Chapter 3

The ________ notes that "private property [shall not] be taken for public use, without just compensation."

Bill of Rights

A loss occurs any time total revenue is greater than total cost.

False

A public good is excludable if individuals cannot be excluded from consuming it.

False

An ethical economic system produces the goods and services preferred by a majority of the people.

False

Competition has increased profits for the producers of DVD players, VCRs, and personal computers, while increasing costs to consumers.

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 diagram.

False

Julian Simon was an airline pilot who came up with the system of offering overbooked passengers compensation if they would take a later flight.

False

One of the complaints against King George III of Great Britain was that he advocated free trade.

False

The consequences of taxation can be determined in advance.

False

The government decides what goods will be produced in a free enterprise economy.

False

You can get something for nothing.

False

The economist who created the system of offering overbooked passengers compensation if they would take a later flight was

Julian Simon

Which of the following is not a feature of free enterprise?

Public property

One of the developers of the personal computer and the iPod is _________

Steve Jobs

A circular flow diagram is a visual model of how an economy is organized.

True

A lighthouse or Fourth of July fireworks display at the beach would be considered a nonexcludable public good.

True

A private good is a good in which one person's consumption takes away from another person's consumption.

True

Entrepreneurs are individuals that risk their own time and money to develop new products so that they can potentially earn a profit.

True

Even people in favor of free enterprise economics may not like everything that people in the system produce, sell, and buy.

True

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

Once a nonexcludable public good is produced, no one will pay for it.

True

The responsibilities of people in a free enterprise economy include open disclosure, obeying the law, and being truthful.

True

When total cost is greater than total revenue, a loss occurs.

True

Which of the following is a public good?

a post office

According to this textbook, taxation

comes with unintended consequences

The U.S. Constitution denies states the right to tax each other's goods in order to preserve

competition

___________ benefit(s) when an idea for a new product is developed and offered for sale.

consumer

The money that a business pays for the things required for production of its products is called

costs

An _________ is a person who has a special talent for searching out and taking advantage of new business opportunities.

entrepreneur

Businesses prefer to produce

excludable public goods

A person who receives the benefit of a good without paying for it is called a

free rider

Economists call those who receive the benefits of a good without paying for it ___________

free riders

On the circular flow diagram, resources flow from

households to businesses

National defense is a good example of a public good because

it is difficult to exclude people from receiving the benefits from national defense once it is provided

The amount of money by which total cost exceeds total revenue is called

loss

Which of the following is not a result of competition?

lower wages

Economists believe that people respond to

monetary incentives

The controversial Supreme Court case Kelo vs. New London was about

private property

Economists agree that the role of government is to

produce excludable and nonexcludable public goods

Fewer innovations would be available without the incentive of potential _________

profit

National defense is an example of a

public good

When one person's consumption does not take away from another person's consumption of a good, that good is called a _________

public good

In the United States, laws have been developed to

regulate banking

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

The government produces public goods because

the private market will not produce them

When people exchange goods or services to make themselves better off by gaining what they value more for what they value less, it is called

voluntary exchange