Chapter 2

Question 0

the income people receive in return for supplying factors of production

Answer 0

factor of payment

Question 1

the structure of methods and pronciples that a society uses to produce and distribute goods and services

Answer 1

economic system

Question 2

profit

Answer 2

the amount of money a business receives in excess of its expenses

Question 3

a set of government programs that protect people who face unfavorable economic conditions

Answer 3

safety net

Question 4

level of economic prosperity

Answer 4

standard of living

Question 5

the process of bringing new methods, products, or ideas into use

Answer 5

innovation

Question 6

traditional economy

Answer 6

an economic system that relies on habit, custom, or ritual to decide that three key economic questions

Question 7

any arrangement that allows buyers and sellers to exchange things

Answer 7

market

Question 8

the concentration of the productive efforts of individuals and businesses on a limited number of activities

Answer 8

specialization

Question 9

free market economy

Answer 9

an economic system in which decisions on the three key economic questions are based on voluntary exchange in markets

Question 10

a person or gorup of people living in a single residence

Answer 10

household

Question 11

an organization that uses resources to produce a product or service, which it then sells

Answer 11

firm

Question 12

the arena of exchange in which firms purchase the factors of production from households

Answer 12

factor market

Question 13

the arena of exchange in which households purchase goods and services from firms

Answer 13

product market

Question 14

an individuals own personal gain

Answer 14

self-interest

Question 15

the hope of reward or fear of penalty that encourages a person to behave in a certain way

Answer 15

incentive

Question 16

the struggle among producers for the dollars of consumers

Answer 16

competition

Question 17

a term coined by Adam Smith to describe the self-regulating nature of the marketplace

Answer 17

invisible hand

Question 18

the power of consumers to decide what gets produced

Answer 18

consumer sovereignty

Question 19

centrally planned economy

Answer 19

an economic system in which the government makes all decisions on the three key economic questions

Question 20

command economy

Answer 20

another name for a centrally planned economy

Question 21

socialism

Answer 21

a range of economic and political systems based on the belief that wealth should be distributed evenly throughout a society

Question 22

communism

Answer 22

a political system in which the government owns and controls all resources and means of production and makes all economic decisions

Question 23

describes a form of government that limits individual freedoms and requires strict obedience from its citizens

Answer 23

authoritarian

Question 24

the doctrine that government generally should not intervene in the marketplace

Answer 24

laissez faire

Question 25

private property

Answer 25

property that is owned by individuals or companies, not by the government or the people as a whole

Question 26

a market- based economic system in which the government is involved to some extent

Answer 26

mixed economy

Question 27

a period of change in which a nation moes from one economic system to another

Answer 27

economic transition

Question 28

privatization

Answer 28

the process of selling businesses or services operated by the government to individual investors, and then allowing them to compete in the marketplace

Question 29

an economic system characterized by private or corporate ownership of capital goods

Answer 29

free enterprise system

Question 30

infrastructure

Answer 30

the basic facilities that are necessary for a society to grow

Question 31

public property

Answer 31

property that is owned by the government or the people as a whole

Question 32

3 decisions (key economic questions)

Answer 32

what and how much to produce?
who receives the goods and services
how the products should be

Question 33

list and briefly explain the five basic goals and societal values that influence the three basic economic questions

Answer 33

economic efficiency - maximize production with the resources you have
economic freedom
economic security - safety net
economic equality - what is fair

Question 34

advantages of the free market

Answer 34

efficiency
economic freedom
economic growth