EconomicsFinal Review

1. Why can’t small convenience stores compete with large stores like Wal-Mart?

1. Why can’t small convenience stores compete with large stores like Wal-Mart?

Because of economies of scale

2. When a local burger joint tries to compete with national burger chains, what type of competition are they engaging in?

2. When a local burger joint tries to compete with national burger chains, what type of competition are they engaging in?

Monopolistic competition

3. When you buy groceries, what type of index could you be helping us to calculate?

3. When you buy groceries, what type of index could you be helping us to calculate?

The Consumer Price Index (CPI)

4. If your city has no growth in its GMP over the last six months, it is said to be in what?

4. If your city has no growth in its GMP over the last six months, it is said to be in what?

Your city is in recession

5. During which phase of a business cycle would you more likely be laid off from your job?

5. During which phase of a business cycle would you more likely be laid off from your job?

During contraction

6. When you use something other than currency to trade for goods and services, that something other is said to be what?

6. When you use something other than currency to trade for goods and services, that something other is said to be what?

That something other is called a “medium of exchange”

7. Full employment is considered to be what percent of the work force?

7. Full employment is considered to be what percent of the work force?

Full employment has roughly 96% of the workforce employed

8. Be able to describe a price spiral.

8. Be able to describe a price spiral.

A price spiral is when your wages increase, then the price of your product increases, then when the the price of your product increases, consumer prices increase, then you’ll be back in front of you boss to ask for another raise……

9. When you choose to do one activity over another, the loss of being able to do the second activity is called what?

9. When you choose to do one activity over another, the loss of being able to do the second activity is called what?

Not being able to do one activity because you’ve chosen to do another is called “opportunity cost”

10. What type of system did the Soviet Union operate under?

10. What type of system did the Soviet Union operate under?

The Soviet Union used a system of authoritarian socialism

11. What causes a Production Possibilities Curve to expand in the short run?

11. What causes a Production Possibilities Curve to expand in the short run?

Improving manufacturing technology and adding additional resources can expand the curve

12. How do you determine unemployment rate?

12. How do you determine unemployment rate?

To determine the unemployment rate, divide the total number of members of the work force by the total number of unemployed workers.

200,000 total workers divided by 2000 unemployed citizens

200,000 / 5000 = 40 = 4%

13. What is the employment status of a stay-at-home mom?

13. What is the employment status of a stay-at-home mom?

She is not considered to be in the workforce

14. When the economy expands and production increases, what is likely to happen to stocks?

14. When the economy expands and production increases, what is likely to happen to stocks?

Stocks will likely increase in value

15. What would an owner of several different companies, in several different industries, most likely want to see from the government?

15. What would an owner of several different companies, in several different industries, most likely want to see from the government?

The owner would probably like to see less government regulation

16. Even if you never made any advancements in your position at work, should you expect to receive any increases in your income?

16. Even if you never made any advancements in your position at work, should you expect to receive any increases in your income?

Yes, you should expect minimal raises due to cost of living increases in pay

17. Why would a huge subway system or light rail system operate as a natural monopoly?

17. Why would a huge subway system or light rail system operate as a natural monopoly?

Because enormous infrastructure costs make competition impractical

18. When a municipality sets a minimum wage, outside the federal minimum wage, it is doing what?

18. When a municipality sets a minimum wage, outside the federal minimum wage, it is doing what?

The municipality is setting a wage price floor

19. If a unique factory is destroyed and millions of dollars in product and equipment are lost, what will happen to the price for those products?

19. If a unique factory is destroyed and millions of dollars in product and equipment are lost, what will happen to the price for those products?

The price of that product will increase due to reduced supply

20. When a government provides healthcare services to all of its citizens, how would you say this government is acting?

20. When a government provides healthcare services to all of its citizens, how would you say this government is acting?

When a government provides healthcare services to all of its citizens, it is acting in a socialistic manner

21. When a business is prevented by the municipality from charging more for a product, what is the municipality doing?

21. When a business is prevented by the municipality from charging more for a product, what is the municipality doing?

The municipality is setting a price ceiling

22. What are variable costs?

22. What are variable costs?

Variable costs are costs of production that can vary month to month

23. If an item is extremely necessary, its elasticity is said to be what?

23. If an item is extremely necessary, its elasticity is said to be what?

It is inelastic

24. What happens to the Lorenz Curve when wealthy citizens gain more wealth and working-class citizens don’t?

24. What happens to the Lorenz Curve when wealthy citizens gain more wealth and working-class citizens don’t?

The Lorenz Curve will shift to the right

25. Why are products made in China likely to be less expensive than products made in the U.S.A.?

25. Why are products made in China likely to be less expensive than products made in the U.S.A.?

The cost of labor is typically less in China

26. If a manufacturer finds it difficult to sell its product outside if its normal distribution area, what can you say about that manufacturer?

26. If a manufacturer finds it difficult to sell its product outside if its normal distribution area, what can you say about that manufacturer?

That industry is an oligopoly

27. Are Federal Income Taxes paid by citizens used in computing the U.S. Gross Domestic Product (GDP)?

27. Are Federal Income Taxes paid by citizens used in computing the U.S. Gross Domestic Product (GDP)?

No, they’re not used in the computation of GDP

28. What type of person believes that all people should share in the prosperity of the nation, and that paying higher taxes for public goods is the right move?

28. What type of person believes that all people should share in the prosperity of the nation, and that paying higher taxes for public goods is the right move?

That person would be democratic socialist

29. What type of insurance claim would you file in the event of the death of your spouse?

29. What type of insurance claim would you file in the event of the death of your spouse?

You would file a life insurance claim

30. You need to be able to read a Supply and Demand chart.

31. What would cause a shift to the right in a demand curve ?

31. What would cause a shift to the right in a demand curve ?

Sales of a limited edition product or other products where the demand is high can cause a shift to the right

32. What happens to the market clearing price of a product if delivery charges increase?

32. What happens to the market clearing price of a product if delivery charges increase?

The price for that product will likely increase

33. When prices go up, and consumers are willing to purchase less of a product, what is being illustrated?

33. When prices go up, and consumers are willing to purchase less of a product, what is being illustrated?

The law of demand is being illustrated

34. You need to be able to interpret a Production Possibilities Curve.

35. Most economies in the real world can be described as what?

35. Most economies in the real world can be described as what?

Most economies in the world are mixed economies

36. Why would you possibly have difficulties in refinancing your home?

36. Why would you possibly have difficulties in refinancing your home?

When the housing market is in a state of decline, you could have difficulties refinancing

37. Describe laissez-faire economics.

37. Describe laissez-faire economics.

Laissez-faire economics wants little to no government regulation, restriction or interference

38. What type of tax structure has millionaires paying more in taxes than the working-class?

38. What type of tax structure has millionaires paying more in taxes than the working-class?

This describes a progressive tax system

39. When you go to the hardware store to purchase lumber, and the sales associate asks you if you need a hammer and nails, what are those additional products considered?

39. When you go to the hardware store to purchase lumber, and the sales associate asks you if you need a hammer and nails, what are those additional products considered?

Those additional products are complementary goods

40. If you win the lottery and you have the option of taking all of the cash now or taking the cash over 20 equal annual payments, what is the best choice economically?

40. If you win the lottery and you have the option of taking all of the cash now or taking the cash over 20 equal annual payments, what is the best choice economically?

It would be best to collect all of your money asap because inflation would cause your future payments to be worth less

41. As you sit in front of the television, eating a bag of Doritos, you become more full and the Doritos become less and less satisfying. What does this illustrate?

41. As you sit in front of the television, eating a bag of Doritos, you become more full and the Doritos become less and less satisfying. What does this illustrate?

This illustrates the law of diminishing marginal utility

42. A lower interest rate at the bank will likely have what type of effect on the economy?

42. A lower interest rate at the bank will likely have what type of effect on the economy?

Decrease in unemployment and increase in inflation

43. How do you determine the price of a product in terms of today’s money using the consumer price index (CPI)?

43. How do you determine the price of a product in terms of today’s money using the consumer price index (CPI)?

Base year price x CPI = price in today’s money

.75 x 200 = 150 (price in today’s dollars is 1.50)

44. What would make it easier for a local bank to make loans to its customers?

44. What would make it easier for a local bank to make loans to its customers?

A lower interest rate from the Federal Reserve would make it easier

45. What type of home mortgage would a person with terrible credit be likely to qualify for?

45. What type of home mortgage would a person with terrible credit be likely to qualify for?

That person would likely be eligible for a subprime mortgage

46. What type of person would most likely dislike inflation?

46. What type of person would most likely dislike inflation?

Wealthy people generally don’t like inflation

47. When a community is more efficient because of its many businesses, it is said to be illustrating what concept?

47. When a community is more efficient because of its many businesses, it is said to be illustrating what concept?

We’re looking at economic interdependence

48. What are typical deductions from a paycheck?

48. What are typical deductions from a paycheck?

Federal & state income tax, payroll taxes (FICA) and insurance premiums

49. What are typical deductions from your income tax return?

49. What are typical deductions from your income tax return?

Mortgage interest, charitable donations, retirement contributions

50. What is the typical overdraft charge when you write a check or use the ATM and you have no money in your account?

50. What is the typical overdraft charge when you write a check or use the ATM and you have no money in your account?

Generally $25.00 – $40.00

51. What are the typical programs for seniors in our society?

51. What are the typical programs for seniors in our society?

Medicare, social security, veterans health care, etc

52. When a municipality decides to lower taxes and invest more in its infrastructure, what is the city adjusting?

52. When a municipality decides to lower taxes and invest more in its infrastructure, what is the city adjusting?

They are adjusting their fiscal policy

53. Why shouldn’t you withdraw money from your 401(k) early?

53. Why shouldn’t you withdraw money from your 401(k) early?

Withdrawing money from your 401(k) can cause you to incur huge penalties

54. What are possible ways to pay off your home mortgage sooner?

54. What are possible ways to pay off your home mortgage sooner?

Lower interest rate, paying more than the minimum monthly, find lower interest rates and apply the savings to the principal, etc.