Chapter 3 Section 1: Benefits of Free Enterprise

For centuries, people have considered America to be a...

"land of opportunity"

Today how many unincorporated businesses are there in America?

18 million

Out of all the over 18 million unincorporated business in America, how many are minority-owned businesses

3 million

President George W. Bush's administration worked to be...

President George W. Bush's administration worked to be more sensitive to the economic considerations raised by businesses

What is profit motive?

Profit motive is the force that encourages people and organizations to improve their material well-being

Because of all these four economic rights, we have extensive...

competition

A fundamental purpose of the free enterprise system is to...

give consumers the freedom to make their own economic choices

Why has America been such an economic success?

Certainly the open land, natural resources, and uninterrupted flow of immigrants with different backgrounds and experiences all contribute

The Sixteenth Amendment, ratified in 1913, first gave Congress the...

The Sixteenth Amendment, ratified in 1913, first gave Congress the clear right to set taxes based on income

Legal equality maximizes...

a country's use of its human capital

What are the major federal regulatory agencies?

1906 Food and Drug Administration (FDA); 1914 Federal Trade Commission (FTC); 1934 Federal Communications Commission (FCC); 1958 Federal Aviation Administration (FAA); 1964 Equal Employment Opportunity Commission (EEOC); 1970 Environmental Protection Agency (EPA); 1970 Occupational Safety and Health Administration (OSHA); 1972 Consumer Product Safety Commission (CPSC); 1974 Nuclear Regulatory Commission (NRC)

What is an interest group?

A private organization that tries to persuade public officials to act or vote according to group members' interests

Many of these 18 million unincorporated businesses in America were started by...

A single entrepreneur or a small group of friends or family members hoping to earn a living, and perhaps, become successful or even wealthy

Although the government does not get directly involved in running private businesses, it...

Although the government does not get directly involved in running private businesses, it does impose various restrictions

America's free enterprise economy several key characteristics?

America's free enterprise economy several key characteristics include: profit motive, open opportunity, legal equality, private property rights, free contract, voluntary exchange, and competition

Article I Sections 2 and 9 of the Constitution require...

Article I Sections 2 and 9 of the Constitution require that direct taxes be apportioned according to the population so that everyone will pay the same amount

Article I of the Constitution gives...

Article I of the Constitution gives Congress the power to levy taxes

What does Article I, Section 10 of the Constitution mean

Article I, Section 10 of the Constitution means that individuals or businesses cannot use the political process to get excused from their contracts

Article I, Section 10 of the Constitution prohibits...

Article I, Section 10 of the Constitution prohibits the states from passing any "Law impairing the Obligation of Contracts"

Because in many other countries, even in modern times, the king or other ruler has had the power to take people's property for his own use, early American statesmen wanted to protect against this, so they did what?

Because in many other countries, even in modern times, the king or other ruler has had the power to take people's property for his own use, early American statesmen wanted to protect against this, so they included property as a protected right under the Fifth Amendment

For centuries, why have people considered America to be a "land of opportunity"?

Because it's been a place where anyone from any background could achieve success through hard work.

Businesses must follow...

Businesses must follow certain environmental protection rules

But consumers in a free market system will not be able to make informed choices if they cannot..

But consumers in a free market system will not be able to make informed choices if they cannot get basic information about the products they are buying

By the United States having a commitment to legal equality, we allow...

By the United States having a commitment to legal equality, we allow everyone to compete in the economic marketplace

Competition provides consumers with...

Competition provides consumers with the choice of a larger variety of goods, most of which are sold at reasonable prices

Congress can only tax in the ways the...

Congress can only tax in the ways the Constitution allows

A key part of this new government activity in economic matters of public interest was...

Consumer protection

Consumers make their desires known through...

Consumers make their desires known through their economic dealings with producers

Countries that restrict the legal rights of women or minorities lose...

Countries that restrict the legal rights of women or minorities lose the productive potential of a large portion of their society

During the 1960s and 1970s popular demand for government protection of consumers and of the environment resulted in...

During the 1960s and 1970s popular demand for government protection of consumers and of the environment resulted in the creation of new governmental agencies and regulations

What do these people share in common? John D. Rockefeller, founder of Standard Oil of New Jersey, or Andrew Carnegie, who started Carnegie Steel Company, or Bill Gates, the founder of Microsoft

Each of these people started with an idea and through persistence, vision, and effort built that idea into a huge business success.

Educated consumers will make the free market system work more...

Efficiently

Role of 1914 Federal Trade Commission (FTC)?

Enacts and enforces antitrust laws to protect consumers

Role of 1972 Consumer Product Safety Commission (CPSC)?

Enacts policies for reducing risks of harm from consumer products

Role of 1970 Environmental Protection Agency (EPA)?

Enacts policies to protect human health and the natural environment

Role of 1970 Occupational Safety and Health Administration (OSHA)?

Enacts policies to save lives, prevent injuries, and protect the health of workers

Even though such protections are not spelled out in the Constitution, many Americans expect protections from...

Even though such protections are not spelled out in the Constitution, many Americans expect protections from problems that affect us all, such as pollution or unsafe foods

Federal and state agencies regulate...

Federal and state agencies regulate industries whose goods and services affect the well-being of the public

Finally, the Constitution guarantees people and businesses the right...

Finally, the Constitution guarantees people and businesses the right to make binding contracts

Gas stations, for example, must dispose of...

Gas stations, for example, must dispose of used motor oil and ensure that gas tanks cannot leak into surrounding soil

Government regulation, however, can have...

Government regulation, however, can have negative effects on both businesses and consumers

Highly regulated industries, such as the airlines and telephone companies, pointed out that...

Highly regulated industries, such as the airlines and telephone companies, pointed out that government rules and regulations stifled competition, resulting in prices that were arbitrarily high.

This is an example of: You many have seen fuel efficiency labels on new cars, or energy efficiency tags on refrigerators or air conditioners

Important information companies give to consumers about their products, as required by Public Disclosure Laws

In a free enterprise system, business owners and managers make the choices of...

In a free enterprise system, business owners and managers make the choices of which companies will be formed and how they will be run themselves, operating in ways they believe will maximize their profits

In addition, until the mid-1900s, manufacturers of cars, food, medicine, and other products affecting people's health and well-being were...

In addition, until the mid-1900s, manufacturers of cars, food, medicine, and other products affecting people's health and well-being were largely unregulated

When did the federal government and many states become actively involved in economic matters of public interest...

In the 1960s, the fed. gov. and many states became actively involved in economic matters of public interest

In the 1980s and 1990s, public pressure for leaner, less costly government resulted in...

In the 1980s and 1990s, public pressure for leaner, less costly government resulted in budget cuts that curtailed some government regulation of industry

In the strong tradition of open opportunity in the United States economy, we accept that...

In the strong tradition of open opportunity in the United States economy, we accept that different people and different companies will have different economic outcomes, depending on their success in the marketplace

Interest groups have formed around...

Interest groups have formed around many economic issues, such as taxation, aid for farmers, and land use

Labels on consumer packages must include...

Labels on consumer packages must include information about safe operation of equipment or expiration dates for perishables

What are Public Disclosure Laws?

Laws requiring companies to provide full information about their products

Second Definition of Public Disclosure Laws?

Laws that require companies to give consumers important information about their products

What are the four economic rights the United States free enterprise system has?

Legal equality, private property rights, right of free contract, and the right of voluntary exchange

Local Zoning Laws may forbid...

Local Zoning Laws may forbid homeowners from running businesses out of their homes

Since educated consumers make the free market system work more efficiently, one of the government's important roles in the economy is to...

Make sure that producers provide consumers with information

Moreover Article I, Section 10 of the Constitution implies that...

Moreover Article I, Section 10 of the Constitution implies that no legislature can pass a law changing the terms of someone's business agreement

What is open opportunity?

Open opportunity is the concept that everyone can compete in the marketplace

This is an example of: In a free enterprise system, business owners and managers make the choices of which companies will be formed and how they will be run themselves, operating in ways they believe will maximize their profits

Profit Motive

Role of 1964 Equal Employment Opportunity Commission (EEOC)?

Promotes equal job opportunity through enforcement of civil rights laws, education, and other programs

Property is a protected right under the...

Property is a protected right under the Fifth Amendment

Property right is a right just as important as...

Property right is a right just as important as the other individual rights

Consumers use government information to..

Protect themselves from dangerous products and fraudulent claims

Role of 1958 Federal Aviation Administration (FAA)?

Regulates civil aviation, air-traffic and piloting standards, and air commerce

Role of 1934 Federal Communications Commission (FCC)?

Regulates interstate and international communications by radio, television, wire, satellite, and cable

Role of 1906 Food and Drug Administration (FDA)?

Sets and enforces standards for food, drugs, and cosmetic products

Since the Fifth Amendment applies only to actions by the federal government, what was ratified?

Since the Fifth Amendment applies only to actions by the federal government, the Fourteenth Amendment, ratified in 1868, also includes a due process clause extending the same limitation to the state governments

The American economy rests on a...

The American economy rests on a recognition of the importance of the profit motive

But what, has also been a key factor in America being such an economic success?

The American tradition of free enterprise

The Bill of Rights to the United States Constitution guarantees certain...

The Bill of Rights to the United States Constitution guarantees certain individual freedoms, such as freedom of speech and freedom of religion

The Constitution also contains the basic rules for the ways in which the government can...

The Constitution also contains the basic rules for the ways in which the government can tax individuals and businesses

The Constitution also guarantees important rights that allow...

The Constitution also guarantees important rights that allow people to engage in business activities

The Fifth Amendment applies only...

The Fifth Amendment applies only to actions by the federal government

Which amendment, regarding which right, states this? "No person shall be deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation"

The Fifth Amendment states this, which is an amendment in which property was included as a protected right under it

The United States economy also benefits from a strong tradition of...

The United States economy also benefits from a strong tradition of open opportunity

The approach of business owners and managers in a free enterprise system making the choices of which companies will be formed and how they will be run themselves, operating in ways they believe will maximize their profits, forces...

The approach of business owners and managers in a free enterprise system making the choices of which companies will be formed and how they will be run themselves, operating in ways they believe will maximize their profits, forces management to exercise financial discipline because it makes people economically responsible for their own success or failure. It rewards innovation by letting creative companies grow, and it improves productivity by allowing more efficient companies to make more money.

What is legal equality?

The concept of giving everyone the same legal rights

What are private property rights?

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

What is a free contract?

The concept that people may decide what agreements they want to enter into

What is voluntary exchange?

The concept that people may decide what and when they want to buy and sell, rather than forcing them to buy or sell at particular times or at specific prices

What is public interest?

The concerns of the public as a whole

The creation of new governmental agencies and regulations in the 1960s and 1970s led to...

The creation of new governmental agencies and regulations in the 1960s and 1970s led to businesses pointing out that the rules were costly to implement, cutting into profits, slowing growth, and forcing them to charge unnecessarily high prices

The free enterprise system allows people to...

The free enterprise system allows people to make their own decisions about their own property

The most important of these rights is the...

The most important of these rights is the constitutional recognition of property rights

What is competition?

The rivalry among sellers to attract customers while lowering costs

What is free enterprise?

The social and political commitment to giving people the freedom and flexibility to try out their business ideas and compete in the marketplace

These due process clauses included in the Fourteenth Amendment, which, extend the same limitation to the state governments, prevent...

These due process clauses included in the Fourteenth Amendment, which, extend the same limitation to the state governments, prevent the government from taking property away from an individual except when there is a public reason-and even then the government must pay the person the fair value of the property that has been taken. These rights also apply to corporations as well, so businesses get the same protection from government seizure that individuals enjoy

In open opportunity, by accepting that different people and different companies will have different economic outcomes, depending on their success in the marketplace, this allows...

This allows economic mobility up or down: no matter how much money you start with, you can end up wealthier or poorer depending on how well your business performs

To the end of consumer protection the government does what?

To the end of consumer protection the government sets manufacturing standards , requires that drugs be safe and effective, and supervises the sanitary conditions in which foods are produced

Often the information of products required by Public Disclosure Laws will be attached...

To the product when it is offered for sale in stores

Under other economic systems, the government may control...

Under other economic systems, the government may control business activities, deciding what companies will be formed and how they will be run

Using the information about products, consumers can...

Using the information about products, consumers can evaluate some important aspects of the products they are considering buying

We expect the government to...

We expect the government to carry out its constitutional responsibilities to protect property rights, contracts, and other business activities in our free enterprise system

What happens when consumers buy products?

When consumers buy products, they signal to producers what to produce and how much to make

America offers special opportunities that have allowed business people to...

be so successful and have contributed to our overall economic prosperity

Consumers can also make their wishes known by joining an...

interest group

The United States economy and people also have a commitment to...

legal equality

Both individuals and businesses are subject to...

local zoning laws

Another essential component of the American free enterprise system are...

private-property rights

The growth in government oversight of industry also...

raised government spending

In a free market system, consumer buying habits determine...

what goods get produced