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