Chapter 11 - The Role of Government in Our Economy

Problems of Monopolies

* do not compete with other firms (enables them to charge any price they want for products or services). * quality may not be their biggest concern. * limit choice, however oligopolies do this as well.

What industries have been given subsidies?

Agriculture and Steel

What governs the workings of the economy?

LAWS (regulate the production process and protect competition, business agreements, and creative properties.)

True or False; government is the largest provider of services in the country, as well as the largest employer in the United States, and even the biggest consumer of goods and services.

TRUE

transfer payment

a government expense that is provided to help people; ensure that people have money when they need it.

trust

a group of companies that band together to form a monopoly and cut out competition.

patent

a legal grant for the sole right to own an invention, granted by the federal government. No one can copy one without permission for 20 years after the inventor fi led his or her application with the U.S. Patent and Trademark Office.

contract

a legally enforceable agreement between two or more parties. (can be written, verbal, or even formed over a handshake.)

trademark

a name, a symbol, or a characteristic that identifies a product. It is also registered with the government. Only the owner can legally use it. Well-known trademarks include Frito-Lay's Doritos®, Kellogg's Rice Krispies Treats®, and Visa®. Protected from being copied if they are registered appropriately

tax break

a special tax benefit given to promote specific economic or social objectives.

tax incentive

a temporary reduction or elimination of a tax that is meant to encourage or discourage an activity.

How many people work for the federal government?

about 3 million

antitrust laws

allow the federal government to break up monopolies, regulate them, or take control of them.

tax

an amount of money people and businesses pay governments to help run the nation, state, county, city, or town; pay for public goods and services by spreading the cost among many people.

interstate commerce

business that takes place between states.

intrastate commerce

business that takes place within states.

In a market economy, a country's economic health depends on _______________________________________.

businesses doing well.

How does the government allocate resources?

by deciding the best ways to spend tax revenues and determining which projects are priorities for funding (the government may decide to pay more for projects in rural areas than projects in urban ones; such a decision can help the economies in rural areas.)

How is the ownership of creative properties protected?

by laws, with either a copyright, patent or trademark.

Federal Trade Commission (FTC)

enforce antitrust laws, also interstate trade, keeps competition between U.S. businesses free and fair (includes setting standards for honest advertising.)

What are the three levels of government?

federal, state and local

copyright

gives artists the legal right to own their creations (photographs, music, paintings, books, plays, etc.) Lasts about 70 years after the owner's death.

public goods and services

items provided by government and paid for using tax money (ex. highways, bridges, water treatment plants, and national defense)

private goods and services

items that consumers purchase directly from businesses. (ex. CDs, clothing, food, and housekeeping services.)

examples of public workers

mayor, president of the US, firefighters.

subsidies

monetary grants given to producers or consumers to encourage certain behaviors (helps businesses that benefit the public compete internationally)

Federal income tax pays for ___________________________________.

national highways and defense.

privitization

occurs when a business offers a public good or service; the government body that pays for it oversees the business.

breach of contact

occurs when one party fails to live up to the terms of a contract (easier to prove if there's a written contract.)

All three levels of government pay for _____________________________.

public education.

Local Government

run counties, townships, cities and towns.

State Government

run their specific state and oversees intrastate commerce.

Federal Government

runs the country and oversees interstate commerce.

State taxes pay for ____________________________________.

state police and motor vehicle departments.

Local taxes pay for _____________________________.

streets and parks.

revenue

the income that governments get from all sources; includes taxes and fees that consumers sometimes must pay to use certain public goods and services. Also money that comes into a business from the sale of goods and services.

monopoly

when a company controls an industry or is the only one to offer a product or service.

oligopoly

when a small number of companies control an industry. (Verizon, AT&T, Sprint, T-Mobile)