Chapter 3: The American Free Enterprise System Flashcards

1
Q

ability to enter, compete in market of one’s choice

A

open opportunity

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2
Q

everyone has same economic rights under the law

A

legal equality

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3
Q

right to decide which legal agreements to enter

A

free contract

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4
Q

incentive to gain from economic activities

A

profit motive

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5
Q

promoter of free markets

  • free to choose
  • believed government should only control money supply
  • scholar
  • 1976: won Nobel Peace Prize for economics
A

Milton Friedman

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6
Q

capitalist system

  • anyone is free to start a business
  • choose how to use resources
  • managers choose workers
  • government protects/encourages competition, enforces contracts
  • consumers choose which goods and services to buy
A

free enterprise system

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7
Q

money left after production costs subtracted from sale price

A

profit

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8
Q

government protections, protections, provisions, regulations against communism

A

modifies free enterprise economy

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9
Q

branches of government that make production decisions

A

public sector

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10
Q

outsiders benefit from or pay for marketplace interaction

A

market failure

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11
Q

products provided by government, consumed by public

- funded with taxes

A

public goods

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12
Q

person who benefits but does not pay for public good or service

  • no incentive for business to produce public goods (people would not pay)
  • only way to have public goods is for government to fund with taxes
A

free rider

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13
Q

goods and services needed for society to function

Ex. highways, mass transit, water, sewer, health care, fire department

A

infrastructure

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14
Q

occurs when economic transaction cause externalities

A

market failure

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15
Q

side effect on someone other than producer/buyer

A

externality

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16
Q

people uninvolved in the transaction pay costs

A

negative externality

17
Q

benefits people uninvolved in transaction

A

positive externality

18
Q

consumed by public but no people can be excluded

A

toll goods

19
Q

government payment to help cover cost of government activity

A

subsidy

20
Q

government programs designed to protect people from economic hardship

A

safety net

21
Q

move income from person or group to another

- recipient does not provide product in return

A

transfer payments

22
Q

made by government with tax money

  • most are in an area of social spending
  • usually go to poor, aged, disabled, or people who lose their jobs
A

public transfer payment