Key Economics Terms and Concepts

Matching Terms with Definitions

Match the following terms with their definitions:

1. Value of Land (Income Economics): The value of land increases over time depending on location.
2. Oligopoly: Producers collaborate to maximize profits.
3. Wage Theory: Individuals are compensated based on the value of their marginal product.
4. Price Theory: Characterized by product differentiation and sales promotion.
5. Monopolistic Competition: Considers both supply and demand factors.
6. Monopoly: Market power is often measured using the concentration ratio.
7. Dumping: Selling goods produced domestically at a lower price in foreign markets.
8. Scope Economics: Combining two or more lines of production within a business.
9. Perfect Competition: Prices are determined by the interaction of supply and demand.
10. Cartel: An organization of firms that collude to make decisions about production levels and prices.

Characteristics and Examples

Four Characteristics of a Monopolistically Competitive Market:

• Some control over prices
• Heterogeneous products
• Use of advertising
• Proportional demand curve

Four Examples of Market Imperfections Causing Income Inequality:

• Dividends
• Wages
• Revenue
• Taxes

True or False

1. False: In the transformation curve, indifference curves of two individuals do not touch each other in the corners; this represents a point of conflict.
2. False: Price theory considers labor market demand as part of wage theory.
3. False: Competition based on factors other than price, used by firms to attract customers, is characteristic of monopolistic competition, not oligopoly.
4. False: Movement along a contract curve benefits one individual and may decrease benefits for the other.
5. False: The labor supply curve is relatively inelastic in the short term.
6. True: Barriers to entry, such as legal concessions or high capital expenditures, can create a monopolistic competitive market.
7. False: A monopolistically competitive firm's profit-maximizing condition differs from perfect competition. A monopoly maximizes profit when elasticity is greater than or equal to one.