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FSOT - Economics
| Question | Answer |
|---|---|
| Economics | The science that studies the choices of people trying to satisfy their wants in a world characterized by scarcity |
| Scarcity | Wants greater than resources |
| Opportunity Cost | What you give up to do what you are doing |
| Zero Opportunity Cost | Exists when someone doesn’t give up anything in choosing to do something else |
| Macroeconomics | The big picture |
| Satisfaction | Utility |
| Choice | A consequence of scarcity |
| Zero Price | No dollars or cents are charged for a good |
| Free Rider | Receives the benefits but does not pay anything |
| Private Good | Benefits of the good can be denied to a person |
| Public Good | Benefits of the good cannot be denied to anyone |
| Contract | An agreement between two or more people to do something |
| Total Revenue | Price times number of units sold |
| Incentive | Encourages or motivates a person toward action |
| Law of Demand | Price and quantity demanded move in opposite directions |
| Law of Diminishing Marginal Utility | Eventually the utility of additional unit decreases |
| Quantity Supplied | Specific number of units of a good produced and offered for sale at a specific price |
| Unit Elastic | Percentage change in quantity demanded equals percentage change in price |
| Increase in Resource Prices | Will end up shifting supply curve to the left |
| Normal Good | Income rises, demand for good rises |
| Substitutes | Price of good A moves in the same direction as demand for good B |
| Shortage | Exists when quantity demanded is greater than quantity supplied |
| Surplus | Exists when quantity supplied is greater than quantity demanded |
| Equilibrium Price | The price that exists in the market when the quantity supplied of a good equals the quantity demanded |
| Equilibrium | The market setting in which the quantity supplied of a good equals the quantity demanded |
| Brute Force | A rationing device that is not commonly used today in the United States |
| Price | A commonly used rationing device in the United States |
| Fixed Cost | Does not change as business firm produces more units of a good |
| Board of Directors | Chosen by the stockholders of the firm |
| Corporation | Form of business organization in which owners have unlimited liability |
| Marginal Revenue | Additional revenue gained from selling an additional unit of a good |
| Partnership | Form of business organization in which owners have unlimited liability |
| Stockholder | One of the owners of the corporation |
| Total Cost | Fixed cost plus variable cost |
| Government Monopoly | Legally protected from competition |
| Copyright | Like a patent, but for authors or publishers |
| Perfect Competition | A market in which firms have no control over price |
| Monopolist | Single seller of a good |
| Monopolistic Competition | Many sellers and slightly differentiated products |
| Oligopoly | Few sellers and identical or slightly differentiated products |
| Patent | Effective for 17 years |
| Equilibrium Wage Rate | The wage rate at which the quantity of labor supplied equals the quantity demanded |
| Right-To-Work-Law | Law that makes it illegal for employers to requre union membership as a condition of employment |
| Minimum Wage | A wage rate determined by Congress |
| Unemployment Rate | The number of persons unemployed divided by the number of persons in the civilian labor force |
| Closed Shop | An organization that hires only union members |
| Union Shop | An organization that does not require individuals to be union members in order to be hired but does require them to join the union within a certain period |
| A Retired Person | An example of a person not in the labor force |
| A Person on Strike | An example of an employed person |
| Positive Balance of Trade | Exports greater than imports |
| Negative Balance of Trade | Exports less than imports |
| Comparative Advantage | Producing at lower opportunity cost |
| Tariff | A tax on imported goods |
| Quota | A legal limit on the amount of a good that may be imported |
| Infant-Industry Argument | Idea that new industries have to be given time to develop |
| Dumping | Selling below cost and below the price domestic residents are asked to pay |
| Appreciation Occurs | When a nation's currency fetches more of some other nation's currency |
| Cooperative | A business that provides services to its members and is not run for profit |
| Sole Proprietorship | A business that is owned by one individual who makes all business decisions, receives all the profits or takes all the losses of the firm, and is legally responsible for the debts of the firm |
| Limited Partner | In a limited partnership, a partner who cannot participate in the management of the firm and who has limited liability. |
| General Partner | In a limited partnership, a partner who is responsible for the management of the firm and who has unlimited liability |
| Dividend | A share of the profits of a corporation distributed to stockholders |
| Asset | Anything of value to which the firm has legal claim |
| Bond | A statement of debt issued by a corporation. The corporation promises to pay a certain sum of money at maturity and also to pay periodic fixed sums until that date |
| Franchise | A contract by which a firm (usually a corporation) lets a person or group use its name and sell its goods in exchange for certain payments being made and certain requirements being met |
| Marginal Costs | The change in total cost that results from producing an additional unit of output |
| Variable Costs | Cost, or expense that changes with the number of units of a good produced |
| Profit | The amount of money left over after all the costs of production have been paid. Profit exists whenever total revenue is greater than total costs. |
| Wage Rate | The price of labor |
| Minimum Wage Law | A federal law that specifies the lowest hourly wage rate that can be paid to workers, this law is established by Congress |
| Labor Union | An organization that seeks to increase the wages and improve the working conditions of its members |
| Taft-Harley Act | An act, passed in 1947 by the U.S. Congress, which gave states the right to pass right-to-work laws. These right-to-work laws prohibit employers from establishing union membership as a condition of employment |
| Downsizing | Restructuring a firm and decreasing its size so that it is a less costly, more productive, more efficient operation |
| Global Competition | Competition from all over the world. American business firms and workers today are said to be faced with global competition. |
| Technology | The body of skills and knowledge concerning the use of resources in production |
| Barter Economy | An economy in which trades are made in goods and services instead of money |
| Double Coincidence of Wants | The situation in which each of two parties to an exchange has what the other wants |
| Money | A good that is widely accepted for the purposes of exchange |
| Face Value | The stated denomination on paper money or coins |
| Checking Account | A deposit that is withdrawable on demand and transferable by means of a check. It is also known as a demand deposit and is the largest component of the money supply |
| Near Money | Assets, such as non checking savings accounts, that can be easily and quickly turned into money |
| Debit Card | A card that can be used to withdraw funds at automated teller machines and to pay for purchases by electronically transferring funds from one account to another |
| Money Supply | The total supply of money in circulation, composed of currency, checking accounts, and traveler's checks. |
| Reserve Requirement | A regulation which requires a bank to keep a certain percentage of each dollar deposited in the bank in its reserve account at the Fed or in its vault (as vault cash) |
| Open Market Operations | Buy and selling of government securities by the Fed |
| Discount Rate | The interest rate the Fed charges a member bank for a loan |
| Federal Funds Rate | The interest rate one bank charges another bank for a loan |
| Demand-Side Inflation | An increase in the price level that originates on the demand side of the economy |
| Supply-Side Inflation | An increase in the price level that originates on the supply side of the economy |
| Deflation | A decrease in the price level |
| Full Employment | The situation that exists when the official unemployment rate equals the natural unemployment rate |
| Frictional Unemployment | Refers to workers who have lost their jobs because of changing market (demand) conditions and who have transferable skills |
| Structural Unemployment | Refers to workers who have lost their jobs because of changing market (demand) conditions and whose skills do not match the requirements of available jobs |
| Specialize | To do only one thing. For example, when a country specializes in the production of a good, it produces only that good. |
| Comparative Advantage | The situation in which a country can produce a good at a lower opportunity cost than another country |
| Economic Integration | When nations combine to form either a common market or a free-trade area |
| NAFTA (North American Free Trade Agreement) | Created a free trade area for Canada, the United States, and Mexico |
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