econ chapter 3
Which of the following products have been created by entrepreneurs to help consumers economize on time?
all of the above: computers, microwave ovens, and cell phones
The government produces public goods because
the private market will not produce them.
A circular flow diagram is a visual model of how an economy is organized.
true
Entrepreneurs are individuals who risk their own time and money to develop new products so that they can potentially earn a profit.
true
Ethics include principles of conduct such as right and wrong, morality and immorality, and good and bad.
true
Even people in favor of free enterprise economies may not like everything that people in the system produce, sell, and buy.
true
Households sell resources to businesses in the circular flow, and businesses pay for those resources.
true
In a free enterprise economy, firms like Microsoft decide what goods they will produce for consumers.
true
Legal systems can both help and hinder free enterprise.
true
Total cost is calculated by multiplying the cost of a good by the number of the good that is sold.
true
Government, in deciding how the goods will be produced, directs individuals who own the business firms in a free enterprise system.
false
In a free enterprise economy, purchase of a good occurs whenever a person has the ability to buy.
false
In free enterprise, the right to own private property is absolute in all cases.
false
In the circular flow of economic activity, the decision maker is the government.
false
Profit is the amount of money taken in from the sale of a firm's production.
false
Sellers in free enterprise have no responsibility to provide buyers with accurate information.
false
The free enterprise system makes value judgments regarding which products should be produced.
false
. If a store is very successful, other stores that appeal to the same customers are likely to open because of the signals being sent to firms on the sidelines.
true
A lighthouse or Fourth of July fireworks display at the beach would be considered a nonexcludable public good.
true
Business people in a free enterprise economy will be quite willing to produce and sell excludable public goods
true
Changing one area of economic activity in the circular flow would result in a change in another part of the circular flow.
true
One of the characteristics of an ethical free enterprise system is the reward or punishment that reflects how well producers have responded to the preferences of the buying public.
true
Profit is the amount of money left over after all the costs of production have been paid.
true
Profits and losses determine where resources will be used.
true
Proponents of free enterprise argue that no economic system can be ethical if it limits people's freedom.
true
The main components of the circular flow diagram are households, businesses, and the government.
true
Total cost is the average cost of a good multiplied by the number of units sold.
true
In a free enterprise economy, purchase of a good occurs whenever a person has the willingness to buy.
false
In a free enterprise economy, the government decides what goods will be produced.
false
In the circular flow, the government provides services to the households in return for their tax payments.
false
Loss is like a magnet and profit is like a big wind.
false
Positive externalities occur when one person's actions
beneficially affect another person.
Which document does not specifically contain free enterprise economic principles within it?
Das Kapital
The responsibilities of people in a free enterprise economy include
all of the above: being truthful, obeying the law, and open disclosure.
Which of the following is a private good?
bicycle
Which of the following is a public good?
city hall
According to this textbook, taxation
comes with unintended consequences.
The money that a business pays for the things required for production of its products is called
costs
A loss occurs when all products have not been sold.
false
An entrepreneur is someone who manages a business for the owner.
false
An ethical economic system guarantees success to those who take risks and start their own businesses.
false
An ethical economic system produces the goods and services preferred by the majority of people.
false
Businesses sell resources to households in the circular flow, and in return households pay taxes to the businesses
false
Economists agree that increasing tax rates on people would have no effect on the circular flow.
false
Excludable public goods are those that individuals cannot be physically prohibited from consuming.
false
Households are the only taxpayers shown on the circular flow.
false
When employers compete for workers, it often drives wages down.
false
A person who receives the benefits of a good without paying for it is called a
free rider
Although there are no guarantees a free enterprise system, it offers
freedom
A negative externality
has an adverse effect on a third party.
On the circular flow diagram, tax dollars flow to the government from a. households and businesses.
households and businesses.
On the circular flow diagram, resources flow from
households to businesses
Which of the following is not a result of competition?
lower wages
Economists believe that people respond to
monetary incentives.
Entrepreneurs are motivated by
potential profit.
The controversial Supreme Court case Kelo v. New London was about
private property
National defense is an example of a
public good
Which of the following is not a feature of free enterprise?
public property
In the United States, laws have been developed to
regulate banking
The circular flow diagram shows
relationships in the economy.
What do households sell to businesses?
resources
The circular flow has two loops. What do they represent?
the flow of goods and services and the flow of dollars
Eminent domain refers to
the right of government to take ownership of private land without the consent of the owner by compensating owners for the loss of their land.
The amount of money that a business receives from the sale of its production is called
total revenue.
The desire to earn money is a strong incentive for most people.
true
When total cost is greater than total revenue, a loss occurs.
true
Profits and losses are signals to
Both A and B: firms earning the profits or taking the losses and firms standing on the sidelines
An externality exists when
one person's actions affect another person