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Econ Chapter 3
| Question | Answer |
|---|---|
| A capitalist system is also known as a_________________ system because anyone is free to start a business or enterprise. | free enterprise |
| the ability of everyone to enter and compete in the market of his or her own free choice | open opportunity |
| Free enterprise also requires __________________, a situation in which everyone has the same economic rights under the law. | legal equality |
| the incentive that encourages people and organizations to improve their material well-being by seeking to gain from economic activities | profit motive |
| a situation in which people decide for themselves which legal agreements to enter into | free contract |
| Everyone should have the ability to enter and compete in any marketplace. Open participation serves as an incentive to be efficient and productive. | Open Opportunity |
| Everyone should have the same economic rights under the law. In other words, the law should not give some people a better chance than others to succeed in the marketplace. | Legal Equality |
| Everyone should have the right to decide for themselves which legal economic agreements they want to enter into. Voluntary exchange, a cornerstone of free enterprise, cannot function without freedom of contract. | Free Contract |
| If people who are not part of a marketplace interaction benefit from it or pay part of the costs, there is (a) ______________. | market failure |
| Goods and services that are provided by the government and consumed by the public as a group are (is) ________________. | public goods |
| A ________ is a person who chooses not to pay for a good or service but who benefits from it when it is provided. | free rider |
| The private and public sectors share the responsibility for the nation’s _____________, the goods and services that are necessary for the smooth functioning of society, such as highways; mass transit; power, water, and sewer systems.. | infrastructure |
| An _________ is a side effect of a transaction that affects someone other than the producer or the buyer. | externality |
| A ____________ is an externality that is a negative effect, or cost, for people who were not involved in the original economic activity. | negative externality |
| A ___________ is an externality that is a positive effect, or benefit, for people who were not involved in the original economic activity. | positive externality |
| the money left over after the costs of producing a product are subtracted from the income gained by selling that product | profit |
| a mixed economic system that includes some government protections, provisions, and regulations to adjust the free enterprise system | modified free enterprise economy |
| a situation in which people who are not part of a marketplace interaction benefit from it or pay part of its costs | market failure |
| goods and services provided by the government and consumed by the public as a group | public goods |
| a person who does not pay for a good or service but who benefits from it when it is provided | free rider |
| the basic set of support systems—such as power, communications, transportation, water, sanitation, and education systems—needed to keep an economy and society going | infrastructure |
| a government payment that helps cover the cost of an economic activity that can benefit the public as a whole | subsidy |
| government programs designed to protect people from economic hardships | safety net |
| a transfer payment in which the government transfers income from taxpayers to recipients who do not provide anything in return | public transfer payment |
| transfers of income from one person or group to another even though the receiver does not provide any goods or services in return. | transfer payments |
| The money left after production costs are subtracted from revenue is called | profit |
| A person who chooses to, and is free to, open a grocery store is participating in a | free enterprise economy |
| Most people are inspired to start a business by the | profit motive |
| Why did an "informal market" develop in Mexico? | to avoid government regulations for starting businesses |
| A chain bookseller forcing many individual booksellers to go out of business is an example of | competition changing the marketplace |
| Free contract means that people can choose | for themselves what legal agreements to enter into |
| The incentive to improve material well-being by seeking to gain from economic activities is called | profit motive |
| Individual booksellers that have competed well against chain booksellers have often | focused on local needs |
| In the marketplace, producers are looking to | earn a profit |
| Open opportunity helps to ensure that everyone is free to | start businesses |
| Producers determine the allocation of scarce resources by seeking | profits and responding to consumer votes on a product |
| Consumers "vote" by choosing | a product over competing products |
| If dry pasta began to receive more consumer votes through increased purchases, producers likely would | allocate more resources into the production of dry pasta |
| An Italian restaurant earns a profit, causing other Italian restaurants to open, is an example of | allocating resources based on profit? |
| Typically, when households are shown on the on the right side of a circular flow model of a modified free enterprise system, businesses are located | on the left |
| The center of a typical circular flow model showing a modified free enterprise system is occupied by | government |
| A modified free enterprise system | has some government involvement in the economy |
| In modified free enterprise system, the government is a consumer in | both the resource and product market |
| In modified free enterprise system, the government is a producer for | both businesses and households |
| an economy that has a few regulations that adjust free enterprise is a | modified free enterprise economy |
| A market failure occurs when people who are not part of a marketplace interaction | benefit from of it |
| Public goods are funded by | taxes collected by the government |
| A person who does not pay for a service but benefits from it is called a(n) | free rider |
| Street lighting is an example of a | public good |
| A common way of dealing with the free rider problem is for | the government to provide the good or service |
| a public park with an entrance fee is an example of a | toll good |
| An externality is a side effect of a transaction that affects | someone other than the buyer or producer |
| A public transfer payment happens when the government transfers income from | taxpayers to recipients who do not provide anything in return |
| Government programs that protect people from economic hardship are called a | public safety net |
| The U.S. government often makes transfer payments to | the aged and disabled |
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