Chapter 3

Question 1

viewed as single decision makers each

Answer 1

households

Question 2

the satisfaction received from consumption; a sense of well-being

Answer 2

utility

Question 3

cash or in-kind benefits given to individuals as outright grants from the government

Answer 3

transfer payments

Question 4

monetary payments such as welfare benefits, social security, unemployment compensation, and disability benefits

Answer 4

cash transfers

Question 5

provide for specific goods and services, such as good, healthcare, and housing

Answer 5

in-kind transfers

Question 6

goods expected to last for 3 or more years

Answer 6

durable goods

Question 7

food, clothing, and gasoline

Answer 7

nondurable goods

Question 8

haircuts, air travel, and medical care

Answer 8

services

Question 9

development of large-scale factory production that began in Great Britain around 1750 and spread to the rest of Europe, North America, and Australia

Answer 9

industrial revolution

Question 10

economic offices or units formed by profit-seeking entrepreneurs who employ resources to produce goods and services for sale

Answer 10

firms

Question 11

a firm with a single owner who has the right to all profits but also bears unlimited liability for the firm’s losses and debts

Answer 11

sole proprietorship

Question 12

a firm with multiple owners who share the profits and bear unlimited liability for the firm’s losses and debts

Answer 12

partnership

Question 13

a legal entity owned by stockholders whose liability is limited to the value of the stock ownership

Answer 13

corporation

Question 14

an organization consisting of people who cooperate by pooling their resources to buy and sell more efficiently than they could individually

Answer 14

cooperative

Question 15

a retail business owned and operated by some or all of its customers in order to reduce costs

Answer 15

customer cooperate

Question 16

producers join forces to buy supplies and equipment and to market their output; farmers

Answer 16

producer cooperative

Question 17

groups that do not pursue profit as a goal; engage in educational, charitable, humanitarian, cultural, professional, or other activities; often with a social purpose

Answer 17

not-for-profit organizations

Question 18

a condition that arises when the unregulated operation of markets yields socially undesirable results

Answer 18

market failure

Question 19

an agreement among firms to divide the market and fix the price

Answer 19

collusion

Question 20

prohibitions against price fixing and other anticompetitive practices

Answer 20

antitrust laws

Question 21

a sole supplier of a product with no close substitutes

Answer 21

monopoly

Question 22

one firm that can supply the entire market at a lower per unit cost than could two or more firms

Answer 22

natural monopoly

Question 23

a good that, once, produced, is available for all to consume, regardless of who pays and who doesn’t; nonrival and noncompetitive

Answer 23

public good

Question 24

a cost or a benefit that affects neither the buyer nor seller, but instead affects people not involved in the market transaction

Answer 24

externality

Question 25

the use of government purchases, transfer payments, taxes and borrowing to influence economy-wide variables such as inflation, employment, and economic growth

Answer 25

fiscal policy

Question 26

regulation of the money supply to influence economy-wide variables such as inflation, employment, and economic growth

Answer 26

monetary policy

Question 27

the total value of all final goods and services in the US, a way to track the government over time

Answer 27

US gross domestic product, GDP

Question 28

those with a greater ability to pay, such as those earning higher incomes or those owning more property, should pay more taxes

Answer 28

ability to pay tax principles

Question 29

those who get more benefits from the government programs should pay more taxes

Answer 29

benefits-received tax principle

Question 30

the distribution of tax burden among taxpayers

Answer 30

tax incidence

Question 31

the tax as a percentage of income remains constant as income increases; also called a flat tax

Answer 31

proportional taxation

Question 32

the tax as a percentage of income increases as income increases

Answer 32

progressive taxation

Question 33

the percentage of each additional dollar of income of income that goes to the tax

Answer 33

marginal tax rate

Question 34

the tax as a percentage of income decrease as income increases; payroll taxes

Answer 34

regressive taxation

Question 35

occurs because the opportunity cost of producing specific goods differs across countries

Answer 35

international trade

Question 36

the value during a given period of a country's exported goods minus the value of its imported goods

Answer 36

merchandise trade balance

Question 37

a record of all economic transactions during a given period between residents of one country and the residents of the rest of the world

Answer 37

balance of payments

Question 38

foreign money needed to carry out international transactions

Answer 38

foreign exchange

Question 39

a tax on imports

Answer 39

tariff

Question 40

a legal limit on the quantity of a particular product that can be imported or exported

Answer 40

quotas