Economics Unit 2

The Latin term ceteris paribus can best be translated as follows:

"Other things being equal."

All of the following could affect the cost of production of a good EXCEPT for

: An increase in consumer demand

Typically investors purchase stock from:

A broker

What is a corporation? Explain the advantages and disadvantages of a corporation. Write at least one complete paragraph.

A corporation is a name or tile for a business or organization. A corporation is given legal rights and is not directly attached to the owners as in a sole proprietorship. An example of a corporation would be a large store such as Dicks Sporting Good or Costco. These examples are owned by a corporation and not a sole proprietorship. An advantage of a corporation would be easier access to money, in comparison to a sole proprietor who would only have the money they personally have for furthering their business. A disadvantage of a corporation would be limited input into the corporation, would also have to do as they are told and might not have a say in how the company is managed.

A distribution of part of a company's earnings to its shareholders is known as:

A dividend

A partnership where profits, liability, and management duties are divided equally among partners is known as:

A general partnership

A higher price will generally lead to the following:

A higher quantity supplied

A monopoly created by a government that prohibits competition by other companies is known as:

A legal monopoly

The U.S. Postal Service would be an example of:

A legal monopoly

A market situation in which there is only one buyer with many sellers of a particular product is known as:

A monopsony

In the case of a company that controls virtually all of the supply of a critical resource (like aluminum in the case of ALCOA) we would use the following term to describe the situation:

A natural monopoly

A good for which demand increases when income increases is known as:

A normal good

A government license giving the holder exclusive rights to a process, design, or new invention for a designated period of time is known as:

A patent

A company that must accept the prevailing prices in the market, since its own activity is unable to affect the market price is known as:

A price taker

. A share of a company held by an individual or group is known as:

A stock

An unexpected event that changes the supply of a product or commodity is known as:

A supply shock

1 A good that decreases in demand when consumer income rises is known as:

An inferior good

Generic corn flake cereal would be an example of the following type of good as compared with Kellogg's Frosted Flakes?

An inferior good

A firm's first sale of stock to investors is called:

An initial public offering

A situation in which a particular market is controlled by a small group of firms is known as:

An oligopoly

A situation in which there are many sellers but few buyers is known as:

An oligopsony

Top executives in a corporation are typically hired by:

Board of Directors

An above-equilibrium price of gasoline would most likely lead to the following situation:

Buyers will be discouraged from purchasing more gasoline.

A below-equilibrium price of gasoline would most likely lead to the following situation:

Buyers will be encouraged to purchase more gasoline

Profits from the sale of property, stocks, or bonds are known as:

Capital gains

All of the following might shift demand for a good EXCEPT for the following:

Changes in the number of suppliers

Goods often used together, because consumption of one good enhances consumption of the other, are known as:

Complementary good

Which of the following would NOT be an example of a barrier to market entry for a company trying to enter a given market?

Demand by consumers for a certain good

If the price of a certain brand of athletic shoes doubles, we should expect:

Demand to fall

The degree to which supply or demand changes in response to a change in price is known as:

Elasticity

The term used to describe the only price where quantity demanded is equal to quantity supplied is known as:

Equilibrium

A business arrangement where private entrepreneurs purchase the rights to open and run a location of a larger company is known as a:

Franchise

A partnership agreement should list all of the following EXCEPT:

How the partners buy and sell company stock.

The law of supply indicates that - all else being equal - as the price of a product increases, the quantity of goods or services that suppliers offer will:

Increase

\When the price of gasoline rises, oil companies would be encouraged to do all of the following EXCEPT:

Increase investment in alternative forms of energy.

. In the case of a monopoly, the following is true:

One firm produces all of the output in a market.

Which of the following would NOT be a condition associated with monopolistic competition?

One producer controls most of the market

Sole proprietorships are a popular business form due to all of the following EXCEPT:

Owners are exempt from taxes

In a sole proprietorship, the owner is:

Personally liable for business debts and lawsuits against the company

The market price where the quantity of goods supplied is equal to the quantity of goods demanded is known as:

Price equilibrium

A conspiracy between business competitors to set prices to buy or sell goods or services at a certain point is known as:

Price-fixing

If demand for a new model of Ford vehicles suddenly doubles, we should expect that:

Prices will rise

A higher cigarette tax that does not discourage smoking is likely to:

Raise more tax revenue for the government

Demand curves typically:

Slope downward from left to right.

\Supply curves typically:

Slope upward from left to right

The type of business structure owned and operated by one person is typically known as a:

Sole proprietorship

What are some factors that influence the workings of a market? Write one complete paragraph of at least 5 sentences to answer the question:

Some factors that influence the market are Monopoly, Oligopoly, and Oligopsony. Monopoly which is one large company controlling a market, there is no competition in this market. A monopoly can be controlled one company that is the only one that produces an item or they may produce the largest quantity of the item. Oligopoly in a market is companies making similar items such as cereal. Some we would thin of as brand name and others as off-brand. Oligopsony is a market where there is a small number of consumers for a product such as items found at a fast food place like Sonic.

The following term describes when a government pays a firm directly or reduces the firm's taxes if the firm carries out certain actions:

Subsidy

If the price of new Blue-Ray DVDs suddenly falls in half, we should expect that:

Supply will decrease

Which of the following is NOT a condition associated with perfect competition?

The government intervenes to make sure competition is fair and equitable

The following statement best reflects the legal requirements of a partnership:

The partnership must be registered with the state.

Describe the relationship between supply, demand, and price. Write at least one complete paragraph.

The relationship of supply, demand, and price are all very related. If an item has an increase demand this will impact the supply as well as the price. Initially price adjustment will increase as the demand increases which will cause a decrease in supply. As supply s increasing to adjust fro the increased need there will potential be a decrease in supply. However, raising prices may impact the demand in a negative fashion and the consumer may elect to not purchase with a new elevated price and a large supply might be available if the price point is too high.

Give examples of and explain several barriers of entry that companies might face. Write at least one complete paragraph:

There are several barriers which may interfere or cause difficulty for companies to start-up. These barriers include advertising, established companies have the financial abilities to advertise more than start-up companies. The costs, or capital required can limit the ability of a start-up company to have required supplies, equipment, and product as they are not able to produce large volumes at first. Customers who are loyal to established companies will be difficult to bring to try and like a new product.

What are some factors that affect the price elasticity of supply? Which of these factors might be considered a limit to price and supply elasticity? Write at least one complete paragraph.

There are several things that can affect the price elasticity of supply, examples include: availability of supply, comparable substitutes, and the time frame the product is needed by. I feel the time frame in which it takes to make the item will greatly impact both the limit to price and supply elasticity. If production of an item is delayed that will impact the price and the volume of supply. Longer production may increase price is it is taking longer to make and people will have to be paid to work longer which will also increase the price.

. The following statement best reflects the name used by a sole proprietorship:

This can either be the legal name or a trade name

A partnership is a business structure where:

Two or more people share ownership.

A good used in the production of other goods or services is known as a:

capital good

Milk would be an example of the following type of good in relation to breakfast cereal:

complementary good

A company that owns a controlling stake in a number of smaller companies, all of which conduct business separately, is known as a:

conglomerate

The law of demand indicates that - all else being equal - as the price of a product increases, the quantity demanded:

decreases

A good or service that can be used in place of another good or service is called a;

substitute

If the price of a certain popular designer shirt triples, we should expect that:

supply with increase