Name:________________________________________ Date:__________________ Work Day:________
Economics – Unit 2 Test Study Guide
What this exam will cover:
 Chapter 4, Sections
 Chapter 5, Sections
 Chapter 6, Sections
 Chapter 7, Sections
1-3
1-3
1-3
1-3
Test Format:
multiple choice/true false questions
short answers questions
essay question
Vocabulary Terms for which you are responsible:
average cost
barrier to entry
black market
cartel
ceteris paribus
collusion
commodity
complements
Demand
Demand Curve
Demand Schedule
demographics
differentiation
diminishing marginal returns
disequilibrium
economies of scale
elastic
elasticity of demand
elasticity of supply
equilibrium
excise tax
fad
fixed cost
franchise
government monopoly
imperfect competition
Income Effect
increasing marginal returns
inelastic
inferior good
inventory
Law of Demand
law of supply
license
marginal cost
marginal product of labor
marginal revenue
Market Demand Schedule
market power
market supply curve
market supply schedule
minimum wage
monopolistic competition
monopoly
natural monopoly
nonprice competition
normal good
oligopoly
operating cost
patent
perfect competition
price ceiling
price discrimination
price fixing
price floor
price war
rationing
regulation
rent control
search costs
shortage
start up costs
subsidy
substitutes
Substitution Effect
supply
supply curve
supply schedule
supply shock
surplus
total cost
total revenue
unitary elastic
variable
variable cost
Possible Short Answer Questions – Four of these will be on the test.
o
o
o
o
In the spring and early summer, consumer demand for bathing suits is inelastic. In the fall and
winter, demand becomes elastic. Based on this information, when should bathing suit companies
increase prices? Explain why.
Suppose sales of hot dogs decrease because of price increases. What should the bakeries that
produce hot dog buns expect to happen to demand for their product? Why? How should they
react?
What are demographics? Why is it important for businesses to understand the demographics of
their markets?
Suppose your company bottles water from a high mountain spring. The blue glass bottles of
water sell very well in cities. Where should you locate your bottling plant? Why?
1
o
o
o
o
o
o
A shoe factory is losing money. Should it shut down? What do the owners of the factory need to
know to decide?
What are the advantages and disadvantages of the minimum wage for workers?
How does rent control help some people and hurt other people?
A company has a monopoly on a glue used in TVs and phones. The company can make as much
of the glue as it wants. It chooses to make less glue than it is able. Why?
What happens to prices and output in a perfect competitive market?
Explain why deregulation can be seen as both good and bad for the economy.
Possible Essay Questions/Prompts – One of these will be on the test.




Essential
Essential
Essential
Essential
Question:
Question:
Question:
Question:
How do we decide what to buy?
How do people decide what to sell?
What is the right price?
How does competition affect your choices?
2