Econ Test 3 Flashcards

Terms Definitions
maximizing rule
GDP Deflator
          Nominal GDPk          
Real GDPk
Multiplied by 100
Natural unemployment
Frictional + structural unemployment
One person or political party exercises absolute control, opposing political parties are prohibited
T/F: Transfers (for example, welfare) enhance the practice or market justice
By specializing, and producing the good in which they have a comparative advantage, each of them ______.
Supply Curve
Graphical depiction of supply schedule: a curve showing the quantity of a good or service supplied at various prices
Preference Reversal
risk tolerance changes from risk aversion to risk taking
T (Transaction)
Total number of transactions during some period of time.
(True/False) In a PC firm, market prices = Marginal Revenue for all values of total product.
What determines Elasticity?
1)The Availability of substitutes 2)Amount of consumer's budget 3)Time frame 4)Necessity or Luxury
balance sheet
used to determine a persons solvency
producing or tending to produce goods and services having exchange value
Large MES
less competition and often time high prices
Demand Deposits (16)
Balances in bank accounts that depositors can access on demand by writing a check
Changes in expectationsChanges in wealthChanges in capital stockChanges in fiscal/monetary policy
diminishing marginal utility
When additional increments of money bring ever smaller increments of added benefit
Is absent
Moral Hazard is the incentive for firms to choose. ________ projects after writing contracts with lenders (Riskier, safer, more productive or any?)
shift in supply
the graphical representation of the effect of a change in a factor other than price on supply
money supply
the sum of demand or checking-account deposits and currency in circulation
Globalization Debate
Is th shift toward a more integrated and interdependent global economy good?
a good for which it is difficult to prevent consumption by those who do not pay for the good
Non-Excludable Good
Marginal Cost
the change in total costs with an increase in output, giving us the additional cost per additional output. "If we add one more output, what are the additional costs?"
demand in which buyers are completely unresponsive to changes in price
perfectly inelastic demand
Supply-side Economics
The views of Reagan and Laffer who proposed that a tax cut would induce more people to work and thereby have the potential to increase tax revenues
+4) instituions: what is included?
+individualist institutions of making porperty and decision making: everyone must agree on who onewn what before any exchanges can take place +Social Institutions of Trust: trust exists between the buying and the seller +infrastructure for the smooth f
2 Necessary Conditions for Perfect Competition
1. Market share
2. Standardized product or Commodity
which of the following statements is correct for a monopolist?
(i) the firm maximizes profits by equating marginal revenue with marginal cost
(ii) the firm maximizes profits by equating marginal revenue with marginal cost
(iii) demand equals marginal r
(i) and (iv) only
1.Simple- easy to understand2.General- apply to a number of situations3.Useful- accurately predict observed behavior
What are desirable characteristics of economic models?
The percentage of change in supply/demand divided by the percentage change in price.
Causes of elasticity in demand
Name the 3 types of productive resources
natural, human, and capital
Prime Minister of Sweden(Political Party = Moderate Party)
What is the title of Frederick Reinfeldt
how is a price determined?
in the resource market through ther interaction of the supply decisions of completing households and the demand decisions of competing businesses

An individual firm is a price taker. It has no power to set price because it is just one small supplier in the market. This is shown by the individual firm’s marginal revenue curve (MR). Describe the attributes of the MR and where it comes from.

Marginal revenue is a firm’s increase in revenue from selling one additional unit of output. Because a firm has no power to set price, the MR curve is a straight line set at the market price for its product. 
newspaper vending machines are often built so that customers can pay to lift a door and select a paper off of a pile of newpapers. Newspaper distributors are not concerned about customers taking the whole stack of papers because the
marginal utility of a second daily newspaper is zero
When policy makers set prices by legal decree, the
are obscuring the signals that normally guide the allocation of societies resources



Demand Schedule



table that shows the relationship between the price of a good and the quantity
demanded, holding constant everything else that influences of how much
consumers of the good want to buy. 

Why Weak Home Currency is not a Perfect Solution
(3 Reasons)
not a perfect solution because its balance of trade deficit will not necessarily be corrected for the following reasons:

1. Counterpricing by competitors:
many foreign companies lower prices to remain competitive with countrys firms

2. Impact of other wak currencies:
Currency does not necessarily weaken against all currencies at the same time

3. Prearranged International Transactions:
Many international trade transactions are prearranged and cannot be immediately adjusted.
*J CURVE: the steeper the immediate change, the greater the rise afterwards (J)
4. Intracompany trade: Trades between subsidiaries
A great deal of damage is done to the enviroment in urban US because
the enviroment is treated as everyone's property and therefore as no one's property
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