Econ Chapter 3
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| A capitalist system is also known as a_________________ system because anyone is free to start a business or enterprise. | free enterprise
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| the ability of everyone to enter and compete in the market of his or her own free choice | open opportunity
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| Free enterprise also requires __________________, a situation in which everyone has the same economic rights under the law. | legal equality
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| the incentive that encourages people and organizations to improve their material well-being by seeking to gain from economic activities | profit motive
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| a situation in which people decide for themselves which legal agreements to enter into | free contract
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| 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
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| 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
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| 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
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| If people who are not part of a marketplace interaction benefit from it or pay part of the costs, there is (a) ______________. | market failure
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| Goods and services that are provided by the government and consumed by the public as a group are (is) ________________. | public goods
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| 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
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| 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
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| An _________ is a side effect of a transaction that affects someone other than the producer or the buyer. | externality
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| A ____________ is an externality that is a negative effect, or cost, for people who were not involved in the original economic activity. | negative externality
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| A ___________ is an externality that is a positive effect, or benefit, for people who were not involved in the original economic activity. | positive externality
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| the money left over after the costs of producing a product are subtracted from the income gained by selling that product | profit
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| a mixed economic system that includes some government protections, provisions, and regulations to adjust the free enterprise system | modified free enterprise economy
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| a situation in which people who are not part of a marketplace interaction benefit from it or pay part of its costs | market failure
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| goods and services provided by the government and consumed by the public as a group | public goods
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| a person who does not pay for a good or service but who benefits from it when it is provided | free rider
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| 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
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| a government payment that helps cover the cost of an economic activity that can benefit the public as a whole | subsidy
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| government programs designed to protect people from economic hardships | safety net
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| a transfer payment in which the government transfers income from taxpayers to recipients who do not provide anything in return | public transfer payment
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| 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
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| The money left after production costs are subtracted from revenue is called | profit
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| A person who chooses to, and is free to, open a grocery store is participating in a | free enterprise economy
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| Most people are inspired to start a business by the | profit motive
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| Why did an "informal market" develop in Mexico? | to avoid government regulations for starting businesses
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| A chain bookseller forcing many individual booksellers to go out of business is an example of | competition changing the marketplace
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| Free contract means that people can choose | for themselves what legal agreements to enter into
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| The incentive to improve material well-being by seeking to gain from economic activities is called | profit motive
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| Individual booksellers that have competed well against chain booksellers have often | focused on local needs
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| In the marketplace, producers are looking to | earn a profit
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| Open opportunity helps to ensure that everyone is free to | start businesses
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| Producers determine the allocation of scarce resources by seeking | profits and responding to consumer votes on a product
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| Consumers "vote" by choosing | a product over competing products
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| If dry pasta began to receive more consumer votes through increased purchases, producers likely would | allocate more resources into the production of dry pasta
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| An Italian restaurant earns a profit, causing other Italian restaurants to open, is an example of | allocating resources based on profit?
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| 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
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| The center of a typical circular flow model showing a modified free enterprise system is occupied by | government
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| A modified free enterprise system | has some government involvement in the economy
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| In modified free enterprise system, the government is a consumer in | both the resource and product market
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| In modified free enterprise system, the government is a producer for | both businesses and households
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| an economy that has a few regulations that adjust free enterprise is a | modified free enterprise economy
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| A market failure occurs when people who are not part of a marketplace interaction | benefit from of it
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| Public goods are funded by | taxes collected by the government
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| A person who does not pay for a service but benefits from it is called a(n) | free rider
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| Street lighting is an example of a | public good
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| A common way of dealing with the free rider problem is for | the government to provide the good or service
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| a public park with an entrance fee is an example of a | toll good
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| An externality is a side effect of a transaction that affects | someone other than the buyer or producer
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| A public transfer payment happens when the government transfers income from | taxpayers to recipients who do not provide anything in return
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| Government programs that protect people from economic hardship are called a | public safety net
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| The U.S. government often makes transfer payments to | the aged and disabled
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