Chapter 2

Question 0

Product Market

Answer 0

The market in which households purchase the goods and services that firms produce

Question 1

Factor Market

Answer 1

Market in which firms purchase the factors of production from households

Question 2

Invisible Hand

Answer 2

Term economists use to describe the self-regulating nature of the market place

Question 3

Consumer Sovereignty

Answer 3

The power of consumers to decide what gets produced

Question 4

Competition

Answer 4

The struggle among producers for the dollars of consumers

Question 5

Self-Interest

Answer 5

One’s own gain

Question 6

Market

Answer 6

An arrangement that allows buyers and sellers to exchange goods and services

Question 7

Profit

Answer 7

The financial gain made in a transaction

Question 8

Firm

Answer 8

An organization that uses resources to produce a product, which it then sells

Question 9

Specialization

Answer 9

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

Question 10

Incentive

Answer 10

An expectation that encourages people to behave in a certain way

Question 11

Household

Answer 11

A person or a group of people living in the same residence

Question 12

Centrally Planned Economy

Answer 12

Central government makes all decisions

Question 13

Mixed Economy

Answer 13

Systems that combine tradition and the free market with limited government intervention

Question 14

Market Economy

Answer 14

Economic decisions are made by individuals and are based on exchange or trade

Question 15

Factor Payments

Answer 15

The income people receive for supplying factors of production-land, labor, capital, or entrepreneurship

Question 16

Traditional Economy

Answer 16

Rely on habit, custom, or ritual to decide what to produce, to whom to distribute it to, and how to produce it

Question 17

Economic System

Answer 17

The method used by a society to produce and distribute goods and services

Question 18

Safety Net

Answer 18

Set of government programs that protect people experiencing unfavorable economic conditions

Question 19

Standard of Living

Answer 19

Level of economic prosperity

Question 20

Socialism

Answer 20

Social and political philosophy based on the belief that democratic means should be used to evenly distribute wealth throughout a society

Question 21

Communism

Answer 21

Political system characterized by a centrally planned economy with all economic and political power resting in the hands of the government

Question 22

Authoritarian

Answer 22

Requiring strict obedience to an authority, such as a dictator

Question 23

Collective

Answer 23

Large farm leased from the state to groups of peasant farmers

Question 24

Heavy Industry

Answer 24

Industry that requires a large capital investment and that produces items used in other industries

Question 25

Lasses-Faire

Answer 25

Let it be, doctrine that states that government generally should not intervene in the marketplace, limited government intervention

Question 26

Free Enterprise

Answer 26

An economic system that permits the conduct of business with minimal government intervention

Question 27

Continuum

Answer 27

A range with no clear divisions

Question 28

Transition

Answer 28

Period of change in which an economy moves away from a centrally planned economy toward a market-based system

Question 29

Privatize

Answer 29

To sell state-run firms to individuals