Chapter 2

Question 1

Capitalism

Answer 1

The private ownership of resources by individuals rather than by the government.

Question 2

Demand

Answer 2

The quantity of a good or service that consumers are willing to buy at a given price.

Question 3

Economic decision making

Answer 3

The process of choosing which needs, and wants, among several, will be satisfied using resources on hand.

Question 4

Economic resources

Answer 4

Means through which goods and services are produced

Question 5

Economies of scale

Answer 5

The cost advantages obtained due to expansion.

Question 6

Equilibrium price and quantity

Answer 6

Point at which the supply and demand curves meet

Question 7

Fixed costs

Answer 7

Costs that must be paid regardless of how much of a good or service is produced

Question 8

Marginal benefit

Answer 8

Measures the advantages of producing one additional unit of a good or service

Question 9

Marginal cost

Answer 9

Measures the disadvantages of producing one additional unit of a good or service

Question 10

Needs

Answer 10

Those things that a person must have in order to survive

Question 11

Opportunity cost

Answer 11

Value of the next best alternative

Question 12

Profit

Answer 12

Difference between the revenues earned by a business and the costs of operating the business

Question 13

Scarcity

Answer 13

Occurs when peoples needs and wants are unlimited and the resources to produce the goods and services to meet those needs are limited

Question 14

Supply

Answer 14

The quantity of a good or service a producer is willing to produce at different prices

Question 15

Variable costs

Answer 15

Costs that go up and down depending on the quantity of the good or service produced

Question 16

Wants

Answer 16

Those things that a person thinks he or she must have in order to be satisfied

Question 17

Economics is about making choices and

Answer 17

Satisfying the needs and wants of consumers.

Question 18

Needs are things you must have to

Answer 18

Survive

Question 19

Wants are things you think you must have to be

Answer 19

Satisfied

Question 20

Three kinds of economic resources are used by entrepreneurs to produce goods and services

Answer 20

Natural resources, Human Resources, and capital resources

Question 21

Entrepreneurs play an important role in the U.S. economy. They supply

Answer 21

Goods and services, provide capital investment and job creation, and serve as agents for change

Question 22

In a command economy the government determines

Answer 22

What, how, and for whom products and services are produced

Question 23

In a market economy individuals decide

Answer 23

What, how, and for whom products and services are produced

Question 24

A mixed economy combines elements of

Answer 24

The command and market economies.

Question 25

Traditional economies are simple economies operated

Answer 25

According to tradition or custom

Question 26

The U.S. economic system is based on the principles of

Answer 26

Private property, freedom of choice, profit, and competition

Question 27

Economic choices are necessary because of our

Answer 27

Unlimited desires and the scarcity of resources available to satisfy them.

Question 28

Every economic decision incurs an

Answer 28

Opportunity cost

Question 29

The functions of business are

Answer 29

Production, marketing, management, and finance

Question 30

The four major market structures are

Answer 30

Perfect competition, monopolistic competition, oligopoly, and monopoly.

Question 31

Market structure is determined by the

Answer 31

Nature and degree of competition among businesses that operates in the same industry.