Microeconomics test

  1. What is the law of supply?
    the higher the price, the more firms are willing to supply
  2. What is the law of demand?
    amount people are willing to buy goes down as price goes up
  3. What three conditions have to be met in order for there to be demand?
    you have to want it, be willing to pay, and able to pay
  4. What is a demand schedule?
    table that shows the amount consumers are willing to buy at different prices
  5. What is a supply schedule?
    table that shows amount firms are willing to sell at different prices
  6. What is quantity demanded?
    the amount of the good that cosumers are willing to buy
  7. What is quantity supplied?
    amount of the good that firms are willing to sell
  8. Describe the demand curve.
    • graph of demand schedule 
    • negative slope
  9. Describe the supply curve.
    • graph of the supply schedule 
    • positive slope
  10. What are some determinites of change in supply?
    • technology
    • price of goods used in production
    • number firms in market 
    • expectations of future prices
    • gov. regulations, subsidies, and taxes
  11. What are some determinates of change in demand?
    • changes in preference
    • consumer income
    • changes in population
    • expectations of future prices/ income
    • prices of substitute and completment goods and inferior goods
  12. What is equilibrium?
    • quantity supplied equals quantity demanded
    • comsumers are willing to buy and producers are willing to sell
  13. Where can market clearing price be found on a graph?
    supply and demand curves intersect
  14. What happens when quantity supplied equals quantity demand?
    it has reached equillribrum
  15. What is elastic demand?
    a small change in price changes quantity demanded
  16. What is inelastic demand?
    change in price does not affect demand
  17. What are the 3 types of businesses in the US?
    sole proprietorship, partnership, corporation
  18. What are the advantages of a sole proprietorship?
    • easy to get in and out of business
    • control over all profits and the way your business is run 
    • pride of ownership
    • lower taxes
  19. What are the disadvantages of a sole proprietorship?
    • unlimited liability
    • difficult to raise captial
    • responsible for all losses
    • poor management skills
    • limited life
  20. What are the advantages of a partnership?
    • easier to raise financial capital 
    • partners combine their abilities
    • personal satisfaction
    • lower taxes
  21. What are the disadvantages of a partnership?
    • unlimited liability 
    • share profits
    • dissagreements between partners 
    • possible instability after death of partnet
  22. What are the advantages of a corporation?
    • limited liability 
    • greater financial capital 
    • unlimited life
    • specialized management
  23. What are the disadvantages of a corporation?
    • incresed taxes
    • difficult to start
    • very large
    • increased gov control
  24. What are the four types of markets in the US?
    • perfect comp. 
    • monopolistic comp
    • oligopoly
    • monopoly
  25. Describe perfect comp.
    • many firms
    • identical products 
    • no control over price
    • easy to enter industry 
    • no non-price comp.
  26. Describe monopolistic competition?
    • Many firms
    • similar but not identical products
    • some control over price
    • fairly easy to enter market
    • lots of non-price comp.
  27. Describe oligopoly?
    • few large firms
    • similar or different prodcuts
    • control over price
    • lots if products are different
    • fairily difficult to enter market
  28. Describe monopoly?
    • one firm
    • different products
    • control over price
    • farily difficult to enter market 
    • non-price comp. may very well exist
  29. What is a market?
    place where people buy and sell
  30. What is a vertical merger?
    merger between companies of different industries
  31. What is a horizontal merger?
    merger between companies of the same industry
  32. What does the circular flow chart show?
    flow of money
  33. Who are the three actors in circular flow?
    • gov
    • factor market and product market
  34. What is a product market?
    sells goods and services
  35. What is a factor or resource market?
    sells factors of production
  36. What is barter?
    the most primative form of trade
  37. What are the disadvantages of barter?
    it is hard to find a double coincidence of wants
  38. What are the charactistics of money?
    • durable
    • portable 
    • stable
  39. What are the functions of money?
    • standard of value
    • medium of exchange
    • way to store value
  40. What type of buisness is the largest in the US?
    sole proprietorship
  41. What is it meant when it is said "money is the yardstick of value''?
    money is a measure of quality
  42. What is natural monopoly?
    monopoly in an industry in which it is most efficient (involving the lowest long-run average cost) for production to be concentrated in a single firm.
  43. What is a price floor?
    • prevent prices from falling
    • creates surpluses
  44. What is a price ceiling?
    • prevents prices of rising 
    • creates shortages
  45. What happens when the gov. set prices?
    creates shortages or surpluses
  46. What can cause supply curve to shift to the left?
    • exit of firms 
    • when less is supplied
  47. What can cause demand curve to shift left?
    when demand falls
  48. What can cause supply curve to shift right?
    • new firms
    • technology 
    • more is supplied at every price
  49. What can cause demand curve to shift right?
    more is demanded
Card Set
Microeconomics test