Economics EOC Review Part 2

Key Terms Perfect Competition Monopolist Competition Monopoly Market structure with many well informed and independent buyers and sellers who exchange identical products. Monopolist Competition Market structure that meets all the conditions of perfect competition except identical products Monopoly Market Structure where a single firm dominate the market Nonprice Competition Sales strategy focusing on a products appearance, quality, or design rather than price. Oligopoly Market Structure in which a few large sellers dominate the industry

Key Terms Price Discrimination Sole Proprietorship Partnership the action of selling the same product at different prices to different buyers, in order to maximize sales and profits. Sole Proprietorship Business owned and run by a single person who has the rights to all profits and unlimited liability for all debts of the firm Benefit: Easy to Start, No separate Tax Disadvantage: Unlimited Liability for Debt, Difficult to Raise Finical Capitol Partnership Unincorporated business owned and operated by two or more people who share the profits and responsibility for debts Benefit: Ease of Management, No separate tax Disadvantage: Unlimited Liability for debts, have to rely on another person

Key Terms Corporations Franchise: LLC (Limited Liability Company) Form of business organization recognized by law as a separate legal entity Benefits: Easy to Raise Financial Capitol Disadvantage: Double Taxation, Difficult to get a charter Franchise: Individually owned store, that is part of a larger corporate operation. LLC (Limited Liability Company) Company where owners or member have limited liability Must file either a corporate, sole propriety or partnership tax return.

Key Terms: Unskilled Labor Semiskilled Labor Skilled Labor Workers not trained to operate specialized machines and equipment: Semiskilled Labor Workers who operate machines that require a minimum amount of training Skilled Labor Workers who are trained to operate complex equipment and require little supervision Professional Labor Worker with high level of training, education, and managerial skills. Unions Organization of workers designed to protect wages, benefits, and the overall interest of its members.

What are the necessary condition for perfect competition? Large Number of buyers and sellers Buyers and sellers deal in identical products Each buy and seller acts independently Buyers and sellers are reasonably well-informed about products and price Buys and sellers are free to enter into, conduct, or get out of business

What are the benefits of natural monopolies and why does the government regulate these monopolies? A natural monopoly is defined by a firm in an industry where the largest supplier can theoretically create the lowest production prices. They are regulated because monopoly have a high risk of creating actual monopoly, and monopoly lack the ability to reach and equilibrium price.

How can price discrimination be beneficial to an individual? Some Groups benefit from cheaper prices. Firms have an incentive to cut prices for groups of consumers who are sensitive to prices Avoid Congestion. Price discrimination is one way to manage demand. If there was no price discrimination rush hour trains would be more overcrowded.

How does specialization increase output per worker? Specialization is capacity of a working to focus on a specific job rather that multiple Specialization increases output because they are doing one task as opposed to multiple task.

Key Terms Gross Domestic Product (GDP) Things Excluded from GDP The dollar value of all final goods, services, and structures produced within a country’s national borders during one year period. Things Excluded from GDP Intermediate Products (Products used to make other Products) Secondhand Sales (Selling of Used Products) Nonmarket Transactions Underground Economy Business Cycle Peak (Point where the GDP Stops increasing) -> Recession (When GDP Declines for two quarters) -> Trough ( When GDP Stops declining ) -> Expansion (When GDP starts go up) ->

Identify the difference between fiscal and monetary policy The way the FED affect the monetary supply Fiscal Policy The action the government takes, by taxing or spending to effect the economy.

Identify the three types of taxes Progressive Tax The higher the income the higher the tax rate Regressive Tax The Higher the income the lower the tax rate Flat Tax The Tax rate stays the same regardless of income

Why should citizens be concerned with national debt? higher taxes less desire to fund government programs Higher interest Rates Redistribution of income.

Why is GDP an indicator of the health of the US economy? Shows how strong our current economy is. More GDP means higher production

What is the impact of deregulation on industry in the United States? Allows production to increase and the supply of a product to grow. It also allows for the market to determine the Equilibrium price.

Differentiate between direct and indirect taxes and describe the different types. A Direct tax is a tax on a product that you can see. Example Sales Tax An indirect tax is a tax on a product that is not shown. Example Gas Tax

How does the Federal Reserve impact US monetary policy? By raising and lowering the interest rate can affect the availability of credit. This changes the amount of money in the U.S.