Lesson 26 pg. 78 - 81

Question 1

Define and describe the profit motive

Answer 1

profit motive - the desire to work to improve one’s economic situation
>is reason that person is willing to trade certain goods, whether they are tangible items or labor and entrepreneurship, for other goods that have greater personal value to him
>keeps free market operating and persuades hard-working men and women to save and invest, plant and reap.

Question 2

What is one of the major differences between a market economy and a command economy?

Answer 2

The amount of freedom that individuals have to base their actions in accordance with the profit motive is one the major differences between a market economy and a command economy.

Question 3

What does the word “profit” mean in the popular sense?

Answer 3

In the popular sense, the word “profit” means any sort of gain–anything one receives in return for his labor or cleverness.

Question 4

Define depreciation

Answer 4

depreciation - the diminishing of the value of goods that is caused by wear and time

Question 5

Define profit

Answer 5

profit - excess of total revenue paid by buyers for goods over the seller’s total expense of producing those goods

Question 6

Define opportunity cost

Answer 6

opportunity cost - value of the best alternative that is foregone when a different alternative is taken
>also defined as “the cost of giving up one opportunity in order to pursue another”

Question 7

Define equity

Answer 7

equity - total value of a business minus any liabilities