture Capital" can be defined as:
Financial investments in new companies that are relatively small in size but that have potential to grow substantially.
In the theory of a perfect competition marketplace, it is assumed that:
Firms that can enter and leave the market without any restrictions.
Assume that two million TVs are sold each year for $500 each. If the long-run average cost curve below represents this market, which firms will be able to compete in the production of TVs:
Firms that produce between 5,000 and 20,000 TVs.
risk
a measure of the uncertainty of that project's profitability
certificate of deposit (CD)
a mechanism for a saver to deposit funds at a bank and promise to leave them at the bank for a time, in exchange for a higher interest rate
earned income tax credit (EITC)
a method of assisting the working poor through the tax system
index fund
a mutual fund that seeks only to mimic the market's overall performance
money-back guarantee
a promise that the seller will refund the buyer's money under certain conditions
warranty
a promise to fix or replace the good for a certain period of time
imperfect information
a situation where either the buyer or the seller, or both, are uncertain about the qualities of what they are buying and selling
asymmetric information
a situation where the seller or the buyer has more information than the other regarding the quality of the item for sale
stock
a specific firm's claim on partial ownership
estate tax
a tax imposed on the value of an inheritance
progressive tax system
a tax system in which the rich pay a higher percentage of their income in taxes, rather than a higher absolute amount
discrimination
actions based on the belief that members of a certain group or groups are in some way inferior solely because of a factor such as race, gender, or religion
affirmative action
active efforts by government or businesses that give special rights to minorities in hiring, promotion, or access to education to make up for past discrimination
high yield bonds
bonds that offer relatively high interest rates to compensate for their relatively high chance of default
initial public offering (IPO)
the first sale of shares of stock by a firm to outside investors
safety net
the group of government programs that provide assistance to the poor and the near-poor
coupon rate
the interest rate paid on a bond; can be annual or semi-annual
equity
the monetary value a homeowner would have after selling the house and repaying any outstanding bank loans used to buy the house
corporate governance
the name economists give to the institutions that are supposed to watch over top executives in companies that shareholders own
bond yield
the rate of return a bond is expected to pay at the time of purchase
voting cycle
the situation in which a majority prefers A over B, B over C, and C over A
logrolling
the situation in which groups of legislators all agree to vote for a package of otherwise unrelated laws that they individually favor
poverty
the situation of being below a certain level of income one needs for a basic standard of living
Suppose a worker can produce two (2) pairs of shoes per hour and the Ace Shoe Company can sell each pair of shoes for $10 each. According to the "first rule of labor markets," the Ace Shoe Company will pay the worker up to but no more than:
$20 per hour.
Teresa bought a house for $250,000 in cash but if she were to sell it now it would sell for $400,000. How much equity does Teresa have in her house?
$400,000.
The Fee-for-Service method of reimbursing medical providers occurs when:
A provider is paid according to services they provide to patients.
As seen in the labor-leisure budget constraint below, Harry chose a combination of work and leisure at Point A. If the government then provided a guaranteed income of $18,000 as shown in the budget constraint line, there would be a strong financial incentive for Harry to work:
0 hours a year.
Assume that 1 million refrigerators are sold each year for $500 each. If the long-run average cost curve (LRAC) below represents this market, how many firms will be able to compete in the production of refrigerators:
100
As shown in the graph below, if a firm is manufacturing refrigerators and is required to comply with certain environmental laws, which results in increased costs and a supply curve shift. The new equilibrium point would be:
40,000 refrigerators.
If there are a finite number of radio frequencies available for broadcasting in a locality and each one costs $10 million to purchase from the Federal Communications Commission this would be an example of:
A barrier to entry.
"Behavioral Economics" is defined to mean:
A branch of economics that seeks to enrich the understanding of decision-making by integrating the insights of psychology and by investigating how the given dollar amounts can mean different things to individuals depending on the situation.
A "Corporation" is:
A business owned by shareholders who are protected by limited legal liability for the company's debt.
Which of the following is a government-enforced barrier to entry:
A city passes a law that bans ride-sharing companies from operating within the city.
The enactment of a rent control ordinance by the City of Berkeley with a price ceiling at P RC will, other things being equal, result in:
A decrease in the number of apartments available for rent after the ordinance passed.
A "Dividend" is:
A direct payment from a firm to its shareholders.
A market structure called oligopoly consists of:
A few large firms that have all or most of the sales in an industry.
A "Bond" is:
A financial contract through which a borrower like a corporation, a city or state, or the federal government agrees to repay the amount that was borrowed and also pay a rate of interest over a period of time in the future.
A "Public Company" is:
A firm that has sold stock to the public.
A copyright is:
A form of protection provided by law for original works of authorship such as a book or musical recording.
An "inferior good" is:
A good in which the quantity demanded by consumers falls as consumer income rises and in which the quantity demanded rises as income falls.
A "Usury Law" is:
A law that imposes an upper limit on the interest rate that lenders can charge consumers.
A city ordinance that gives one company the exclusive task of collecting garbage from businesses and homes within the city is an example of:
A legal monopoly
A labor market is:
A market in which households sell their labor as workers to business firms or other employers.
An "Index Fund" is:
A mutual fund that seeks only to mimic the overall performance of the market.
The concept of "utils" in Microeconomics assumes that:
A person can measure his or her utility from a product or service.
The graph below shows the Average Cost, Marginal Cost and Marginal Revenue for Sue's Raspberry Farm. Is her farm making:
A profit
If a Ford truck was for sale on Craigslist but the seller didn't disclose to potential buyers that the truck was recently submerged in water from Hurricane Harry in Houston this situation would be an example of the problem of:
Asymmetric information.
As shown by the 3 Indifference Curves and Luis' budget constraint line shown below, what point should Luis choose to maximize his utility in purchasing a combination of books and doughnuts?
B
The antitrust laws of the United States gives the federal government the power to:
Block certain mergers and even in some cases to break up large firms into smaller ones to promote competition.
Low-skilled immigration tends to have what type of impact on different levels of government?
Boost tax revenues for the federal government, relatively fewer tax revenues and higher program costs for state and local governments.
As shown below in the "Lorenz Curve," income distribution in 1980 was
Closer to perfect equality than the income distribution in 2011.
The concept of a kinked demand curve, as shown below, describes a situation in which:
Competing oligopoly firms commit to match price cuts but not price increases by the other firms.
The Production Possibilities Frontier graph below describes a situation in which moving from Point C to Point D means:
Cost-effective policies make it possible to both increase equality and increase economic output.
The term "sunk costs" means:
Costs that were incurred in the past and cannot be recovered.
Why might legislators vote to impose a tariff on Indian cotton when consumers in their districts would benefit from low-cost cotton from India?
Cotton producers in the U.S. would lobby heavily to protect themselves from foreign competition whereas consumers, who would pay a relatively small additional amount for cotton, have little incentive to organize against the tariff.
Insurers use "Risk Groups" to:
Create a group of policyholders that share roughly the same risks of an adverse event occurring.
As seen below in the Demand Curve for Cars, if there is a recession in the United States and thereby a significant decrease in the incomes of Americans, the original Demand Curve (D o) for Cars will move toward:
D2
Since the mid-1950s the percentage of workers in the U.S. who are in a union has:
Decreased.
Firms in an oligopoly face what is called a prisoner's dilemma because:
Each oligopolist must worry that while it is holding down output, other firms will cheat, raise output and gain higher profits.
The graph below shows the average cost of production for a firm that manufactures clocks. The graph demonstrates that in the production of clocks by this firm there is:
Economies of scale.
A firm's fixed costs are:
Expenditures that must be made before production starts and does not change regardless of the level of production.
Specialization allows businesses to take advantage of "economies of scale," which means:
For many goods, as the level of production increases the average cost of producing each individual unit declines.
A "Mutual Fund" is:
Funds that buy a range of stocks or bonds from different companies to increase diversification for an investor.
The problem of "Adverse Selection" in insurance occurs when:
Groups with inherently higher risks than the average person seek out insurance thus straining the insurance system.
In a "Perfectly Competitive Labor Market," firms can:
Hire all the labor they wish at the going market wage.
As the term is used in Microeconomics, "scarcity" means:
Human wants for goods and services exceed the available supply of goods and services.
The following can be considered as part of the "Safety Net:"
Medicaid.
The federal government decides to require that all automobile manufacturers of self-driving cars to install a new automatic braking system that costs $3,500 per car. Under what conditions can these cars pass almost all of this cost along to purchasers of self-driving cars?
If the demand for these cars is inelastic.
A government regulator of a public utility may use cost-plus regulation, which:
In approving rates, permits the regulated firm to cover its costs and to make a normal profit.
As seen below, the perceived demand curve for a monopolist shows that:
In choosing a lower level of output Ql, it can charge the higher price Ph.
Which of the following meets the definition of a "monopsony?"
In the town of Zeus, California, there is a single employer, Greek God Bottling Company.
If the U.S. Congress enacted legislation that increased the patent protection for drug manufacturers from 20 to 23 years, the ability of those drug manufacturers with patented drugs to increase the price of those drugs would:
Increase.
If the U.S. Congress enacted legislation that increased the period of patent protection for drug manufacturers from 20 years to 23 years, the amount of private research and development investment for new drugs would likely:
Increase.
At seen in the Production Possibilities Frontier, a nation that is at Point M is:
Inefficient in economic output and environmental protection.
A firm in a perfectly competitive market is considered to be a price taker because:
It must take the prevailing market price as a given.
"Logrolling" occurs when an elected official:
Joins other elected officials in a group who agree to vote for a package of otherwise unrelated laws that they individually favor.
As seen below, the enactment of a minimum wage (W 1) by the City of Seattle is above the equilibrium wage level (W o). This will, other things being equal, result in the number of potential workers willing to supply labor at:
L1
As shown below, if the City of Seattle enacts a minimum wage at W 1, we can predict that, other things being equal, employers in the City of Seattle will be willing to hire people at what Quantity of Labor?
L2
The use of Command-And-Control Regulations to reduce pollution occurs when:
Laws are enacted that specify allowable quantities of pollution and can also detail which pollution-control technologies that must be used by businesses.
If the federal Environmental Protection Agency (EPA) required that all tomato food processing plants install scrubbers on its smoke stacks to reduce the emission of pollutants into the air and the new scrubbers result in a cost increase of 10 cents per can of tomato sauce manufactured, the Supply Curve for the tomato sauce market will shift or not shift in the following direction?
Left.
The City of Marysville has imposed a new 10% tax on homeowners who use online companies like Airbnb.com to rent overnight stays to visitors in their home. We would expect the Supply Curve for Overnight Stays booked via online companies in homes in the City of Marysville to shift:
Leftward
If the State of California required all Medical Assistants to obtain a 4-year Bachelor's Degree from the current requirement of a 2-year Associates Degree as a job requirement, the Labor Supply Curve for Medical Assistants would shift:
Leftward.
A good example of a Public Good is:
Legal system and courts.
In a perfect competition marketplace, is it characterized by:
Many firms that produce identical products.
A market structure called monopolistic competition consists of:
Many firms that sell similar but differentiated products
California's Cap-And-Trade Program to reduce emissions of greenhouse gas emissions is an example of using which environmental protection approach:
Marketable permit program.
When a monopolistic competitor is earning positive economic profits, this will result in:
More firms entering the market.
A firm's implicit costs are:
Opportunity costs of resources already owned by the firm.
A firm's explicit costs are:
Out-of-pocket costs, such as payment for rent, wages, or materials.
A Free Rider Problem can arise when:
People don't pay for the public good but benefit from using the public good without paying the cost.
The problem of "Moral Hazard" in insurance occurs when:
People who have insurance against a certain event are less likely to guard against that event occurring.
Below is the perceived demand curve for a firm that is in:
Perfect competition market structure.
"Monetary Policy" means:
Policies that effect bank lending, interest rates and financial capital markets.
"Fiscal Policy" means:
Policies that effect government spending and taxes.
If incomes rise for low-income and high-income workers but rise more for the high-income earners, we can describe this as a situation in which:
Poverty falls, inequality rises.
A "market economy" is organized as follows:
Private enterprises are the primary means of production and decision---making related to what goods and services will be produced and what prices are charged is decentralized.
As seen below, the City of Berkeley has imposed rent control on apartments with the city, a price ceiling at P RC. As a result, the quantity of apartments demanded by potential renters and current renters is:
Q D
With the enactment of the rent control ordinance in the City of Berkeley as shown below, the quantity of rent-controlled apartments supplied by apartment building owners will be:
Q S
As seen in the graph below, if a union successfully bargains with all the employers in a specified industry to raise wages from Wo to Wu, the number of workers hired by the employers when the wage increase goes into effect would be:
Qd
As seen the graph below if a union successfully bargains with all the employers in a specified industry to raise wages from Wo to Wu, the quantity of labor available to the employer would be at:
Qs
The equilibrium price is $1 for a pound of corn ( P e). The federal government then enacts legislation that requires that a pound of corn can only be sold for $.50 per pound (P f). With enactment of the price floor, what will be the quantity of corn supplied by corn farmers?
Qs
As seen below, assuming an efficient market for the production and sale of gasoline, if today's price for a gallon of gasoline is $2.00 and the supply rises to 700 million gallons, gas sellers will soon feel increasing pressure to:
Reduce the $2.00 price closer to the equilibrium price to sell accumulating gas supplies.
The Production Possibilities Frontier graph below describes a situation in which moving from Point A to Point B means:
Requiring a higher level of equality will result in less economic output.
The "Temporary Assistance for Needy Families (TANF)" program and law attempts to avoid the poverty trap by:
Requiring that welfare recipients work and by limiting the length of time recipients can receive benefits.
A new technology allows the efficient mechanical harvesting of peaches at less cost than manually picking the peaches. The technological advancement will tend to shift the Supply Curve for Peaches in the following manner:
Rightward
From 2015 to 2020, the per-person consumption of tacos by Americans rose from 12 pounds per year to 15 pounds per year and the per-person consumption of roast beef sandwiches fell from 9 pounds per year to 5 pounds per year. As tastes have changed for these substitute goods during the 2015-2020 time period, we would expect the Demand Curve to shift or not shift in the following manner:
Rightward for tacos and leftward for roast beef sandwiches.
As seen below the Supply Curve for Trucks, if the U.S. government imposes a new tariff on imported steel that causes the cost of steel to rise by 25% per ton, we would expect the original Supply Curve (S 0) for Trucks to shift or not shift to:
S1
When a government agency of public utilities choses to use Price Cap Regulation they:
Set the price that the utility can charge but not exceed for a specified number of years.
As the proportion of children in the U.S. population decreases over the next ten years, we would expect the demand curve for toys to:
Shift leftward.
"Pork-barrel spending" occurs when an elected official:
Supports the spending of taxpayer funds that benefits mainly his or her political district.
The "Poverty Rate" is:
The percentage of the population living below the poverty line.
The concept of a "budget constraint line" means:
The possible combinations of two goods that is affordable given a consumer's limited income.
A state or country that has a Progressive Income Tax System is characterized by:
The rich paying a higher percentage of their income in taxes.
If the U.S. reduces the levels of low-skilled immigration, what impact would that have on the wages for low-skilled labor currently in the United States?
Tend to raise the equilibrium wage for low-skill labor.
Adam Smith's metaphor of the "invisible hand" means:
That self-interested behavior by individuals can lead to positive social outcomes.
A firm's marginal cost is:
The additional cost of producing one more unit of a good or service.
Marginal revenue means:
The additional revenue gained from selling one more unit of a good or service.
An "equilibrium" in a market exists when:
The combination of price and quantity where there is no economic pressure from surpluses or shortages that would cause the price or quantity to change.
What is the main factor preventing a large community from influencing policy in the same way as a special interest group?
The cost of organization the small benefit to the individual.
Social benefits are:
The dollar value of all benefits of a new product or process invested by a company that can be captured by other firms and by society as a whole.
As cited in the textbook, Economist Gary Becker argues that competitive markets tend to have what kind of impact on employers who use discrimination as a hiring or selling practice:
The employer will make less in profits.
If we were discussing the "Law of Diminishing Marginal Utility" in terms related to Bob's consumption of 6 ice cream cones, we can assume that:
The first ice cream cone brought more satisfaction than the sixth.
An "Initial Public Offering (IPO)" is:
The first sale of shares of stock by a firm to outside investors.
A firm is experiencing a diseconomies of scale if:
The long run average cost of producing each individual unit increases as total output increases.
"Tax Incidence" means:
The manner in which the tax burden is divided between buyers and sellers of a product or service.
As shown below, from the labor demand and supply curves for nurses in Minneapolis-St. Paul, if the employers (hospitals, physician offices) offered a salary of $70,000, would there be:
The right number of nurses would be hired.
The theory of "Rational Ignorance" can be defined as:
The theory that rational people will not vote if the costs of becoming informed and voting are too high or because they know their vote will not be decisive in the election.
Adam Smith (1723---1790) introduced a concept that explains efficiency in the production of goods for which he called the "division of labor." The "division of labor" means:
The way a good or service is produced is divided into a number of tasks that are performed by different workers instead of all the tasks being done by the same worker.
As seen in the Production Possibilities Frontier below, a nation at Point T has chosen:
To invest more in environmental protection than economic output.
The Golden Arches representing McDonald's fast food restaurants is an example of a:
Trademark.
The authors of the textbook argue that a study that concludes that an earnings gap between people who are classified into certain groups (male, female, racial backgrounds) proves discrimination if the study does not compare the wages of people in the same job and who have the same amount of education, experience and productivity.
True.
The "Median Voter Theory" argues that politicians:
Try to match policies to what pleases the median voter preferences.
As seen in the graph below, the total cost line for the firm slopes upward because:
Variable costs are being added to fixed costs with increased output.
Which type of investor listed below would we expect to have better information about whether a small, start-up firm is likely to earn profits?
Venture capitalist.
The authors of the textbook argue that "rational ignorance" is a major reason why:
Voter turnout in the U.S. is relatively low.
As shown in Al's Labor Supply Curve, what shows that Al as he earns a higher income, he decides to work fewer hours?
W3-L3
Which mechanism to reduce the risk of imperfect information includes a promise to fix or replace the good for certain period of time:
Warranty.
"Opportunity cost" means:
What must be given up to obtain something that is desired.
The authors in the textbook argue that the self-correcting mechanism is stronger in the private sector than in government because:
When a firm produces a product no one wants to buy or produces at a higher cost than its competitor, the firm is likely to suffer losses and change direction in order to stay in business.
"Coinsurance" is"
When an insurance policyholder pays a percentage of a loss and the insurance company pays the remaining cost.
When analyzing Elasticity, which is generally true?
When analyzing Elasticity, which is generally true?
"Elastic Demand" means:
When elasticity of demand is greater than 1, indicating a high responsiveness by consumers to price changes.
The authors of the textbook contend that:
While government may play a useful role in addressing the problems of markets, government action is also imperfect and may not always reflect majority views.
savings account
a bank account that pays an interest rate, but withdrawing money typically requires a trip to the bank or an automatic teller machine
checking account
a bank account that typically pays little or no interest, but that gives easy access to money, either by writing a check or by using a "debit card"
municipal bonds
a bond issued by cities that wish to borrow
corporate bond
a bond issued by firms that wish to borrow
Treasury bond
a bond issued by the federal government through the U.S. Department of the Treasury
present value
a bond's current price at a given time
corporation
a business owned by shareholders who have limited liability for the company's debt yet a share of the company's profits; may be private or public and may or may not have publicly-traded stock
debit card
a card that lets the person make purchases, and the financial insitution immediately deducts cost from that person's checking account
partnership
a company run by a group as opposed to an individual
sole proprietorship
a company run by an individual as opposed to a group
dividend
a direct payment from a firm to its shareholders
Medicaid
a federal-state joint program enacted in 1965 that provides medical insurance for certain (not all) low-income people, including the near-poor as well as those below the poverty line, and focusing on low-income families with children, the low-income elderly, and the disabled
Supplemental Nutrition Assistance Program (SNAP)
a federally funded program, started in 1964, in which each month poor people receive SNAP cards they can use to buy food
bond
a financial contract through which a borrower like a corporation, a city or state, or the federal government agrees to repay the amount that it borrowed and also a rate of interest over a period of time in the future
capital gain
a financial gain from buying an asset, like a share of stock or a house, and later selling it at a higher price
private company
a firm owned by the people who run it on a day-to-day basis
public company
a firm that has sold stock to the public, which in turn investors then can buy and sell
shares
a firm's stock, divided into individual portions
income
a flow of money received, often measured on a monthly or an annual basis
Lorenz curve
a graph that compares the cumulative income actually received to a perfectly equal distribution of income; it shows the share of population on the horizontal axis and the cumulative percentage of total income received on the vertical axis
risk group
a group that shares roughly the same risks of an adverse event occurring
perfectly competitive labor market
a labor market where neither suppliers of labor nor demanders of labor have any market power; thus, an employer can hire all the workers they would like at the going market wage
monopsony
a labor market where there is only one employer
bilateral monopoly
a labor market with a monopsony on the demand side and a union on the supply side
deductible
an amount that the insurance policyholders must pay out of their own pocket before the insurance coverage pays anything
first rule of labor markets
an employer will never pay a worker more than the value of the worker's marginal productivity to the firm
financial intermediary
an institution, like a bank, that receives money from savers and provides funds to borrowers
compound interest
an interest rate calculation on the principal plus the accumulated interest
simple interest
an interest rate calculation only on the principal amount
health maintenance organization (HMO)
an organization that provides health care and is paid a fixed amount per person enrolled in the plan—regardless of how many services are provided
cosigner
another person or firm who legally pledges to repay some or all of the money on a loan if the original borrower does not
poverty trap
antipoverty programs set up so that government benefits decline substantially as people earn more income—as a result, working provides little financial gain
quintile
dividing a group into fifths, a method economists often use to look at distribution of income
service contract
the buyer pays an extra amount and the seller agrees to fix anything specified in the contract that goes wrong for a set time period
mutual funds
funds that buy a range of stocks or bonds from different companies, thus allowing an investor an easy way to diversify
special interest groups
groups that are small in number relative to the nation, but well organized and thus exert a disproportionate effect on political outcomes
expected rate of return
how much a project or an investment is expected to return to the investor, either in future interest payments, capital gains, or increased profitability
diversification
investing in a wide range of companies to reduce the level of risk
As a mobile device to listen to music, an iPod is a substitute for a Walkman cassette player. The cost of purchasing an iPod has decreased by 20%, so therefore we would expect the Demand Curve for Walkman Cassette Players to shift or not shift in the following manner:
leftward
If Amazon Corporation were granted permission to greatly expand the use of drones for same-day delivery of their packages to homeowners, the Labor Demand Curve for Delivery Truck Drivers would shift or not shift in the following manner:
leftward
If the price of bicycles rises by 40%, the Demand Curve for Bicycle Helmets (a complimentary good) would shift or not shift in the following manner:
leftward
occupational license
licenses issued by government agencies, which indicate that a worker has completed a certain type of education or passed a certain test
insurance
method of protecting a person from financial loss, whereby policy holders make regular payments to an insurance entity; the insurance firm then remunerates a group member who suffers significant financial damage from an event covered by the policy
collective bargaining
negotiations between unions and a firm or firms
premium
payment made to an insurance company
shareholders
people who own at least some shares of stock in a firm
poverty rate
percentage of the population living below the poverty line
effective income tax
percentage of total taxes paid divided by total income
liquidity
refers to how easily one can exchange money or financial assets for a good or service
A new and large area of shale oil deposits have been discovered in Wyoming and government regulations allow for the cost-effective extraction of shale oil deposits in Wyoming. We would expect the Supply Curve for Shale Oil to shift or not to shift in the following manner:
rightward
Because of a severe hailstorm in Wheatland, the painted exteriors of many homes and businesses were damaged. We can expect the Demand Curve for Paint to shift or not to shift in the following manner:
rightward
If a higher percentage of Americans learn how to write computer code and Silicon Valley firms are looking to hire more coders, the Labor Demand Curve for Coders will shift or not shift in the following manner:
rightward
If the State of California provided a $5,000 subsidy for homeowners to stall solar panels on their homes, this subsidy would shift the Supply Curve for Solar Panels:
rightward
We read a news story in the Wall Street Journal that reports a significant avocado blight has just occurred in Mexico and this will lower supplies of avocados in the grocery stores by 20% in 30 days. The Demand Curve for Avocados will shift or not shift in the following manner.
rightward
junk bonds
see high yield bonds
bondholder
someone who owns bonds and receives the interest payments
collateral
something valuable—often property or equipment—that a lender would have a right to seize and sell if the buyer does not repay the loan
maturity date
the date that a borrower must repay a bond
pork-barrel spending
spending that benefits mainly a single political district
redistribution
taking income from those with higher incomes and providing income to those with lower incomes
face value
the amount that the bond issuer or borrower agrees to pay the investor
poverty line
the specific amount of income one requires for a basic standard of living
wealth
the sum of the value of all assets, including money in bank accounts, financial investments, a pension fund, and the value of a home
rational ignorance
the theory that rational people will not vote if the costs of becoming informed and voting are too high or because they know their vote will not be decisive in the election
actual rate of return
the total rate of return, including capital gains and interest paid on an investment at the end of a time period
median voter theory
theory that politicians will try to match policies to what pleases the median voter preferences
near-poor
those who have incomes just above the poverty line
copayment
when an insurance policyholder must pay a small amount for each service, before insurance covers the rest
coinsurance
when an insurance policyholder pays a percentage of a loss, and the insurance company pays the remaining cost
adverse selection
when groups with inherently higher risks than the average person seek out insurance, thus straining the insurance system
fee-for-service
when medical care providers are paid according to the services they provide
income inequality
when one group receives a disproportionate share of total income or wealth than others
moral hazard
when people have insurance against a certain event, they are less likely to guard against that event occurring
