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Contents - Lessons & Practice

Business · Social Sciences

Principles of Economics 3e

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Principles of Economics 3e

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Principles of Economics 3e

34 lessons

One lesson for each chapter of Principles of Economics 3e, in the book’s order. The lesson teaches what that chapter says you need to know, then checks it.

  1. 1Welcome to Economics!Microeconomics and macroeconomics are two different perspectives on the economy.
  2. 2Choice in a World of ScarcityThe budget constraint, which is the frontier of the opportunity set, illustrates the range of available choices.
  3. 3Demand and SupplyThe equilibrium price and equilibrium quantity occur where the supply and demand curves cross.
  4. 4Labor and Financial MarketsIn the demand and supply analysis of financial markets, the “price” is the rate of return or the interest rate received.
  5. 5ElasticityAn inelastic demand or supply curve is one where a given percentage change in price will cause a smaller percentage change in quantity demanded or supplied.
  6. 6Consumer ChoicesHowever, the additional utility people receive from each unit of greater consumption tends to decline in a pattern of diminishing marginal utility
  7. 7Production, Costs, and Industry StructureWhile accounting profit considers only explicit costs, economic profit considers both explicit and implicit costs
  8. 8Perfect CompetitionPerfect competition means that there are many sellers, there is easy entry and exiting of firms, products are identical from one seller to another, and sellers are price takers
  9. 9MonopolyThese barriers include: economies of scale that lead to natural monopoly; control of a physical resource; legal restrictions on competition; patent, trademark and copyright protection; and practices to intimidate the…
  10. 10Monopolistic Competition and OligopolyMonopolistic competition refers to a market where many firms sell differentiated products.
  11. 11Monopoly and Antitrust PolicyAntitrust laws seek to ensure active competition in markets, sometimes by preventing large firms from forming through mergers and acquisitions, sometimes by regulating business practices that might restrict…
  12. 12Environmental Protection and Negative ExternalitiesAn externality, which is sometimes also called a spillover, can have a negative or a positive impact on the third party.
  13. 13Positive Externalities and Public GoodsNew technology often has positive externalities; that is, there are often spillovers from the invention of new technology that benefit firms other than the innovator.
  14. 14Labor Markets and IncomeProfit maximizing firms employ labor up to the point where the market wage is equal to the firm’s demand for labor.
  15. 15Poverty and Economic InequalityThe poverty rate is what percentage of the population lives below the poverty line, which the amount of income that it takes to purchase the necessities of life determines.
  16. 16Information, Risk, and InsuranceIn goods markets, buyers facing imperfect information about products may depend upon money-back guarantees, warranties, service contracts, and reputation.
  17. 17Financial MarketsCorporate bonds are issued by firms; municipal bonds are issued by cities, state bonds by U.S.
  18. 18Public EconomyLogrolling refers to a situation in which two or more legislators agree to vote for each other’s legislation, which can then encourage pork-barrel spending in many districts
  19. 19The Macroeconomic PerspectiveTo avoid double counting, GDP counts only final output of goods and services, not the production of intermediate goods or the value of labor in the chain of production
  20. 20Economic GrowthThe Industrial Revolution facilitated the extensive process of economic growth, that economists often refer to as modern economic growth.
  21. 21UnemploymentA person without a job must be willing and able to work and actively looking for work to be counted as unemployed; otherwise, a person without a job is counted as out of the labor force.
  22. 22InflationEconomists often express the price level in terms of index numbers, which transform the cost of buying the basket of goods and services into a series of numbers in the same proportion to each other, but with an…
  23. 23The International Trade and Capital FlowsThe current account balance includes the trade in goods, services, and money flowing into and out of a country from investments and unilateral transfers
  24. 24The Aggregate Demand/Aggregate Supply ModelNeoclassical economists emphasize Say’s law, which holds that supply creates its own demand.
  25. 25The Keynesian PerspectiveThe latter is an example of a macroeconomic externality.
  26. 26The Neoclassical PerspectiveThe neoclassical perspective argues that, in the long run, the economy will adjust back to its potential GDP level of output through flexible price levels.
  27. 27Money and BankingM2 includes all of M1, plus savings deposits, time deposits like certificates of deposit, and money market funds
  28. 28Monetary Policy and Bank RegulationA bank run occurs when there are rumors (possibly true, possibly false) that a bank is at financial risk of having negative net worth.
  29. 29Exchange Rates and International Capital FlowsIn the foreign exchange market, people and firms exchange one currency to purchase another currency.
  30. 30Government Budgets and Fiscal PolicyWhen a government spends more than it collects in taxes, it is said to have a budget deficit.
  31. 31The Impacts of Government BorrowingThe theory of Ricardian equivalence holds that changes in private saving will offset changes in government borrowing or saving.
  32. 32Macroeconomic Policy Around the WorldMacroeconomic policy goals for most countries strive toward low levels of unemployment and inflation, as well as stable trade balances.
  33. 33International TradeA country has an absolute advantage in those products in which it has a productivity edge over other countries; it can produce more of a product.
  34. 34Globalization and ProtectionismThere are three tools for restricting the flow of trade: tariffs, import quotas, and nontariff barriers.