Chapter 2

Question 1

Economic system

Answer 1

Method by society to produce and distribute goods and services

Question 2

Factor payment

Answer 2

Income people receive for supplying factors of production

Question 3

Patriotism

Answer 3

Love of ones country

Question 4

Safety net

Answer 4

Government programs protect people experiencing unfavorable economic conditions

Question 5

Standard of living

Answer 5

Level of economic prosperity

Question 6

Traditional economy

Answer 6

Economic system that relies on habit, custom, or ritual to decide questions of production and consumption of goods and services

Question 7

Market economy

Answer 7

Economic system in which decisions on production and consumption of goods and services based on voluntary exchange in markets

Question 8

Centrally planned economy

Answer 8

Economic system in which the central government makes all decisions on production and consumption of goods and services

Question 9

Command economy

Answer 9

Economic system in which a central authority is in command of the economy

Question 10

Mixed economy

Answer 10

Market-based economic system with limited government involvement

Question 11

Market

Answer 11

Arrangement that allows buyers and sellers to exchange things

Question 12

Specialization

Answer 12

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

Question 13

Household

Answer 13

A person or group of people living in the same residence

Question 14

Firm

Answer 14

Organization uses resources to produce a product then sold

Question 15

Factor market

Answer 15

Firms purchase the factors of production from household

Question 16

Profit

Answer 16

The financial gain made in a transaction

Question 17

Product market

Answer 17

Households purchase the goods and services that firms produce

Question 18

Self-interest

Answer 18

Ones own personal gain

Question 19

Incentive

Answer 19

Expectation that encourages people to behave in a certain way

Question 20

Competition

Answer 20

Struggle among producers for the dollars of consumers

Question 21

Invisible hand

Answer 21

Term economists use to describe the self-regulating nature of the marketplace

Question 22

Consumer sovereignty

Answer 22

The power of consumers to decide what gets produced

Question 23

Socialism

Answer 23

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

Question 24

Communism

Answer 24

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

Question 25

Authoritarian

Answer 25

Requiring strict obedience to an authority (dictator)

Question 26

Collective

Answer 26

Large farm leased from the state to groups of peasant farmers

Question 27

Heavy industry

Answer 27

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

Question 28

Laissez faire

Answer 28

Doctrine states that government generally should not intervene in the marketplace

Question 29

Private property

Answer 29

Owned by individuals or companies not by government or people as a whole

Question 30

Free enterprise

Answer 30

Economic system characterized by private or corporate ownership of capital goods

Question 31

Continuum

Answer 31

A range with no clear divisions

Question 32

Transition

Answer 32

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

Question 33

Privatize

Answer 33

To sell state-run firms to individuals