IAAO 101 Exam | Questions with Correct Answers

IAAO 101 Exam | Questions with Correct Answers marginal product - ansthe increase in output that arises from an additional unit of input diminishing marginal product - ansthe property whereby the marginal product of an input declines as the quantity of the input increases fixed costs - anscosts that do not vary with the quantity of output produced variable costs - anscosts that vary with the quantity of output produced average total cost - anstotal cost divided by the quantity of output average fixed cost - ansfixed cost divided by the quantity of output average variable cost - ansvariable cost divided by the quantity of output marginal cost - ansthe increase in total cost that arises from an extra unit of production efficient scale - ansthe quantity of output that minimizes average total cost economies of scale - ansthe property whereby long-run average total cost falls as the quantity of output increases diseconomies of scale - ansthe property whereby long-run average total cost rises as the quantity of output increases constant returns to scale - ansthe property whereby long-run average total cost stays the same as the quantity of output charges competitive market - ansa market with many buyers and sellers trading identical products so that each buyer and seller is a price taker average revenue - anstotal revenue divided by the quantity sold marginal revenue - ansthe change in total revenue from an additional unit sold sunk cost - ansa cost that has already been committed and cannot be recovered monopoly - ansa firm that is the sole seller of a product without close substitutes natural monopoly - ansa monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms price discrimination - ansthe business practice of selling the same good at different prices to different customers oligopoly - ansa market structure in which only a few sellers offer similar or identical products monopolistic competition - ansa market structure in which many firms sell products that are similar but not identical game theory - ansthe study of how people behave in strategic situations collusion - ansan agreement among firms in a market about quantities to produce or prices to charge cartel - ansa group of firms acting in unison Nash equilibrium - ansa situation in which economic actors interacting with one another each choose their best strategy given the strategies that all the other actors have chosen Base of the pyramid (BOP) - ansEconomies where people make less than $2,000 per capita per year. BRICA - ansBrazil, Russia, India, and China. Emerging economies - ansterm that has gradually replaced the term "developing countries" since the 1990s. Emerging markets - ansA term that is often used interchangeably with "emerging economies." Expatriate manager - ansA manager who works abroad, or "expat" for short. Foreign direct investment (FDI) - ansInvestment in, controlling, and managing value-added activities in other countries. Global Business - ansBusiness around the globe. Globalization - ansThe close integration of countries and peoples of the world. Gross domestic product (GDP) - ansThe sum of value added by resident firms, households, and governments operating in an economy. Gross national income (GNI) - ansGDP plus income from non-resident sources abroad. The term used by the World Bank and other international organizations to supersede the term GNP. Gross national product (GNP) - ansGDP plus income from non-resident sources abroad Group of 20 (G-20) - ansThe group of 19 major countries plus the European Union (EU) whose leaders meet on a biannual basis to solve global economic problems. International business (IB) - ans(1) A business (or firm) that engages in international (cross-border) economic activities and/or (2) the action of doing business abroad. International premium - ansA significant pay raise when working overseas. Liability of foreignness - ansThe inherent disadvantage that foreign firms experience in host countries because of their non-native status. Multinational enterprise (MNE) - ansA firm that engages in foreign direct investment (FDI). Nongovernmental organization (NGO) - ansAn organization that is not affiliated with governments. Purchasing power parity (PPP) - ansA conversion that determines the equivalent amount of goods and services that different currencies can purchase. Reverse innovation - ansAn innovation that is adopted first in emerging economies and is then diffused around the world. Risk management - ansThe identification and assessment of risks and the preparation to minimize the impact of high-risk, unfortunate events. Scenario planning - ansA technique to prepare and plan for multiple scenarios (either high or low risk). Semiglobalization - ansA perspective that suggests that barriers to market integration at borders are high, but not high enough to insulate countries from each other completely. Triad - ansNorth America, Western Europe, and Japan. Increase - ansIf demand is inelastic, a price increase causes total revenue to ______ market structures aggregate demand - ansthe total demand for final goods and services in the economy at a given time and price level. aggregate demand - ansspecifies the amounts of goods and services that will be purchased at all possible price levels. The wealth effect, the interest- rate effect and the exchange rate effect - ansWhat are the three reasons that the aggregate demand curve slopes downward? the wealth effect - ansA lower price level raises the real value of households' money holdings the interest rate effect - ansA lower price level reduces the amount of money people want to hold. the exchange rate effect - ansWhen a lower price level reduces the interest rate, investors move some of their funds overseas in search of higher returns - this movement of funds causes the real value of the domestic currency to fall in the market for foreign-currency exchange. Value to buyers - Amount paid by buyers - ansEquation for consumer surplus Amount received by sellers - cost to sellers - ansEquation for producer surplus