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economics final review chapter 7,10, 12

perfect competition
the simplest market structure. a market with a large number of firms all producing essentially the same product.
commodity
a product that is the same no matter who produces it, such as petroleum, notebook paper, or milk.
barrier to entry
any factor that makes it difficult for a new firm to enter the market.
imperfect competition
a market structure that does not meet the conditions of perfect competition
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
economies of scale
factors that cause a producer’s average cost per unit to fall as output rises.
natural monopoly
a market that runs most efficiently when one large firm supplies all of the output.
government monopoly
a monopoly created by the government
patent
a license that gives the inventor of a product the exclusive right to sell it for a short period of time.
franchise
the right to sell a good or service within an exclusive market.
license
a government issued right to operate a business.
price discrimination
division of customers into groups based on how much they will pay or a good.
market power
the ability of a company to change prices and output like a monopoly.
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,
nonprice competition
a way to attract customers through style, service, or location, but not a lower price.
oligopoly
a market structure in which a few large firms dominate the market.
price war
a series of competitive price cuts that lowers the market price below the cost of production.
collusion
an agreement among firms to divide the market, set prices, or limit production.
price fixing
an agreement among firms to charge one price for the same good.
cartel
a formal organization of producers that agree to coordinate prices and production.
predatory pricing
selling a product below cost to drive competition out of the market.
antitrust laws
laws that encourage competition in the marketplace.
trust
like a cartel, an illegal grouping of companies that discourages competition.
merger
combination of two or more companies into a single firm.
deregulation
the removal of some government controls over the market.
money
anything that serves as a medium of exchange, a unit of account, and a store of value.
medium of exchange
anything that is used to determine value during the exchange of goods and services.
barter
the direct exchange of one set of goods or services for another.
unit of account
a means for comparing the values of goods and services.
store of value
something that keeps its value if it is stored rather than used.
currency
coins and paper bills used as money.
commodity money
objects that have value in themselves and that are also used as money.
representative money
objects that have value because the holder can exchange them for something else of value.
fiat money
money that has value because the government has ordered that is is an acceptable means to pay debts.
bank
an institution for receiving, keeping, and lending money.
national bank
a bank chartered, or licensed by the national government.
bank run
widespread panic in which great numbers of people try to redeem their paper money.
greenback
paper currency issued during the civil war
gold standard
a monetary system in which paper money and coins are equal to the value of a certain amount of gold.
Federal Reserve System
the nation’s banking sytem
central bank
bank that lends to others in times of need.
member bank
bank that belongs to the Federal Reserve system.
Federal Reserve Note
the national currency we use today in the United States.
Great Depression
the severe economic decline that began in 1929 and lasted for a decade.
Federal Deposit Insurance Corporation
the government agency that insures customer deposits if a bank fails.
money supply
all the money available in the United States economy
liquidity
the ability to be used as, or directly converted to cash.
demand deposit
the money in checking accounts.
money market mutual fund
a fund that pools money from small savers to purchase short-term government and corporate securities.
fractional reserve banking
a banking system that keeps only a fraction of funds on hand and lends out the remainder.
default
failure to pay back a loan.
mortgage
a specific type of loan that is used to buy real estate.
credit card
a card entitling its holder to buy goods and service based on the holder’s promise to pay for these goods and services.
interest
the price paid for the use of borrowed money.
principal
the amount of money borrowed.
debit card
a card used to withdraw money
creditor
person or institution to whom money is owed.
national income accounting
a system that collects macroeconomic statistics on production, income, investment, and savings.
gross domestic product
the dollar value of all final goods and services produced within a country’s borders in a given year.
intermediate goods
goods used in the production of final goods.
durable goods
goods that last for a relatively long time
nondurable goods
goods that last a short period of time, such as food, light bulbs, and sneakers.
nominal GDP
GDP measured in current prices
real GDP
GDP expressed in constant or unchanging prices.
gross national product
the annual income earned by U.S. owned firms and U.S. citizens
depreciation
the loss of the value of equipment that results from normal wear and tear.
price level
the average of all prices in the economy
aggregate supply
the total amount of goods and services in the economy available at all possible levels.
aggregate demand
the total amount of services in the economy that will be purchased at all possible levels.
business cycle
a period of macroeconomic expansion followed by a period of contraction
expansion
a period of economic growth as measured by a rise in real GDP
economic growth
a steady long term increase in real GDP
peak
the height of an economic expansion, when real GDP stops rising.
contraction
a period of economic decline marked by falling real GDP.
trough
the lowest point in an economic contraction, when real GDP stops falling.
recession
a prolonged economic contraction
depression
a recession that is especially long and severe.
stagflation
a decline in real GDP combined with a rise in the price level.
leading indicators
key economic variables that economists use to predict a new phase of a business cycle.
real GDP per capita
real GDP divided by the total population
capital deepening
process of increasing the amount of capital per worker.
saving
income not used for consumption
savings rate
the proportion of disposable income that is saved.
technological progress
an increase in efficiency gained by producing more out put without using more inputs.

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