Chapter.1

Question 1

What’s the goal of a business? How is it done?

Answer 1

To make profit.
Revenue-Expenses=Profit

Question 2

What is a non-profit organization?

Answer 2

Provide goods and services but do not seek profit ex: schools, hospitals

Question 3

List the factors of production.

Answer 3

• Natural resources
• Capital
• H.R (labour)
• Entrepreneurs
• Information resources

Question 4

List 2 command economies.

Answer 4

Socialism, communism

Question 5

List 2 market economies.

Answer 5

Capitalism, mixed economy

Question 6

List 4 examples of command economies.

Answer 6

-No private property
-No private profit
-No private capital
-Career determined by state

Question 7

What is communism?

Answer 7

Government owns and operates all industries it makes resource distribution decisions.

Question 8

What is socialism?

Answer 8

Government owns + operates critical industries (utilities + major industries)
Individuals own non-critical businesses

Question 9

What is mixed economy?

Answer 9

-Economic basis is a supply + demand
-Political basis is capitalism
-Ownership of the factors of production is open
-Buyers and sellers have freedom of choice
-The market is the mechanism for the exchange of services

Question 10

What is input market?

Answer 10

Firms buy resources from households

Question 11

What is output market?

Answer 11

Households buy goods and services from firms

Question 12

What is capitalism?

Answer 12

-Encourages entrepreneurship + private ownership of the factors of production
-Encourages profit making as an incentive
-Operates under the concept of supply and demand

Question 13

What is privatization?

Answer 13

Converting government firms into privately owned companies

Question 14

What is nationalization?

Answer 14

The conversion of private firms into government - owned firms

Question 15

What is deregulation?

Answer 15

Reducing laws and government intervention

Question 16

Describe Government as regulator.

Answer 16

-Regulates through administrative boards, tribunals, commissions
-Promotes healthy competition between businesses
-Protects consumers
-Achieves social goals
-Protects the environment

Question 17

Describe Government as Taxation Agent.

Answer 17

Revenue tax, progressive revenue tax, progressive revenue tax, regressive revenue tax

Question 18

Describe Government as Provider of Incentives.

Answer 18

-Provides aid and financial assistance
-Provides incentives to stimulate growth (revenues + employment)

Question 19

Name 8 Government services

Answer 19

Highways, postal service, money, military, education, health services, sewer and sanitation, emergency services

Question 20

Explain supply and demand

Answer 20

Low supply -> prices up
High supply -> prices down

Question 21

When does private enterprise occur?

Answer 21

Private enterprises occur in a market economy with little government restriction

Question 22

Under this system individuals can…

Answer 22

-Own private property
-Have freedom of choice
-Have freedom to earn profits
-Have freedom to compete

Question 23

Describe the competition.

Answer 23

-Competition occurs when businesses vie for the same resources or customers in a particular market or industry
-Motivates business to operate efficiently
-Forces business to make products better or cheap

Question 24

What are the degrees of competition?

Answer 24

Perfect competition, monopolistic competition, oligopoly, monopoly

Question 25

Monopolistic?

Answer 25

-Few to many sellers
-Product is seen as unique by some buyers (not all)
-Differentiated brands have some (minor) control over pricing

Question 26

Oligopoly?

Answer 26

-A few large suppliers dominate
-High barriers to entry
-Products are seen as similar
-Prices gravitate toward a common “market price”

Question 27

Monopoly?

Answer 27

-One producer and source of supply
-Unique product
-Complete control over price
-No competitors