Econ chapter 3

How does the constitution regulate free enterprise

1. eminent domain and property rights 2. article 1, section9- taxation 3. article 1 section 10- contracts

What are the benefits of a free enterprise system?

1. encourages innovation 2. economic mobility 3. improves productivity 4. makes decisions of private property

What advantages does the US have the encourage a free market?

1. lots of land 2. large reserves of natural resources 3. will do anything to make money, labor fueled by immigrants 4. free enterprises

What are the characteristics of a public good?

1. making each customer pay individually 2. exclude those who do not pay 3. any number of consumers can use them without reducing the benefits to any single consumer

What are the characteristics of a free enterprise system?

1. profit motive- profit drives competition, decides their success 2. open oppurtunity- anyone can compete 3. legal equality- everyone has same legal rights 4. private property- control own property 5. free contract- decide own agreements 6. voluntary exchange- what, when and how they exchange stuff

What are the roles of the Government in a free market economy?

1. regulating business: public disclosure, environmental rules, consumer safety 2. promoting growth: price stability, regulation of banks, patents and copyrights 3. providing public goods: roads and bridges, defense 4. providing a safety net: social security, unemployment insurance, medicare

What are the cost-benefit analysis questions asked in order to determine if a product will become a public good?

1. the benefit to each individual is less than the cost that each would have to pay if it were provided privately 2. the total benefits to society are greater than the total cost

What is the difference between a patent and a copyright?

a patent is a license issued by the government to the inventor of a new product the exclusive right to produce and sell it a copyright is a government license that grants an author exclusive rights to publish and sell creative works

What is the difference between public good and PUBLIC GOOD?

a public good is something that everyone gets, such as roads and bridges, PUBLIC GOODS is something that is good for the entire public not just for one group

Why is the government decision to inverses or decrease spending a matter of macroeconomic policy?

because macroeconomics deals with the economic behavior of the entire country

How do consumers express their wishes?

by buying or not buying certain products

CHIP

children's health insurance

Why are economic predictions important? give an example

economic predictions are important in order to prevent an entire collapse of the economy. for example, if the stock market were to tank tomorrow but no was was predicting anything then our entire economy would plummet

How can technological innovation lead to obsolescence?

if a new invention comes along that is much better than what is on the market then it can cause the older product to become "out of date" or an obsolescence

why are public goods examples of market failures?

it is a market failure because resources are not distributed equally; since there is no competition they charge whatever they want for tolls and they wouldn't build a bridge in a low populated area

food stamps

money for food

Medicare

money for old people and disabled

How is the principle of open opportunity different from guaranteeing success to everyone in the marketplace?

open opportunity allows everyone to compete in the market place but does not guarantee that everyone will succeed. it is up to to the person to determine if they fail or succeed. open opportunity is a chance but you decided what to do with it

workers' compensation

provides insurance for workers that are injured or disabled

What is a free rider?

someone who would not be willing to pay for a certain good or service but would get the benefit anyway if it were provided as a public good

TANF

temporary assistance for needy families

How do the decisions you make as a consumer affect the economy?

they affect the economy because we buy what we want so if we don't want something then we won't buy it

How are unemployment insurance and workers' compensation alike?

they both have to do with insurance, in both instances one does not have to work, the government funds both, mandated by state law

How are incentives from chapter 2 like externalities in chapter 3?

they're both results or effects of an action, both can be positive or negative