Section 1-4 and Homework

Question 1

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

Answer 1

Profit Motive

Question 2

The concept that everyone can compete in the marketplace

Answer 2

Open Opportunity

Question 3

The concept of giving everyone the same legal rights

Answer 3

Legal Equality

Question 4

The concept that people have the right and privilege to control their possessions as they wish

Answer 4

Private Property Rights

Question 5

The concept that people may decide what and when they want to buy and sell

Answer 5

Voluntary Exchange

Question 6

The rivalry among sellers to attract customers while lowering costs

Answer 6

Competition

Question 7

A private organization that tries to persuade public officials to act or vote according to the group member’s interest

Answer 7

Interest Group

Question 8

Requiring companies to give customers important information about their products

Answer 8

Public Disclosure Laws

Question 9

The concerns of the public as a whole

Answer 9

Public Interest

Question 10

The study of the behavior and decision making of entire economics

Answer 10

Macroeconomics

Question 11

The study of the economic behavior and decision making small units such as small units, such as individuals, families, and businesses

Answer 11

Microeconomics

Question 12

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

Answer 12

Gross Domestic Product (GDP)

Question 13

A period of macroeconomic expansion followed by a period of contraction

Answer 13

Business Cycle

Question 14

A commitment to the value of work and purposeful activity

Answer 14

Work Ethic

Question 15

The process used to produce a good or service

Answer 15

Technology

Question 16

A shared good or service for which it would be impractical to make consumers pay individuality and to include non payers

Answer 16

Public Goods

Question 17

The part of the economy that involves the transactions of the government

Answer 17

Public Sector

Question 18

The part of the economy that involves the transactions of individuals and businesses

Answer 18

Private Sector

Question 19

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

Answer 19

Free Rider

Question 20

A situation in which the market does not distribute resources efficiency

Answer 20

Market Failure

Question 21

An 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

Answer 21

Externality

Question 22

An income level below that which is needed to support families to households

Answer 22

Poverty Threshold

Question 23

Government aid to the poor

Answer 23

Welfare

Question 24

Direct payments of money to eligible poor people

Answer 24

Cash Transfers

Question 25

Goods and services provided for the free or at greatly reduced prices

Answer 25

In-Kind Benefits

Question 26

What constitutional guaranteed underline the American free enterprise system ?

Answer 26

The Bill of Rights to the United States constitution guarantees certain individual freedoms. For example, freedom of speech and freedom of religion which undermine the american free enterprise system

Question 27

Explain at least three benefits of the free enterprise

Answer 27

Profit motive, open opportunity, and economic rights

Question 28

Example of Macroeconomics and microeconomics

Answer 28

Macro-The Great Depression

Micro-the price of milk going up

Question 29

How does gross domestic product provided a means to analyze economic growth ?

Answer 29

Economists can look at GDP’s and predict a business cycle

Question 30

How does welfare attempt to raise poor people’s standard of living ?

Answer 30

It doesn’t attempt to raise. The purpose is to provide individuals that have made mistakes or fallen own bad times through chance, the opportunity to pull themselves from their terrible situation

Question 31

Why does poverty exist in a free market economy ?

Answer 31

People can choose to make their money

Question 32

What is the difference between cash transfers and in-kind benefits ?

Answer 32

A cash transfer consists of the payment of currency of transferal deposit by one unit to another w/o a counter part
In-kind benefit is a benefit other than received by employees as part of their total compensation package

Question 33

How is Social Security an example of income redistribution ?

Answer 33

By taking a small amount of earned income and storing over time

Question 34

What is laissez faire ?

Answer 34

The doctrine that states that government generally should not intervene in the marketplace

Question 35

Why have some nations begun a transition to free enterprise ?

Answer 35

The people want control what goes on in the marketplace instead of government choosing for them

Question 36

Why are nations with centrally planned economies sometimes slow to succeed when they privatize industry ?

Answer 36

They don’t want competition between corporations and companies

Question 37

Compare the U.S. free enterprise system with other economic systems you have read about in this chapter

Answer 37

The U.S. has an economy where the government has limited involvement in the economic system

Question 38

What benefits might citizens of a centrally planned economy derive from a move toward a market-based system ?

Answer 38

Citizens would gain more economic freedom and consumer choices