Chapter 3

Question 1

Profit motive

Answer 1

The force that encourages people and organizations to improve their material well-being

Question 2

Open opportunity

Answer 2

the concept that everyone can compete in the marketplace

Question 3

Legal equality

Answer 3

The concept of giving everyone the same legal rights

Question 4

Private property rights

Answer 4

People have the right and privilege to control their possessions as they wish

Question 5

Free contract

Answer 5

People may decide what agreements they want to enter into

Question 6

Voluntary exchange

Answer 6

People may decide what and when they want to buy and sell

Question 7

Competition

Answer 7

Rivalry among sellers to attract customers while lowering costs

Question 8

Interest group

Answer 8

Private organization that tries to persuade public officials to act or vote according to group members interest

Question 9

Public disclosure laws

Answer 9

Laws requiring companies to provide full information about their products

Question 10

Public interest

Answer 10

Concerns of the public as a whole

Question 11

Macroeconomics

Answer 11

Behavior and decision making of entire economics

Question 12

Microeconomics

Answer 12

Economic behavior and decision making of small units, such as individuals, families, and businesses

Question 13

Gross domestic product (GDP)

Answer 13

The total value of all final goods and services produced in a particular economy

Question 14

Business cycle

Answer 14

Period of macroeconomic expansion followed by a period of contraction

Question 15

Work ethic

Answer 15

Commitment to the value of work and purposeful activity

Question 16

Technology

Answer 16

Process used to produce a good or service

Question 17

Public good

Answer 17

Shared good or service…it would be impractical to make consumers pay individually and to exclude nonpayers

Question 18

Public sector

Answer 18

Part of economy that involves the transactions of the government

Question 19

Private sector

Answer 19

Part of economy that involves the transactions of individuals and businesses

Question 20

Free rider

Answer 20

Someone who would not choose to pay for a certain good or service but gets benefits of it anyway if provided as a public good

Question 21

Market failure

Answer 21

Market doesn’t distribute resources efficiently

Question 22

Externality

Answer 22

Economic side effect of a good or service that generates benefits or costs to someone other than the person deciding how much to produce or consume

Question 23

Poverty threshold

Answer 23

Income level below that which is needed to support families or households

Question 24

Welfare

Answer 24

Government aid to the poor

Question 25

Cash transfers

Answer 25

Direct payment of money to eligible poor people

Question 26

In-kind benefits

Answer 26

Goods and services provided for free or at greatly reduced prices