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PRAXIS ECON1
| Question | Answer |
|---|---|
| THE OPPORTUNITY COST OF PURCHASING A USED AUTOMOBILE FOR $6,000 | is a vacation or other purposes for thiwch the $6,000 could have been used |
| assume that a country can produce both good x and good y, but has a comparative advantage in the production of good x only. if the country specialized in the production of good x and imports good y, the coutnry will most likely consume... | greater amounts of goods x and y than before trading |
| which of the follwoing is a characterisitc of socialism as an economic system? | the production and distribution of the nations ouput are determined by central government planners |
| a firm that has market power to set the price for its product or service is | a monopoly. it is a markert structure characterized by a single producer |
| when compared with perfectly competive firms in long run equilibrium, a monopoly with an identical cost structure will charge a | higher price and produce lower output |
| if a price ceiling is repealed it will cause the market to | increase the price due to the previous shortage. as the price increases, the quantity supplied will increase and the quantity demanded will decrease |
| comparative advantage | idea that even though one entity may be better at producing a good than a second entity, it still may be beneficial to trade with the second entity if they have lower opportunity costs |
| price floor | lowest legal price a commodity can be sold at...The most common price floor is the minimum wage |
| For a price floor to be effective, | it must be set above the equilibrium price. |
| price ceiling | when the government puts a legal limit on how high the price of a product can be |
| order for a price ceiling to be effective | it must be set below the natural market equilibrium |
| A negative externality occurs when an individual or firm making a decision does not have to pay the full cost of the decision | If a good has a negative externality, then the cost to society is greater than the cost consumer is paying for it |
| The first law of supply states that as the price of a product increases the quantity supplied will increase | supply curve |
| Marginal cost is the cost of an additional unit | MC = Change in TC / Change in Q |
| Price elasticity measures the sensitivity of the quantity demanded or the quantity supplied to the change in the price | how much will a change in price affect the quantity demanded or supplied? |
| Fixed costs are costs that are independent of output | These remain constant throughout the relevant range |
| Variable costs are costs that vary with output | Generally variable costs increase at a constant rate relative to labor and capital. Variable costs may include wages, utilities, materials used in production, etc |
| Total cost is variable cost and fixed cost combined. | TC=VC+FC |
| A monopoly exists when there is a single firm in an industry; it can change output to directly affect the market price. | Market power is the ability of a firm to affect the market price. A firm in a competitive market doesn't have the ability to affect the market price since it holds a small share of the market and can easily be undercut by another firm...only monopolies do |
| The Clayton Act was passed in 1914 to help clarify some of the vagueness of the Sherman Act | The Clayton Act more clearly defines anticompetitive acts such as price discrimination, tying clauses, and mergers between competitors. |
| socialism/communism: government or the state should be in charge of economic planning, production and distribution of goods. | north korea, china, cuba |
| capitalism-Capitalism is the economic system based on private or corporate ownership of, production and distribution of goods, Capitalists favor a system of free enterprise which means the government should not interfere in the economy | us, great britian, canada |
| Later a form of socialism called communism sprang up based on the writings of Karl Marx and Friedrich Engels. | Later a form of socialism called communism sprang up based on the writings of Karl Marx and Friedrich Engels. |
Created by:
misty66
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