Econ chapter 3

Relates to principles of right and wrong, morality and immorality, good and bad

Ethics

Something that encourages or motivates a person toward an action

Incentive

If a products total cost is greater than total revenue,

Loss

A good of which one person's consumption takes away from another person's consumption

Nonexcludable private good

A beneficial side affect of an action that is felt by others

Positive externality

A computer is an example of what kind of good

Private

The price of a good times the number of units of the goods sold equals

Total revenue

Explain how voluntary exchange can make individuals better off

Voluntary exchange gives individuals the right to make a choice that will make them better off

An agreement between two or more people to do something

contract

What are the five major features of free enterprise

private property, choice, voluntary exchange, competition, and economic incentives

Any good that is owned by the government

public property

an economist would say that profit attracts resources. What does this statement mean? You may want to give an example to illustrate your point

Profit signal that a certain good or service is making money so new companies will try to replicate that. For example, in Silicon Valley there is several successful tech companies. This attracts more resources to the area whether that be more money, more companies or more labor

identify and explain the three ways government may deal with a negative externality

. A school can lead to noble peace prizes, cancer cureers, real estate booms, population growth, diversity...basically anything good that comes from education

One reason a private business firm will not supply a nonexcludable public good is because it cannot collect payment from

Free riders

How is the question "How will goods be produced?" answered in a free enterprise economy?

Goods will be produced by those willing and able to produce them, and they will produce them however the company or business owner chooses to produce them. Some will want quantity over quality some will prefer quality over quantity. Depends on the business owner.

according to supporters of free enterprise, what should government do? why should it do these things?

the gov't should enforce contracts, provide non-excludable public goods, and control externalities. This gives assurances for individuals to do business together, provides goods that a private business cannot profit from and to fix negative side effects