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Econ chapter 7,8,17, & 18 test review

Perfect competition
A market structure in which a large number of firms all produce the same product
Commodity
A product that is the same no matter who produces it
Barrier to entry
Any factor that makes it difficult for a new firm to enter a market
Start up costs
The expenses a firm must pay before it can begin to produce and sell goods
Monopoly
A market dominated by a single seller
Monopolistic competition
A market structure in which many companies sell products that are similar but not identical
Differentiation
Making a product different from other similar products
Oligopoly
A market structure in which a few large firms dominate a market
Price war
A series of competitive price cuts that lowers the market price below the price of production
Collusion
An agreement among firms to divide the market, set prices, or limit production
Cartel
A FORMAL organization of producers that agree to coordinate prices and production
Business organization
An establishment formed to carry on commercial enterprise
Sole proprietorship
A business owned and managed by a SINGLE individual
Business license
An authorization to start a business issued by the local government
Liability
The legally bound obligation to pay debts
Partnership
A business organization owned by two or more persons who agree on a specific division of responsibilities and profits
General partnership
Most common type of partnership. Share equally in both responsibility and liability
Limited partnership
Only one partner has the control and liability.
(Only one partner is required to be a general partner)
Limited liability partnership (LLP)
Partnership in which all partners are limited partners
Assets
Money and other valuables belonging to an individual or business
Corporation
A legal entity owned by individual stockholders
Closely held corporation
also known as privately held corporations. These stockholders rarely trade their stock, but pass it on within families.
Publicly held corporations
Has many shareholders who can buy or sell stock on the open market.
Certificate of incorporation
License to form a corporation issued by state government
Horizontal merger
Join two or more firms competing in the same market with the same good or service.
Vertical merger
Join two or more firms involved in different stages of producing the same good or service.
Conglomerate
Business combination merging more than three businesses that make unrelated products
Multinational corporation
Large corporation that produces and sells its good and services throughout the world
Business franchise
A semi-independent business that pays fees to a parent company
Royalty
Share of earnings given as payment
Cooperative
A business organization owned and operated by a group of individuals for their mutual benefit
Consumer cooperative
Retail outlet owned and operated by consumers
Service cooperative
Cooperative that provides a service, rather than a good
Nonprofit organization
Institution that functions much like a business, but does not operate for the purpose of generating profits
Business association
Promote the collective business interests of a city, state, or other geographical area or of a group of similar businesses
Trade association
Nonprofit organizations that promote the interests of particular industries.
Absolute advantage
The ability to produce more of a given product using a given amount of resources
Comparative advantage
The ability to produce a product most efficiently given all the other products that could be produced
Law of Comparative advantage
The idea that a nation is better off when it produces goods and services for which it has a comparative advantage
Export
A good that is sent to another country for sale
Import
A good that is brought in from another country for sale
Trader barrier
A means of preventing a foreign product or service from freely entering a nation’s territory
Import quota
A limit on the amount of a good that can be imported
Tariff
A tax on imported goods
Protectionism
The use of trade barriers to PROTECT a nation’s industries from foreign competition
International free trade agreement
Agreement that results from cooperation between at least two countries to reduce trade barriers and tariffs and to trade with each other
European Union
A regional trade organization made up of European nations
Euro
A single currency that replaces individual currencies among members of the European union
Free-trade zone
A region where a group of countries agrees to reduce or eliminate trade barriers
NAFTA
Agreement that will eliminate all tariffs and other trade barriers between Canada, Mexico, and the United States
Exchange rate
The value of a foreign nation’s currency in terms of the home nation’s currency
Appreciation
An increase in the value of a currency
Depreciation
A decrease in the value of a currency
Foreign exchange market
The banks and other financial institutions that facilitate the buying and selling of foreign currencies
Fixed exchange-rate system
A currency system in which governments try to keep the values of their currencies constant against one another
Trade surplus
The result of a nation exporting more than it imports
Trade deficit
The result of a nation importing more than it exports
Balance of trade
The relationship between a nation’s imports and its exports
Development
The process by which a nation improves the economic, political, and social well-being of its people
Developed nation
Nation with a higher average level of material well-being
Less developed country
Nation with a low level of material well-being
Per capita gross domestic product
A nation’s gross domestic product (GDP) divided by its total population
Industrialization
The extensive organization of an economy for the purpose of manufacture
Infant morality rate
The number of deaths that occur in the first year of life per 1,000 live births
Infrastructure
The services and facilities necessary for an economy to function
Newly industrialized country
Less developed country that has shown significant improvement in the measures of development
Population growth rate
The increase in a country’s population in a given year, expressed as a percentage of the population figure at the start of the year
Natural rate of population increase
The difference between the birth rate and death rate
Internal financing
Financing derived from the savings of a country’s citizens
Foreign investment
Investment originating from other countries
World bank
The largest provider of development assistance
United Nations Development Program (UNDP)
United Nations program dedicated to elimination of poverty through development
International Monetary Fund (IMF)
Organization formed to stabilize international exchange rates and facilitate development
Debt rescheduling
Lengthening the time of debt repayment and forgiving, or dismissing, part of the loan
Stabilization program
An agreement between a debtor nation and the IMF in which the nation agrees to revise its economic policy
Privatization
The sale or transfer or state-owned businesses to individuals
Glasnot
A policy of political “openness” introduced into the Soviet Union in the late 1980s
Perestroika
Soviet leader Gorbachev’s plan for economic restructuring
Special economic zone
Designed regions in China where foreign investment is encouraged, businesses can make most of their own investment and production decisions, and foreign companies are allowed to operate
1. Authorization
2. Site permit
3. Name
What are the 3 typical minimum requirements that a sole proprietor must meet?
Business licences are key to sole proprietorship’s because it the authorization to run the business
zoning laws are where a city/town will let the business be located if they prohibit the business being ran from home.
What role do business license and zoning laws play in sole proprietorship?
-Spells out each partner’s rights and responsibilities
-Outlines how partners will share profits with losses
-also addresses details such as the ways how partners can join the firms duration of the partnerships and tax responsibilities
What issues are addressed in articles of partnership?
Because all partners are limited in certain situations, such as another partners mistake
Why might accountants and physicians find limited liability partnerships attractive?
Horizontal mergers join two or more firms in the same market
Vertical mergers joins two or more firms involved in different stages
Conglomerates merge more than three businesses that produce unrelated products
How do horizontal mergers, vertical mergers, and conglomerates differ?
Trade surplus is the result of a nation exporting more than it imports
Trade deficit is the result of a nation exporting more than it exports
What is the difference between trade surplus and trade deficit?
Developed nations are those with a higher average level of material well-being
Less developed nations are low levels of material well-being
What is the difference between developed nations and less developed nations?
Per capita Gross Domestic Product
What is the main factor used in measuring development?
A nation’s GDP divided by the population
Per capita GDP
Privatization
How is transition achieved?
Production costs vary from country to country because of differences in:
-natural forces
-climate
-labor force
-capital
Why is trade necessary?

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