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
