Economics Semester Test Study Guide

What is a disadvantage of a checking account?

Account balance requirement

Some examples of standardized products include __________.

Agricultural products, such as eggs and milk

Provide an example of a personal liability.

Answers may vary. Here's an example: A guest comes to your house and falls off of a latter, suffering head injury's. You would be personally liable for their injury's and you would most likely have to pay for their hospital bills (also, you could be taken to court and sued for this as well). For this reason, and from a business standpoint, it is very important to get a form of personal liability insurance.

Absolute loyalty to the people in power is required by a(n)

Authoritarian system

A record of all individual, business, and government transactions between one nation and those of the rest of the world is called the...

Balance of payments

Suppliers in a product market are...

Businesses

In a market economy, the real power in the market place is held by the...

Consumer

Which of the following is an example of involuntary debt? • Court judgement lien • Unsecured line of credit • Fixed-rate mortgage • Automobile loan

Court judgement lien

The difference between fixed costs and variable costs is that...

Fixed costs remain the same; variable costs depend on how much is produced

When the exchange rates for currencies change as supply and demand for these currencies changes, this is called a...

Flexible exchange rate

Monetary policy deals with the nation's what?

Interest rates, money, and banks.

Why is deflation bad for the economy?

It reduces output and can lead to layoffs

The first nationwide union that organized workers by industry was called the _________.

Knights of Labor

Using advertising to try to convince customers to buy one product rather than another is a form of...

Nonprice competition

Which business types are easy to form?

Partnerships and sole proprietorship's.

Marginal revenue equals...

Produce price Formula = Change in total revenue/change in total output quantity

Taxes on imported goods that minimize the price advantage they have over domestic goods are called...

Protective tariffs

The primary goal of negotiation is to...

Reach an agreement

Lisa charges another sole proprietor to use the extra office in the building she owns. Based on this, what is a source of Lisa's income?

Rent

Taxes on imports which are levied specifically to raise money are called...

Revenue tariffs

In a market economy with imperfect competition sellers...

Sometimes join with other sellers to influence prices

The nation where government plays the most limited role in the economy is...

The United States

Why do economists use a supply curve?

A Supply Curve is a graphic representation of the relationship between product price and quantity of product that a seller is willing and able to supply. Economists want to make the most profit and this helps them to see if/when they should sell and how much.

What does a circular flow model show?

A circular flow model shows/describes the flow of money and products throughout the economy. The model represents all of the actors in an economy as either households or firms (companies), and it divides markets into two categories (these two categories are markets for goods and services and markets for factors of production).

What happens in a factor market?

A factor market is a market place for the services of a factor of production. A factor market facilitates the purchase and sale of services of factors of production, which are inputs like labor, capital, land, and raw materials that are used by a firm to make a finished product.

A specific region in which trade between nations takes place without protective tariffs is called...

A free trade zone

Example of macroeconomics?

A general rise in prices

Which of the following is an example of a capital good: • A cashier • A highway • Coal • A pine forest

A highway

What is a trade barrier?

A means of preventing a product or service from freely entering a country

Other than the desire for a good or product, what is needed to make up demand?

Ability to pay

What is an expectation that encourages people to behave in a certain way?

An expectation that encourages people to behave in a certain way is an incentive. An incentive is something that motivates an individual to perform an action (these are things that motivate you to engage in certain behavior, because they are a path towards reaching some of your goals).

Read the paragraph below. How does the breeding of "designer dogs" relate to the economic concept of demand? Think About: - the public reaction to designer dogs - why designer dogs are popular - how much designer dogs sell for "Move over chocolate lab, the labradoodle has arrived....Mixed-breed dogs, once the domain of U.S. animal shelters, are being sought by an increasing number of Americans looking for special pooches. Intentionally bred and cutely named, today's special-order mixes have newfound status-and a purebred price tag...Sought-after mixes, some of which can fetch up to $4,000, are the labradoodle, a cross between the labrador and the poodle; the schnoodle, a schnauzer-poodle mix...and the yorkipoo, a cross between a Yorkshire terrier and a poodle."

Answers may vary. Here's an example: The breeding of "designer dogs" relates to the economic concept of demand by showing that as demand increases (in this case, the demand for mixed-breed dogs), price increases and quantity increases. This explains why the price of mixed-dogs is getting extremely expensive and why there are so many people trying to intentionally breed dogs for their mixed-breed children (to make a profit). Demand is an economic principle that describes a consumers desire and willingness to pay for a specific good or service, and as you can tell by the above paragraph, the demand for dogs is described by the reaction to the dogs, such as "they're so cute" and "I need one". This explains the increase in demand for them. This also explains how the breeding of "designer dogs" relates to the economic concept of demand.

Explain the growth of the global economy. Think About: - transportation - computers - business operations

Answers may vary. Here's an example: What exactly is economic growth? An individual laborer is more productive (and worth more) when they can efficiently turn resources into valuable goods and services. When a whole group of economic actors can produce goods and services more efficiently, it's known as economic growth. Growing economies turn more into less, faster.This surplus of goods and services makes it easier to achieve a certain standard of living. There are only a handful of ways to increase real marginal productivity. The most obvious is to have better tools and equipment, which economists call capital goods. It takes time to develop and build capital goods, which requires savings and investment. Savings and investment increase when present consumption is delayed for future consumption. The financial sector provides this function in modern economies. The other way to improve productivity is through specialization. Laborers improve the productivity of their skills and capital goods through education, training, practice, and new techniques. When the human mind better understands how to use human tools, more goods and services are produced and the economy grows, which in turn raises the standards of living. This is how the global economy grows.

What are the advantages and disadvantages of a traditional economy? Think About: - methods of production - ritual and customs - traditionally defined roles

Answers may vary. Here's an example: What is a traditional economy? A traditional economy can be defined as an economy which is based on customs and beliefs which people get from generation to generation. The main advantage of traditional economy is that this type of economics produces only those good and services needed (there is no surplus or wastage). Another advantage in this economy is that people know exactly what their roles/jobs are and because of that, there is no duplication of effort. However, there are disadvantages. One disadvantage is that this economy resists any changes because the methods/procedures of their ancestors are thought to be correct. This leads to lower productivity thus leading to lower development of the society as a whole. Due to this lower productivity, people have lower standards of living than other economies. Also, people do the job that they're told to do - some do not like this, and that can lead to less productivity as well.

If you limit the number of credit cards that you have, explain how it will help you financially?

Answers may very. Here's an example: A credit card is a payment card issued to a user allowing them to pay for goods on the promise that the card holder will pay back the amount spend plus other agreed charges that came with the card. By limiting the number of credit cards you have, you will be free from extra fees and interest rate costs. Credit cards are notorious for getting people into debt, because the card user can't afford the fees that go along with the use of a credit card, along with the high interest rates. By limiting the number of credit cards you have, you will reduce the risk that you will go into debt and eventually file for bankruptcy. In addition, everything you buy will be paid off without extra fees, allowing you to actually own your own items for their true cost. Ultimately, limiting the use of credit cards would help you financially in many areas, including present and future risks.

What effects does international trade have on a nation's economy? Think About: - prices - demand - employment

Answers may very. Here's an example: International trade has multiple effects on nation's economy. When trading, exports create jobs (in many ways, such as you need people to be in charge of managing exported goods), which boosts economic growth. International trade also gives domestic companies more experience in producing for foreign markets causing companies to gain a competitive advantage in global trade and, in turn, makes them more efficient. When they are efficient, they are also more productive. On the other hand, to make trade easier overall, governments reduce tariffs and block other imports, which reduces jobs in domestic industries that can't compete on a global scale. This leads to job outsourcing, which in turn effects jobs in the U.S. These are some of the effects that international trade has on a nation's economy.

What are the characteristics of perfect competition? Think About: - buyers and sellers - products - markets

Answers may very. Here's an example: Perfect competition is a market structure in which all firms sell identical products, all firms are price takes (have no influence on market price of a product), market share has no influence on prices, buyers have complete information about product, and firms can enter without cost. Perfect Competition is the opposite of a monopoly. Under perfect competition, there are many buyers and sellers, and the prices reflect supply and demand. Companies earn just enough profit to stay in business. If they were to earn excess profit, other companies would enter the market and prices would go. These are the characteristics of perfect competition.

What economic advantages would a nation gain by joining the European Union? Think About: - imports/exports - currency - trade barriers

Answers may very. Here's an example: There are many economic advantages that a nation would gain by joining the European Union. First of all, it would be easier overall to share a currency with many other nations, as it would make it easier to interact. Plus, if you were joined by many other countries that had goods that you needed, it would be much easier to receive goods and to export them. In addition, trade barriers would probably be no more, since you would be joined together with many other countries that had the goods that you needed/wanted. There are many other benefits and economic advantages that a nation would gain by joining the European Union. Firstly, since the nations would be joined, it would produce more opportunities of trade to benefit the greater good of the whole Union. Secondly, travel becomes easier due to the nations being united, as there would be less checkpoints. Joining the European Union would also create peace between more countries, which would lessen conflict, benefiting the economy of all countries in the European Union. Last, but not least, joining the European Union would create another level of international security, which would help keep the population of all countries safer. These are just some of the economic advantages and benefits a nation would gain by joining the European Union.

Car manufacturers who use robots to do certain jobs on the assembly line are trying to increase supply by...

Applying new technology

Absolute loyalty to the people in power is required by a(n) __________.

Authoritarian system

What is the difference between the value of its imports and exports?

Balance of Trade

Audits of a bank's financial practices are called _______.

Bank exams

Any law passed to limit free trade between nations is called a trade...

Barrier

The situations that make starting a firm in a particular industry difficult is defined as _______.

Barriers to entry

What do finance professionals need to do to build long-term relationships with their clients?

Be honest, open, and trustworthy

Read the following statement: Buyers and sellers are informed about the market. This statement means simply that consumers are aware of what the good should cost, and suppliers know what they should expect to receive for the items they produce. Since a perfect competition market is generally for a mass-produced good, suppliers have little influence on the market. If a single dairy farmer wanted to increase what they charged for milk, it would have a negligible effect on the overall market. It is also possible that the buyers would simply buy from a competing producer, rather than pay the higher prices. When evaluating whether or not why suppliers have little influence on the market, what would buyers rather do than spend more money?

Buy from a competing producer

Between 1867 and 1894, Karl Marx published a 3-volume study called...

Capital

Your skills, experience and the value you add to the buyer of your services or your employer, determine the material _______ you get.

Compensation

When sellers actively compete for the dollars of consumers, it is called a _____________.

Competition

Which of the following is an example of an uninsurable risk: • Fire • Consumer buying habits • Personal injury • Business interruption

Consumer buying habits

An actress sets off a craze for wearing camouflage clothing among her fans. What factor is affecting demand?

Consumer taste

Legal protections given to inventors and creators...

Copyright and patents

The idea of comparative advantage was developed by...

David Ricardo

The government uses excise taxes to ___________.

Decrease the supply of products it doesn't want people to use

What two factors are necessary for demand?

Desire for a good or service and the ability to pay for it

How much you earn depends on the value of your work, how well you do at your job, and what?

Difficulty of replacement

What are the 6 characteristics of money?

Durability, portability, divisibility, uniformity, limited supply, and acceptability.

The economic and political union of European nations established in 1993 is called the...

EU

In the marketplace, producers are looking to...

Earn a profit

A situation in which producers in one nation depend on others to provide goods and services they do not produce is called...

Economic interdependence

A situation in which the average cost of production falls as the producer grows larger is called...

Economics of scale

Which economic concept is defined as the measure of how responsive consumers are to price change?

Elasticity of demand

What is it called when you cut off of all trade with specific country?

Embargo

In a market economy with perfect competition, sellers...

Enter and exit the market freely

Who is a person who decides how to combine resources to create goods and services?

Entrepreneur

The wage at which the number of workers needed equals that number of workers available is called _________.

Equilibrium wage

Which of the following is not a natural resource? • Oil • Water • Soil • Equipment

Equipment

The need to make a choice arises because __________.

Everything that exists is limited

The need to make a choice arises because____________.

Everything that exists is limited

What are goods and services produced in one country and sold to other countries called?

Exports

What course of action can a lender take if a debtor's account is past due?

File a judicial lien.

This allocation method is by who is first in line, first name on list, first to a stop sign

First come, first serve

Fiscal Policy over the past 80 years

Fiscal policy also changes the composition of combined (aggregate) demand. When the government runs a deficit, it meets some of its expenses by issuing bonds. In doing so, it competes with private borrowers for money loaned by savers. Holding other things constant, a fiscal expansion will raise interest rates and "crowd out" some private investments, thus reducing the fraction of output composed of private investment.

The currencies of different countries are brought and sold in the _________.

Foreign Exchange Market

Read the following documents and answer the question that follows: Document 1 The interaction could be through trade of goods or the sharing of technology advancements. The globalization process has effects on the the culture, well-being of the people, economic development, political aspects, and the environment. It has been around for centuries. Do you recall the Silk Roads? The Silk Road is a historically important international trade route between China and the Mediterranean. Because China silk comprised a large proportion of the trade along this ancient road, in 1877, it was named the 'Silk Road' by Ferdinand von Richthofen, an eminent German geographer. Document 2 The trade between countries has increased 20 times since 1950 and continuously rises. Globalization has allowed countries to increase the standard of living for some of the poorer countries, it has also allowed companies to develop in other countries. In some peoples' eyes, globalization is not a good thing. They see that globalization transforms the lives of those that should develop on their own at their own pace. Answer the following: __________ is when governments, businesses, and people interact.

Globalization

In the movie, The Lorax, the main character makes money. What are factors that determine what a person makes?

How difficult it is to replace you, how well you do what you do, and how others value what you do

When economists refer to scarcity, they mean...

Human desires for goods are greater than the available resources

A factory closes, laying off hundreds of workers, and consumer spending in the town falls. What factor is affecting demand?

Income

If quantity demanded does not change significantly when price changes, how is demand described?

Inelastic

You have watched the clip from a nonprofit organization called Life Happens that talks about risks and the consequences that follow and the clip from Get Insured that shows children explaining a deductible. Answer the following question: Another word for protection from all the possible accidents is called what?

Insurance

The law of increasing opportunity cost exists because...

It is difficult to move resources from one industry to another

Jonathan, an insurance agent, explains both the pros and cons of his products to all of his customers to help them decide which policies to purchase. Hank, also an insurance agent, explains to his customers why they should purchase his products, but he doesn't talk about anything negative before making a sale. Based on this information, which agent is more likely to retain and grow his client base?

Jonathan, because his customers feel that they can trust him

Into what four categories do economist divide factors of production?

Land, labor, capital, and entrepreneurship

The idea that countries gain when they produce items they are most efficient at producing and are at the lowest opportunity cost is called the...

Law of Comparative Advantage

A critical aspect of financial planning involves what?

Life insurance (save money for unexpected circumstances, i.e. life insurance).

With monopolistic competition there are...

Many buyers and many sellers

Why do many financial advisers recommend that you validate your financial credit history annually?

Many financial advisers recommend checking and validating your financial credit history annually to make sure that there are no errors in your expenses. If there are errors, they could potentially keep you from being able to buy certain things (like vehicles) and prevent you from being able to get a loan. Your credit history can affect the way you would like to do things in your future - if you're seen as incompetent, you could be held back from purchasing vehicles and possibly a home. A financial adviser will recommend you checking and validating your financial credit history to ensure that you're finances are in order and that you will be, in a way, protected for future purchases (protected as in you will be safe to purchase items in the future without fear of rejection because of an error on your credit history).

The change in total output that results from hiring one additional worker is called...

Marginal product

With capitalism, the allocation of goods and resources is determined by...

Market forces

Skiers flock to a town in the Rockies in January, and restaurant business booms. What factor is affecting demand?

Market size

Which of the following is a land resource? • Minerals made into items like rings and bracelets. • Minerals inside the Earth. • Implements used to work the land, like plows. • A wooden desk.

Minerals inside the Earth.

Two market structures that are most present in the United States?

Monopolistic Competition and Oligopoly

A market structure in which only one seller sells a product for which there are no close substitutes is called...

Monopoly

How is total revenue calculated?

Multiplying price by quantity sold

With voluntary exchange, a buyer and seller agree to do business together for the...

Mutual benefit of both

A monopoly in which the costs of production are lowest when only one firm provides output is called a...

Natural monopoly

Monopolists are able to control prices because they have...

No competition and there are no close substitutes for their products

Characteristics of Perfect Competition.

PC is a theoretical market structure in which all firms sell identical products and all firms are price takers (no influence on market price of product). Market share has no influence on price and buyers have complete information about the product. Firms can enter without cost. PC is the opposite of monopoly. Under PC, there are many buyers and sellers and the prices reflect supply and demand. Companies earn just enough money to stay in business. If they were to earn excess profit, other companies would enter the market and drive prices down.

Why do businesses make investments?

Payroll deductions.

This allocation method is by test score, time in race, quantity of sales, number of push-ups

Performance

This allocation method is by age, weight/height, ancestry, alphabetically, by need

Personal characteristic

Trade wars often occur when nations cannot reach agreements on...

Quotas and tariffs

This allocation method is by luck, lottery or drawing out of a hat

Random draw

When the government takes an action that affects production of a good or service is called ___________.

Regulation

The government creates policies to help improve market outcomes is done with what?

Regulatory Policy

According to the Law of Demand, "As price of the good or service increases, demand for that product..."

Remains the same

What source of credit buys borrowers' contracts from sellers?

Sales finance companies

When using a debit card to pay for goods and services, the funds are electronically transferred from a(n)

Savings or checking account

Consumers benefit from imports because they cause the...

Selection of goods to increase and prices to decrease

What is the term for intangible products, such as transportation, insurance, banking, consulting, and tourism?

Services

The government owns some, but not all, factors of production in a(n)

Socialist System

The prices of goods and services remaining fairly steady is an indication that the economy is...

Stable

The expenses that a new business pay to enter a market are called...

Start-up costs

What can be defined as the amount of a good or service that is available for sale?

Supply

The way a society uses scarce resources to satisfy its people's unlimited wants is called an economic __________.

System

A monopoly that exists because a firm controls an invention is called a...

Technological monopoly

What explains the shape of a demand curve?

The Law of Diminishing Marginal Utility explains the shape of the demand curve. The demand curve shows how much people will want of a good at different prices, and it is downward sloping.

What is the international trade organization consisted of 149 members called?

The World Trade Organization

What do all owners of resources try to obtain from their limited resources?

The greatest satisfaction

What is the income people receive for supplying factors of production, such as land, labor, or capital called?

The income people receive for supplying factors of production is called factor payments.

Read the following passage: This question focuses on how goods and services are distributed to the people. How much should each person receive? Should everyone receive an equal amount or should the amount we receive be determined by how much we are willing to pay? How will the goods and services be delivered to them? In the United States, we have many methods to distribute goods across the country. We have the railroads, the interstate highways, rivers, airports, seaports, computer networks, the U. S. Postal Service, FedEx, UPS, and many other methods of distribution. Producers will use the most efficient method to move goods and services to consumers. Identify the problem with the idea that is demonstrated in the following quote: "Should everyone receive an equal amount or should the amount we receive be determined by how much we are willing to pay?"

The problem is that the answer can differ according to different countries. In the United States, we have many methods to distribute goods across the country

The opportunity cost of increased defense spending is...

The production of other goods that could be produced with those same resources

Read the following passage and then answer the question that follows: The trade between countries has increased 20 times since 1950 and continuously rises. Globalization has allowed countries to increase the standard of living for some of the poorer countries, it has also allowed companies to develop in other countries. In some peoples' eyes, globalization is not a good thing. They see that globalization transforms the lives of those that should develop on their own at their own pace. What does this passage suggest that globalization represents?

The well-being of the people, economic development, culture, political aspects, and the environment.

Read the following passage: Human labor consists of the time, effort, and talent that individuals invest into the production of a good or service. Let us consider the effort teachers invest into their profession. Teachers must graduate from a university. Upon graduation, teachers must take tests to become licensed to teach. To maintain the teaching license, teachers must continually remain up-to-date with the current theories and applications of theory in the classroom. In addition, teachers develop lesson plans, work with students individually or in-group settings, develop and grade assessments, and participate in school related functions. Teachers are supplying both physical and intellectual value to the educational process. Which elements of the passage help to illustrate the theme?

Time, effort, and talent that individuals invest into the production of a good or service

Read the following passage: An incentive is the benefit gained when a choice has been made. For example: you decide to complete your homework and the incentive is getting good grades. Every time a decision must be made, you are deciding between alternatives, which is defined as a trade-off. Each alternative is based on your decisions, for instance; you must decide between water or soda at dinner. The water and the soda would both be considered to be an alternative. Deciding between soda and water at dinner is considered to be a ________ decision.

Trade-Off

Comparative Advantage is when a particular country produces items with the lowest opportunity cost. This means the country produces items that best fit its resources. Remember, opportunity cost is what you give up in order to produce a certain product. An example of this would be if you were really good at making hats and not as good at making purses. You would be better off to make a surplus of hats and trade them to someone that is very good at making purses. This allows both individuals to produce as much as possible and still meet their needs. Answer the following question: One country has an advantage over another causing_______ to occur.

Trading

Which of the following statements is the best match for the economic way of thinking? • Having the ability to satisfy our needs and many of our wants. • Understanding that all human behavior involves choice and that these choices can be analyzed and understood. • Scarcity results in us not being able to satisfy every person's needs and wants. • Recognizing that the government will take care of us and allocate resources in the most efficient method.

Understanding that all human behavior involves choice and that these choices can be analyzed and understood

After having already watched both the Why Do Countries Restrict Trade? video and the Episode 36: Types of Trade Restrictions video and comparing the two, answering the following question: A ____________ is a self-imposed limitation of products that are shipped to a particular country.

Voluntary Export Restraint

Every two weeks, Jana receives an automatic deposit in her checking account from her employer for work she has performed. This is an example of which form of income?

Wages

What can be inferred from the line, "Scarcity is the gap between our unlimited wants and limited resources?"

Whenever we are faced with deciding if a good or service is worth the cost, we are experiencing scarcity

With capitalism, what is investment driven by?

With capitalism, investment is driven by owners of wealth. Another way to say this is that with capitalism, investment is driven by private parties seeking profit.

Are you in economics?

Yes