ECONUT2CH6 7

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ECONUT2CH6 7 Powered By Docstoc
					Chapter 6 “Prices” (pp. 124)
Section 1 “Combining Supply and Demand”
PREVIEW OBJECTIVES (pp. 125)

   1. Explain: How supply and demand create Balance in the Marketplace.
Equilibrium _________________________________________________________
___________________________________________________________________
Figure 6.1 Finding Equilibrium
        Equilibrium Point      Combined Supply & Demand Schedule




   2. Compare: a market in equilibrium with a market in disequilibrium.
Disequilibrium ______________________________________________________
___________________________________________________________________
Figure 6.2 Excess Demand and Excess Supply
            Excess Demand                            Excess Supply




  3. Identify: how the government sometimes intervenes in markets to control
     prices. Price Ceilings ____________________________________________
     _____________________________________________________________
     Price Floors ___________________________________________________

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      __________ Minimum Wage _____________________________________
      _____________________________________________________________
      Price Supports in Agriculture _____________________________________
      _____________________________________________________________
   4. Analyze: the effects of price ceilings and price floors.
Rent Control ________________________________________________________
___________________________________________________________________
Minimum Wage _____________________________________________________
___________________________________________________________________
SECTION FOCUS In an uncontrolled market, ______________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________

Chapter 6 “Prices”
Section 2 “Changes in Market Equilibrium”
PREVIEW OBJECTIVES (pp. 133)

   1. Identify: the determinants that create Changes in Price.
Understanding a Shift in Supply ________________________________________
___________________________________________________________________
Finding a New Equilibrium ____________________________________________
___________________________________________________________________
Changing Equilibrium ________________________________________________
__________________________________________________________________
   2. Explain: how a market reacts to a fall in supply by moving to a new
      equilibrium ____________________________________________________
      _____________________________________________________________
   3. Explain: how a market reacts to shifts in demand by moving to a new
      equilibrium ____________________________________________________
      _____________________________________________________________
      _____________________________________________________________




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SECTION FOCUS When a supply or demand curve _________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________

KEY TERMS:

   Surplus: _____________________________________________________
    _____________________________________________________________
   Shortage: _____________________________________________________
    _____________________________________________________________
   Search costs: _________________________________________________
    _____________________________________________________________

Chapter 6 “Prices”
Section 3 “The Role of Prices”
PREVIEW OBJECTIVES (pp. 139)

  1. Analyze: the role of Prices in a Free Market _________________________
     _____________________________________________________________
  2. List: the Advantages of a Price-based System
     Incentive _____________________________________________________
     _____________________________________________________________
     Signals _______________________________________________________
     _____________________________________________________________
     Flexibility _____________________________________________________
     _____________________________________________________________
     Supply shock __________________________________________________
     _____________________________________________________________
     Rationing _____________________________________________________
     Price system is free _____________________________________________
  3. Explain: how a price-based system leads to a wider choice of goods and
     more efficient allocation of resources ______________________________
     _____________________________________________________________
     _____________________________________________________________
  4. Describe: the relationship between Prices and the Profit Incentive

                                                                  Page 3 of 11
     Adam Smith, 1776 The Wealth of Nations ___________________________
     _____________________________________________________________
     _____________________________________________________________
     Market Problems: Imperfect Competition ___________________________
     _____________________________________________________________
     Spillover Costs (externalities) _____________________________________
     _____________________________________________________________
SECTION FOCUS Goods and services can be divided ________________________
___________________________________________________________________
___________________________________________________________________

Chapter 7 “Market Structures” pp. 150
Section 1 “Perfect Competition”
PREVIEW OBJECTIVES pp. 151

   1. Describe: Four Conditions for Perfect Competition
Many Buyers
and Sellers
Identical         Commodity _______________________________
Products          _________________________________________
Informed Buyers
and Sellers
Free Market
Entry and Exit


Figure 7.2 Market Equilibrium in Perfect Competition




                                                                 Page 4 of 11
   2. List: Barriers to Entry
Start-Up Costs
Technology
   3. Describe: Prices and output in a perfectly competitive market. __________
      _____________________________________________________________
      _____________________________________________________________
      _____________________________________________________________
SECTION FOCUS Perfect competition exists _______________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________

Chapter 7 “Market Structures”
Section 2 “Monopoly”
PREVIEW OBJECTIVES pp. 156

      1. Describe: characteristics and give examples of monopoly ____________
         _______________________________________________________
      2. Describe: how monopolies are formed, including governmental
         monopolies _______________________________________________
         _______________________________________________________
      3. Explain: how a firm with a monopoly sets output and price, and why
         companies practice price discrimination _________________________
         ___________________________________________________________
         _______________________________________________________

SECTION FOCUS A firm has a monopoly when it ___________________________
___________________________________________________________________
___________________________________________________________________
Define KEY TERMS

    Monopoly ____________________________________________________
     _____________________________________________________________
    Economies of scale _____________________________________________
     _____________________________________________________________
                                                                     Page 5 of 11
    Natural monopoly ______________________________________________
     _____________________________________________________________
    Government monopoly __________________________________________
     _____________________________________________________________
    Patent _______________________________________________________
     _____________________________________________________________
    Franchise _____________________________________________________
     _____________________________________________________________
    License _______________________________________________________
     _____________________________________________________________
    Price discrimination ____________________________________________
     _____________________________________________________________
    Market power _________________________________________________
     _____________________________________________________________

COPY: Figures 7.3, 7.4, 7.6 and 7.7




                                                             Page 6 of 11
Answer: Section Assessment Questions pp. 164 Key Terms and Main Ideas

  1. _____________________________________________________________
     _____________________________________________________________
     _____________________________________________________________
  2. _____________________________________________________________
     _____________________________________________________________
     _____________________________________________________________
  3. _____________________________________________________________
     _____________________________________________________________
     _____________________________________________________________
  4. _____________________________________________________________
     _____________________________________________________________
     _____________________________________________________________

Applying Economic Concepts

  5. _____________________________________________________________
     _____________________________________________________________
     _____________________________________________________________
  6. _____________________________________________________________
     _____________________________________________________________
     _____________________________________________________________
     _____________________________________________________________
  7. _____________________________________________________________
     _____________________________________________________________
     _____________________________________________________________




                                                                Page 7 of 11
Section 3 “Monopolistic Competition and
Oligopoly” PREVIEW OBJECTIVES pp. 166
          1. Describe: characteristics and give examples of monopolistic
              competition ______________________________________________
              ________________________________________________________
Four Conditions of Monopolistic Competition
1 Many Firms                     _______________________________________
                                 _______________________________________
2 Few artificial barriers to     _______________________________________
entry                            ________________________________________
3 Slight control over price      ________________________________________
                                 ________________________________________
4 Differentiated products        ________________________________________
                                 ________________________________________


          2. Explain: how firms compete without lowering prices (Nonprice
             Competition)
1 Physical characteristics       ________________________________________
                                 ________________________________________
2 Location                       ________________________________________
                                 ________________________________________
3 Service level                  ________________________________________
                                 ________________________________________
4 Advertising, image, or status ________________________________________
                                 ________________________________________


        3. Understand: how forms in a monopolistically competitive market set
           output (Price, Output, and Profit) ____________________________
           ________________________________________________________
           ________________________________________________________
           ________________________________________________________
           ________________________________________________________
           ________________________________________________________
        4. Describe: characteristics and give examples of oligopoly __________

                                                                     Page 8 of 11
           ________________________________________________________
           ________________________________________________________
           ________________________________________________________
           ________________________________________________________
           ________________________________________________________
           ________________________________________________________


SECTION FOCUS Monopolistic competition is similar to perfect competition,
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________



Figure 7.10 Comparison of Market Structures (pp. 170)
                     Perfect         Monopolistic Oligopoly    Monopoly
                     Competition     Competition
Number of firms
Variety of goods
Control over prices
Barriers to entry
Examples



  Answer: Section Assessment Questions pp. 171 Key Terms and Main Ideas

  1. _____________________________________________________________
     _____________________________________________________________
  2. _____________________________________________________________
     _____________________________________________________________
  3. _____________________________________________________________
     _____________________________________________________________
  4. _____________________________________________________________
     _____________________________________________________________


                                                                  Page 9 of 11
Applying Economic Concepts

  5. _____________________________________________________________
     _____________________________________________________________
     _____________________________________________________________
  6. _____________________________________________________________
     _____________________________________________________________
     _____________________________________________________________
  7. _____________________________________________________________
     _____________________________________________________________
     _____________________________________________________________

Section 4 “Regulation and Deregulation”
PREVIEW OBJECTIVES pp. 172

     1. Understand: how firms use Market Power. Predatory pricing
        __________________________________________________________
        ___________________________________________________________
     2. List: three market practices that the government regulates or bans to
        protect competition __________________________________________
        ___________________________________________________________
     3. Define: deregulation _________________________________________
        ___________________________________________________________
        effects of deregulation ________________________________________
        ___________________________________________________________

SECTION FOCUS The federal government sometimes steps into markets to ______
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________
___________________________________________________________________




                                                                   Page 10 of 11
ANSWER questions page 176 Key Terms and Main Ideas

  1. _____________________________________________________________
     _____________________________________________________________
  2. _____________________________________________________________
     _____________________________________________________________
     _____________________________________________________________
  3. _____________________________________________________________
     _____________________________________________________________
     _____________________________________________________________
  4. _____________________________________________________________
     _____________________________________________________________
     _____________________________________________________________
     _____________________________________________________________

Applying Economic Concepts

  5. _____________________________________________________________
     _____________________________________________________________
     _____________________________________________________________
  6. _____________________________________________________________
     _____________________________________________________________
     _____________________________________________________________
  7. _____________________________________________________________
     _____________________________________________________________
     _____________________________________________________________




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