Foundations & PPC
This production factor includes all natural resources to make goods and services
land
When price rises and quantity demanded falls, this law is demonstrated
law of demand
A business owned by one person
sole proprietorship
Money has value because the government says so
fiat
A limit on the number of exports
quota
The value of the next best alternative you give up
Opportunity Cost
input costs increase for producers, what happens to supply
Supply decreases (shifts left)
Monopolistic competition
Bank earns profit through this mechanism
Charging higher interest on loans than they pay on deposits
What is the main reason countries trade
comparative advantage
A point inside the PPC indicates this type of resource use
Underutilization or inefficiency
Name on TRIBE determinant that causes demand to shift
Tastes, Related Goods, Income, Buyers, Expectations
Corporations have this advantage over sole proprietors
Limited liability
Name one tool of expansionary fiscal policy
Increasing government spending or lowering taxes
When the U.S. dollar strengthens, what happens to imports
imports increase
A country's PPC shifts outward. Name one reason why.
More resources, better technology, increased human capital, or productivity improvements
Airline tickets drop in price and consumers buy many more.
Elastic or Inelastic
Elastic
Why do natural monopolies exist?
One firm can provide the good more efficiently due to high fixed costs
If the government's spending exceeds revenue, this occurs
Budget deficit
How does a country with absolute advantage in all goods still benefit from trade
Comparative advantage allows specialization based on lower opportunity cost
Producing 20 tons of steel or 10 tons of wheat. Explain why specializing in steel might be a comparative advantage
The opportunity cost of producing steel is lower than producing wheat relative to other nations
Difference between movement along the demand curve and a shift of the curve
moving the curve is caused by price alone and a shift is caused by determinants other than price
What structure has 3 large companies dominating the market
oligopoly
What kind of tax becomes a smaller percentage of income as income increases
Regressive tax
A complete ban on trade with another nation
embargo