chapter 2 economics

Question 1

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

Answer 1

economic system

Question 2

the income people receive in return for supplying factors of production

Answer 2

factor payment

Question 3

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

Answer 3

profit

Question 4

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

Answer 4

safety net

Question 5

level of economic prosperity

Answer 5

standard of living

Question 6

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

Answer 6

innovation

Question 7

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

Answer 7

traditional economy

Question 8

any arrangement that allows buyers and sellers to exchange things

Answer 8

market

Question 9

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

Answer 9

specialization

Question 10

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

Answer 10

free market economy

Question 11

a person or group of people living in a single residence

Answer 11

household

Question 12

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

Answer 12

firm

Question 13

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

Answer 13

factor market

Question 14

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

Answer 14

product market

Question 15

an individuals own person gain

Answer 15

self-interest

Question 16

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

Answer 16

incentive

Question 17

the struggle among producers for the dollars of consumers

Answer 17

competition

Question 18

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

Answer 18

invisible hand

Question 19

the power of consumers to decide what gets produced

Answer 19

consumer sovereignty

Question 20

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

Answer 20

centrally planned economy

Question 21

another name for a centrally planned economy

Answer 21

command economy

Question 22

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

Answer 22

socialism

Question 23

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

Answer 23

communism

Question 24

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

Answer 24

authoritarian

Question 25

the doctrine that government generally should not intervene in the marketplace

Answer 25

laissez faire

Question 26

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

Answer 26

private property

Question 27

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

Answer 27

mixed economy

Question 28

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

Answer 28

economic transition

Question 29

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

Answer 29

privatization

Question 30

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

Answer 30

free enterprise system