chapter 3 study guide Test Questions

question

what are the basic principles of American Free Enterprise system?
answer

profit motive, open opportunity, legal equality, private property rights, competition
question

how do consumers influence the U.S. economy?
answer

consumer sovereignty
question

What is the government’s role in the American Free Enterprise system?
answer

constitutional responsibilities, agencies regulate industries,and inform consumers
question

Marco
answer

Big
question

Mirco
answer

small
question

why is the free enterprise system subject to business cycles?
answer

become economic decisions about factors such as prices, production, and consumption are made by individuals and firms acting in their own self- interest
question

what three outcomes does the government pursue in promoting economic strength?
answer

high employment, steady growth, stable prices
question

what are three indicators of economic stability?
answer

price levels, health of nations, financial institution and how well they hold up to economic downturn
question

how does the u.s government encourage innovation in the marketplace?
answer

funds research and development at universities, produces own research NASA issues copyrights and parents
question

What is a public good?
answer

A shared good or service for society
question

What must the government determine when deciding to produce a public good?
answer

benefits must outweigh the costs
question

private sector
answer

individual and firm transactions
question

public sector
answer

government transactions
question

what is the free rider problem?
answer

consume what they do not pay for
question

positive externality
answer

benefits people to many people not just those who pay for the goods
question

negative externatity
answer

generate unintended costs
question

what is the government’s role in combating the poverty problem?
answer

providing safety net programs
question

what are the two major concerns critics have about the welfare system?
answer

people become dependent upon welfare, and discourages productivity
question

what are cash transfer
answer

social security, and unemployment
question

in kind benefits?
answer

food stamps, food giveaways, subsidized housing

Get instant access to
all materials

Become a Member