Fundamentals of Economics and Types of Markets Accessible

Producer Price Index (PPI)

Surveys the manufacturing, mining, and service industries to determine changes in the prices of wholesale goods

Select all of the ways through which the government affects markets.

Taxation Regulation Infrastructure development

Expanding or shrinking the money supply and raising or lowering interest rates are the two techniques _____ __________ _______________ _____________ can use to influence economic activity.

The Federal Reserve System

The U.S. government's attempts to stabilize the economy by (1) raising or lowering taxes, or (2) borrowing or spending money are part of __________ policy.

fiscal

wholesale goods

goods purchased in large quantities for resale

fiscal policy

refers to the U.S. government's attempts to stabilize the economy by (1) raising or lowering taxes, or (2) borrowing or spending money

Monopolistic Competition example

Soda industry; Athletic Shoe Industry

Market Price (Equilibrium Price)

(what are they willing to pay), is established when the quantity supplied (how much the seller has available) is equal to the quantity demanded (how many people want it)

Socialism

- State-owned industries and redistributed wealth - is an economic system in which the government owns some major industries, but individuals own smaller businesses

Welfare states

- most countries with state-owned industries - countries in which the government offers citizens economic security by providing for them when they are unemployed, ill, or elderly.

scarce

-Diamond rings -Paintings by famous artists -Thoroughbred horses

Microeconomics

-Effects of coupons on Consumers' buying behavior -How e-books affect that sales of printed books -How gas prices affect which cars people buy

Forces effecting marketing:

-Government influences -Incomplete information -Irrationality and consumer sovereignty

Macroeconomics

-Gross Domestic Product (GDP) -Consumer Price Index -Industrial Production

3 big-picture measures of U.S. economic conditions are:

-Gross domestic product (GDP) -The 2 key price indexes: -The consumer price index -The producer price index -The unemployment rate

Socialism "benefits":

-More benefits to lower class citizens -less social inequality and poverty

Communism drawbacks:

-central planning flaws -lack of incentives -extreme government intrusion

4 phases of the business cycle

-expansion: Pace of economic activity speeds up -peak: Economic activity hits its high -contraction: Pace of economic activity slows down -trough: Economic activity hits bottom

Select all of the ways that natural resources can be gathered.

-mining -harvesting

Free-market economy benefits:

-more jobs and more/higher incomes -more goods and services -help for the less fortunate -career choices and entrepreneurial activity

Free-market economy drawbacks:

-possibility of heavy losses -income inequality -greed that leads to exploitation

Select all the aspects of knowledge as an economic resource. A. Technological expertise B. Practical experience C. Human effort D. Risk-taking

A. Technological expertise B. Practical experience

To influence economic activity, the Fed can do two things:

1. Expand or shrink the money supply: Here, the Fed would use restrictive monetary policy or expansionary monetary policy. 2. Raise or lower interest rates: Here, the Fed can raise or lower interest rates.

5 factors of production

1. Natural resources: Materials supplied by nature 2. Capital: The buildings and tools used to produce goods and services 3. Human Resources: The human effort required to produce goods and services 4. Entrepreneurship: The process of taking risks to create a new enterprise 5. Knowledge: The technological expertise and practical experience

4 types of free markets

1. Perfect competition 2. Monopolistic competition 3. Oligopoly 4. Monopoly

The 4 basic rights under capitalism:

1. Right to own property 2. Right to compete 3. Right to free choice 4. Right to make and keep profits

How many factors of production are there?

5

What is inflation?

A price increase for most productions

expansion

A rise in investment spending, government spending, or exports causes a rise in GDP.

What is the drawback of monopolistic competition? A. Businesses find it difficult to differentiate their products from competitors. B. Consumers cannot distinguish between your product and a competitor's product at all. C. There is no real drawback to being in monopolistic competition. D. Being the only business producing a product comes with intense pressure from consumers. E. Because the business is only one of a few firms who can produce the product, the competition is fierce, which often drives the price of the product down.

A. Businesses find it difficult to differentiate their products from competitors.

Select all of the techniques the government can use to influence the economy through monetary policy. A. Expanding or shrinking the money supply B. Borrowing or spending money C. Raising or lowering taxes D. Raising or lowering interest rates

A. Expanding or shrinking the money supply D. Raising or lowering interest rates

What are natural resources? A. Land, forests, water, wind, sunlight, and mineral deposits B. The facts, information, and skills acquired by a person through training or education C. The buildings, machines, tools, and technology used by humans to produce goods and services D. The physical and intellectual contributions of a company's employees

A. Land, forests, water, wind, sunlight, and mineral deposits

Which phrase best describes monopolistic competition? A. Many sellers, some product differences B. Many sellers, no product differences C. Few sellers, no product differences D. One seller only, no competition

A. Many sellers, some product differences

Fatima runs a small coffee shop that sells artisan coffee beverages, such as lattes and cappuccinos. Environmentally conscious customers flock to Fatima's coffee shop over the many other coffee shops nearby because she offers shade-grown coffee, a type of coffee that is friendly to birds. What type of free market is Fatima operating in? A. Monopolistically competitive B. Perfectly competitive C. Oligopoly D. Monopoly

A. Monopolistically competitive

Agricultural Commodities: There are many different growers of these products, which prevents any one of them from setting prices. A. Perfect Competition B. Monopolistic Competition C. Oligopoly D. Monopoly

A. Perfect Competition

Beef Industry: There are many different suppliers of these products, which prevents any one of them from setting prices. A. Perfect Competition B. Monopolistic Competition C. Oligopoly D. Monopoly

A. Perfect Competition

Select all of the indicators for gauging the performance of a national economy. A. Price indexes B. Unemployment rate C. Profit and loss statement D. Gross domestic product (GDP)

A. Price indexes B. Unemployment rate D. Gross Domestic Product(GDP)

In some states there are legal limits to how much a scalper can mark up the price of tickets. Which real world force is affecting the market? A. government influences B. incomplete buyer-seller information C. buyer-seller irrationality D. consumer sovereignty

A. government influences

Monopoly examples

ACME Light and Power; Cable Television Industry

Select the sectors of the economy in which oligopolies commonly occur.

Air travel Automobiles Cola drinks

Profits - Capitalism example

All of the money earned beyond the cost of running the shoe manufacturing business goes to the government.

Oligopoly example

Automotive Industry; Airline Industry

Athletic Shoe Industry: The market has many sellers who sell similar products, but the sellers have found ways to distinguish among their products, or buyers perceive the products as being different. A. Perfect Competition B. Monopolistic Competition C. Oligopoly D. Monopoly

B. Monopolistic Competition

Soda Industry: The market has many sellers who sell similar products, but the sellers have found ways to distinguish among their products, or buyers perceive the products as being different. A. Perfect Competition B. Monopolistic Competition C. Oligopoly D. Monopoly

B. Monopolistic Competition

Based on price alone, which product is likely the most scarce? A. One with a $1,000 price tag B. One with a $10,000 price tag C. One with a $10 price tag D. One with a $100 price tag

B. One with a $10,000 price tag

Select all of the benefits of higher taxes. A. Lower government expenditures B. Reduced government debt C. More money in the hands of businesses D. Lower risk of inflation

B. Reduced government debt D. Lower risk of inflation

Which of the following best describes the negative impact of ticket scalping? A. Scalping decreases the availability of tickets through traditional channels, causing demand to decrease. B. Scalping decreases the availability of tickets through traditional channels, causing ticket price to increase. C. Scalping decreases the availability of tickets through traditional channels, causing demand to increase. D. Scalping decreases the availability of tickets through traditional channels, causing ticket price to decrease.

B. Scalping decreases the availability of tickets through traditional channels, causing ticket price to increase.

What happens to the economy when the money supply is expanded? A. The national debt declines B. The cost of borrowing decreases C. Economic activity increases D. The risk of inflation decreases

B. The cost of borrowing decreases C. Economic activity increases

What is demand? A. The willingness and ability of sellers to purchase products at different prices B. The willingness and ability of buyers to purchase products at different prices C. The materials supplied by nature, such as land, soil, water, and minerals D. The increase in the price of most products

B. The willingness and ability of buyers to purchase products at different prices

What is supply? A. The willingness and ability of buyers to provide products at different prices B. The willingness and ability of sellers to provide products at different prices C. The human effort, both mental and physical, required to produce products D. The study of large economic units

B. The willingness and ability of sellers to provide products at different prices

Select examples of monopolistically competitive firms.

Banana Republic Quiznos

Perfect Competition Examples

Beef industry; Agricultural commodities

Select all of the techniques the government uses to influence the economy via fiscal policy.

Borrowing or spending money Raising and lowering taxes

Incomplete information

Buyers and sellers do not have perfect information about product needs and availability.

Irrationality and consumer sovereignty

Buying and selling decisions are often made by irrational emotion.

Which of the following is most likely to be part of a perfectly competitive market? A. A restaurant B. An airline C. An alfalfa farm D. A power utility

C. An alfalfa farm

Which aspects of the U.S. economy does the Federal Reserve System control? A. Tax rates B. Government spending C. Interest rates D. The money supply

C. Interest rates D. The money supply

Airline Industry: Market usually consists of three or four sellers who dominate more than half the market and who try to differentiate their products through marketing. A. Perfect Competition B. Monopolistic Competition C. Oligopoly D. Monopoly

C. Oligopoly

Garfield sells organic weight management foods, which is a market with a few players offering similar products. As a result, while Garfield has multiple brands in his store, all of them are produced by just three large companies. In what type of market do the organic weight management foods manufacturers operate? A. Monopoly B. Monopolistic competition C. Oligopoly D. Perfect competition

C. Oligopoly

Which of the following scenarios involving scalpers is likely to result in prices for consumers that are lower than the initial price listed by the legitimate retailer? A. Scalpers purchase all available tickets, allowing them to control the price offered to the general public. B. After scalpers purchase tickets, it is announced that a desirable and popular guest drummer will join the band. C. Scalpers purchase tickets that are undesirable to consumers, forcing the scalpers to auction the tickets at a price lower than the original price offered by the retailer. D. All of these choices are correct.

C. Scalpers purchase tickets that are undesirable to consumers, forcing the scalpers to auction the tickets at a price lower than the original price offered by the retailer.

What is government spending?

Expenditures made by the government to stimulate the economy and create jobs

Which form of competition is the most common? A. perfect competition B. None of the answers are correct. C. monopolistic competition D. oligopoly E. monopoly

C. monopolistic competition

During which phase of the business cycle do recessions or depressions occur?

Contraction

Select all of the events that occur during the trough phase of the business cycle.

Contraction ends Expansion begins

How do the forces of supply and demand affect the sale of ticket prices? A. As demand for tickets decreases and supply of tickets decreases, the price of tickets decreases. B. As demand for tickets decreases and supply of tickets increases, the price of tickets increases. C. As demand for tickets increases and supply of tickets decreases, the price of tickets decreases. D. As demand for tickets increases and supply of tickets decreases, the price of tickets increases.

D. As demand for tickets increases and supply of tickets decreases, the price of tickets increases.

ACME Light and Power: Through special legislation, this supplier is the sole provider of electricity to its local municipalities. A. Perfect Competition B. Monopolistic Competition C. Oligopoly D. Monopoly

D. Monopoly

Cable Television Industry: In smaller markets, one company is the sole provider of cable television service to consumers in local municipalities. A. Perfect Competition B. Monopolistic Competition C. Oligopoly D. Monopoly

D. Monopoly

Jeff is a farmer who grows sugar beets in Michigan. Many of his local friends are farmers who grow sugar beets, too, and Jeff knows that across the state there are hundreds of sugar beet farmers who are all selling their products for about the same amount of money per unit. What kind of free market is Jeff operating in? A. Oligopoly B. Monopolistic competition C. Monopoly D. Perfect competition

D. Perfect competition

Gross Domestic Product (GDP)

Expresses the total value of all of the goods produced within a country's borders in one year.

What do economists study? A. Cultures around the world B. How parents' disciplinary styles affect their children's emotional well-being as adults C. The voting patterns of millennials D. The production, distribution, and consumption of products

D. The production, distribution, and consumption of products

What is resource development? A. The study of small economic units B. The materials supplied by nature, such as land, soil, water, and minerals C. The study of large economic units D. The study of how to cultivate the resources for creating and best utilizing goods and services

D. The study of how to cultivate the resources for creating and best utilizing goods and services

The fact that there are a limited number of products is referred to as ______. A. macroeconomics B. microeconomics C. capital D. scarcity

D. scarcity

Price - capitalism example

Each time there is a risk that the oil supply will decrease, or the supply does in fact decrease, gasoline prices skyrocket.

Contraction

Economic activity slows and the GDP falls.

Oligopoly

Few sellers, some product differences

2 primary forms of economy:

Free-market and command

From the list below, select all of the characteristics of the peak phase of the business cycle.

GDP reaches its highest point of the cycle. The economy starts to decline.

Which of the following allows the government to create jobs and stimulate the economy?

Government spending

What is the term used to describe the total value of all the goods and services that a country produces within its borders in one year?

Gross Domestic Product (GDP)

No buyer or seller can know everything about the marketplace. What force does this refer to?

Incomplete information

Unemployment Rate

Indicates the level of joblessness among people who are actively seeking work

Competition- Capitalism example

Jack Sampson works in a highly competitive industry. He has to make sure he knows the trends of his market so he always offers good value and retains his competitive advantage

Consumer Price Index (CPI)

Measures the rate of inflation or deflation by monitoring the monthly costs of a "market basket" of goods

employment options - communism example

Mike receives notice from the government regarding where he is assigned to work.

The U.S. government's attempts to manage the money supply and interest rates in order to influence economic activity is called

Monetary Policy

What is the term for the money the government owes because federal spending has exceeded federal revenue?

National Debt

Select the statements about perfect competition that are true.

No seller is large enough to determine the price of a product. It involves many small sellers who sell products that are virtually the same.

Not very scarce

Pencils, Sodas, headphones

Select all of the features of deflation.

Prices decline for most goods and services. The amount of goods produced exceeds the amount of money available to make purchases.

What it the primary difference between inflation and deflation?

Prices increase during inflation and fall during deflation.

Select all of the features of inflation.

Prices increase for most goods and services. Too many dollars are in circulation for too few goods.

What are the two parts of the expansion phase of the business cycle?

Prosperity Recovery

What fiscal policy approach does the government use to pay for government services intended to create jobs and stimulate the economy?

Raising taxes

Price - communism example

Relative to people's income, the price for gasoline is quite high, so those who own cars are very conscientious about using them.

Employment options - capitalism example

Sara completes her college application to start her studies in Accounting.

Profits - capitalism example

Selena Franka chose to give all the money earned beyond the cost of running her footwear company to charity.

Competition - communism example

Since bread production and sales are the same each month, the factory managers can ignore competition from other bread companies.

product availability - communism example

Since sweater selection is so limited, Penny has a difficult time finding one to purchase that makes her stand out from the crowd.

Government spending:

Since the government spends just as businesses do, government spending can also create jobs and stimulate the economy.

Government influences

The government influences the marketplace trough taxation, regulation, import/export restrictions, and infrastructure development and maintenance.

taxation

The government levies taxes to raise money to pay for government services.

What is fiscal policy?

The government's attempts to influence the economy through taxation or spending

consumer sovereignty

The idea that consumers influence the marketplace through their buying decisions.

Trough

The lowest point in the business cycle, where the decline in GDP ends and the rise in economic activity begins again.

Federal Reserve System (The Fed)

The part of the government responsible for monetary policy

What is gross domestic product (GDP)?

The total value of all goods and services produced within a nation's borders in one year

Peak

This is the height of prosperity, where the increase of economic activity starts to lose steam.

Equilibrium point

This is the point at which the quantity of oil in supply meets the quantity in demand.

Price axis

This part of the graph indicates the price of oil. The price increases along the continuum.

Quantity axis

This part of the graph indicates the quantity of oil. The quantity increases along the continuum.

Demand curve

This represents how much oil buyers want to purchase. This increases when prices are low.

Supply curve

This represents the amount of available oil. This increases when prices are high.

Product availability - capitalism

When Janet goes to the mall to buy shorts for summer, she becomes frustrated when she can't decide which ones to buy due to so many different choices.

Business ownership - capitalism example

When John Wakoski was a teenager, he worked at his uncle's famous artisan pottery shop on the weekends.

Business ownership - communism example

When Suzanna Kogan was a teenager, she worked at the state-owned bread factory where everyone in her family worked.

When does a federal budget deficit occur?

When the government spends more than it collects in tax revenues

Right to own property

You can buy things and sell or bequeath them to heirs. Restriction: In the US, property ownership is restricted by environmental and legal regulations.

Right to make and keep profits

You can choose any strategy to earn profits. Restriction: The means of earning are regulated by child labor, workers' compensation, truth in advertising, and workplace safety laws.

Right to free choice

You can freely make choices related to your business (where/how to conduct business), likewise employees can choose where to work. Restriction: The sale of certain items (E.g.: Drugs, alcohol, some weapons) are restricted by the government.

Right to compete

You can go into the marketplace and compete with other businesses. Restriction: Competition is limited by antitrust, fraud, licensing, and consumer-protection legislation.

deflation

a general decline in the prices of most goods and services

inflation

a general increase in the prices of most goods and services

In a free-market economy, if consumers are always pleased with and prefer one business's products over all others, then this may lead to

a monopoly.

depression

a particularly sever and long-lasting recession, accompanied by falling prices (deflation)

communism

an economic system in which the government owns all property and everyone works for the government

A general decline in the prices of most goods and services is called

deflation

The term __________ expresses how willing and able buyers are to purchase goods and services at different prices.

demand

Resource ___________ is the study of how to cultivate the resources for creating and best utilizing goods and services.

development

The study of the production, distribution, and consumption of scarce goods and services is known as

economics

Consumer Price Index (CPI)

encapsulates the monthly costs of a "market basket" of about 400 representative consumer goods and services (including food, clothing, and medical services) that allow data analysts to measure the rate of inflation or deflation

demand

expresses buyers' willingness and ability to purchase goods and services at different prices

supply

expresses sellers' willingness and ability to provide goods and services at different prices

The means for developing goods and services, and for satisfying consumers' demand, are known as the five __________ of production.

factors

Scalpers often artificially decrease supply by releasing tickets in waves, making it impossible for consumers to know how many tickets remain. This causes the equilibrium price to

increase.

Two common threats to economic instability:

inflation; deflation

The national debt

is the amount of money the government owes because federal spending has exceeded federal revenue.

productivity

is the amount of output produced for each unit of input, such as the number of custom-made chairs produced by one carpenter in one hour

mixed economy

leverages elements of free-market economics and command economics.

The school of thought that argues that government should leave more money in the hands of businesses, which will then use that money to grow and pay more taxes in the long run, suggests that government should do which of the following?

lower taxes

Perfect competition

many sellers, no product differences

monopolistic competition

many sellers, some product differences

A federal budget deficit

occurs when the government spends more than it collects in tax revenues.

Monopoly

one seller only, no competition

Which phase of the business cycle is considered the height of prosperity?

peak

If a buyer has an almost unlimited selection of products that are very difficult to differentiate between, this represents

perfect competition.

Market

price is also referred to as equilibrium price.

monetary policy

represents the U.S. government's attempts to manage the money supply and interest rates in order to influence economic activity

The Fed will use a ________ monetary policy when it thinks the economy is growing too fast and the risk of inflation is high.

restrictive

No matter how much of something there seems to be, all things are essentially limited. This illustrates the economic concept of

scarcity

The term _________ expresses how willing and able sellers are to provide goods and services at different prices.

supply

Communism "benefit":

supposed to prevent the accumulation of wealth in the hands of a tiny percentage of the population while providing for the needs of all citizens

One fiscal policy tool the government has is to spend money on programs aimed at creating jobs or stabilizing the economy. To raise money for these programs, the government levies ______________________ on consumers and businesses.

taxation

An example of an oligopoly would be

the automobile industry.

Command (central-planning economy)

the government owns most businesses and regulates the amounts, types, and prices of goods and services

unemployment rate

the level of joblessness among people actively seeking work

factors of production

the means for developing goods and services, and for satisfying customers' demand

Producer Price Index (PPI)

the measure of wholesale prices

Monetary policy is the government's attempts to manage _____ __________ _________ _____ ___________ ________ in order to influence economic activity.

the money supply and interest rates

Business cycle

the periodic but irregular ups and downs in total economic production

free-market economy(capitalism)

the production and distribution of goods and services are controlled by private individuals rather than by the government

Market price is established when ______.

the quantity supplied equals the quantity demanded

Resource Development

the study of how to develop the resources for creating and best utilizing goods and services

Gross Domestic Product (GDP)

the total value of all the goods and services that a country produces within its borders in one year

recession

two or more consecutive quarters of decline in the GDP

Socialism drawbacks:

• Problems with central planning • High taxes • Possible brain drain • Less job and wealth creation • Possible government deficits