Unit 3 Test Review Chapters 8, 7, 4, 5, 6, 10
1 voluntary exchange- define.
2 If the supply of greebes drops below equilibrium quantity, demand will exceed _______________.
3 Where does the flow of goods and services from businesses to households occur?
4 Opportunity Cost- define.
5 Advantages of a corporation.
6 Buyers help determine price in a market economy by how much they __________ and are willing to ___________.
7 A volcano erupts in Attapulgus that destroys or damages many of the farms that supply the US with
cotton. Cotton prices will _________ but supply will __________.
8 substitute good- define.
9 One shoe sells for $50 and another shoe sells for $75. What is the best way to explain the price difference?
10 Ben willingly pays $75 for a POLO shirt but only $25 for an Izod. What concept does this express?
11 What are the three major economic actors in the US economy?
12 If the demand curve for coats moves left, then supply will move ____________.
13 The United States economy is one in which best described as a ______________ economy.
14 DVD players are purchased by consumers in a _______________ market.
15 The use of money in an economy provides for an efficient means of _________________.
16 and 17 Know the formula for determining shortage and surplus.
18 The idea that producers will produce whatever there is sufficient demand for, as long as they can
continue to make a sufficient profit, is referred to as what?
19 Define franchise- example.
20 Assuming demand remains the same, if the supply of a product is reduced, what will happen to the price?
21 The market for labor would be considered a __________ market.
22 What types of products have price elasticity?
23 Advantages of a partnership. Examples.
24 A free enterprise system is based on _________ exchange. You produce what you want and consumers buy…
25 An economic actor that exists primarily to produce a product for a profit is called _______________.
Unit 3 Test Review Chapters 3, 4, 5, 6, 7, 11 continued
26 If we invest in a corporation, our liability is limited/ unlimited?
27 Most common type of business organization.
28 If the price of a product goes down, what will happen to the demand?
29 With respect to raising funds, the primary difference between a corporation and other types of businesses is that…
30 What role do profits play in a market economy?
31 An industry that is dominated by a few large firms is an __________________.
32 What are some things that could cause demand to shift right?
33 What type of business owner is part of a corporation but must obey the rules of that corporation?
34 Give examples of products with low price elasticity.
35 If consumer taste for a product increases both ___________ and _____________ will rise.
36 Monopolistic competition- define.
37 Perfect competition- Define.
38 In a perfectly competitive market, a firm will hire new employees as long as ___________________________.
39 Circular flow- explain.
40 If the income of consumers declines, what will be the MOST LIKELY effect on the equilibrium price and quantity?
41 Sole proprietorship- define.
42 What is the primary motivation for producers to sell their products at a price consumers can afford?
43 Division of labor- define.
44 A price floor usually leads to a ___________ of that product.
45 How did the invention of money change early economic systems?
46 Know what is done in both the factor and product market.
47 On a supply and demand diagram, if the demand curve shifts to the left, what happens to the equilibrium price ?
48 Examples of consumer goods.
49 With respect to the circular flow model, businesses provide households with ___________________________.
50 If marginal cost exceeds marginal revenue, our incentive to produce _________________.
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Buyers and sellers freely and willingly exchange goods and services.
Supply
In the product market.
Value of the next best alternative you give up when you choose. Choose you lose.
Easily raise capital by selling stock, unlimited life, limited liability.
Demand, spend
Rise, fall
Good we use in place of another good. Ex. Ice cream or yogurt, sweater or sweatshirt.
Consumer taste, remember, this is a demand shifter.
Consumer taste
Household (consumer), Business (producer), and the government.
Left, equilibrium price will decrease.
Mixed market
Product
Exchange (medium of exchange)
QS (quantity supplied) – QD (quantity demanded) = surplus (positive #) or shortage (negative #)
Same as above
Law of Supply- P increases then QS increases, P decreases then QS decreases, arrows go same.
Law of Demand- P increases then QS decreases, P decreases then QS increases, arrows go opposite.
Business you purchase from a corporation, you buy their name, product and reputation. Ex. McDonalds
Increase
Factor
Those product that are wants, not needs. Ex. Name brand shoes, steak, and fancy car.
Share risk, increase start up capital, share responsibility, like a sole proprietorship, it is your baby.
Voluntary
Business (producer)
Limited to only the amount of money you invest.
Sole proprietorship
Law of Demand says if P decreases then QD increases.
Raise money more easily buy selling stocks and or bonds, unlimited life and limited liability.
It is the incentive or the motivation for the seller and the buyer.
Oligopoly (few). Remember- a monopoly would be one firm dominates the market.
Consumer income, consumer taste, consumer expectations, number of consumers, compliments, substitutes.
Owner of a franchise. Ex. Burger King
Inelastic products are needs based. Ex. Medicine, gas, milk and other basic food items.
Demand (followed by supply) and Price
Not identical products, firms make greater than normal profit, not easy to enter market, advertising is used to
distinguish product from other products, not a large number of sellers, etc.
Few barriers to entry, identical products, large number of buyers and sellers, well informed buyers and sellers.
What they are paid is equal to how much they produce (their marginal product), this will be in stage 1 or stage 2,
remember you need to fire someone in stage 3.
Draw the picture and understand money flows one way and goods and services flow the other way, remember the
Andy and Abby example, 4 parts are the product market, factor market, consumer and business.
Prices will decrease; demand curve will move left, QD will decrease.
Limited life, unlimited liability, easy to start, most common business type, gets all profits, sense of pride, etc.
Profit
Divide tasks such as Henry Ford did with his assembly line to increase worker productivity, shifts supply right.
Surplus. Ex of a price floor is minimum wage. Lowest legal price.
Medium of exchange, standard of value, store of value, easier to do business. Ended bartering.
Buy goods and services in product market, make your money in factor market, CELL exists in factor market.
Price will decrease, QD will also decrease. Remember the 6 demand shifters from #32.
Your clothes, personal car, toothbrush, groceries, etc. Things you use for you. You use capital goods to make
money or for your business.
Income (paycheck or salary), goods and services.
Goes down, this means it is costing us more to make something than we can sell it for, there is no incentive.