Outlining the Chapter

Size: px
Start display at page:

Download "Outlining the Chapter"

Transcription

1 Outlining the Look over the chapter for an overview of the material. Pay attention to the main topics in the book. As you look over each section of the book, fill in the missing words in the outline below. I. Free Enterprise A. Free enterprise and the three economic 1. What goods will be produced?. will goods be produced? 3. will the goods be produced? B. Five features of free enterprise 1.. Choice (or freedom to choose) 3. Voluntary exchange Economic incentives II. III. Free Enterprise: Emphasis on and Loss A. Profits in a free-enterprise economy 1. Profit equals total (price of a good times the units of the good sold) minus total (average cost of a good times the number of units of the good sold.). Profits and losses are signals to other firms to enter or exit the industry. 3. Resources flow profit; resources flow from losses. B. Profit is never guaranteed in a free-enterprise system The Ethics of the Free-Enterprise System A. Ethics and free enterprise 1. Supporters of free enterprise say that an ethical economic system should have these characteristics: a. Allow individuals to their own occupations or professions. b. Produce goods and services preferred by both the majority and the. Study Guide 16 NTC/Contemporary Publishing Group, Inc.

2 c. (or ) producers according to how well (or poorly) they respond to the preferences of the buying public. d. Allow people to work where they want to work, to start their own businesses if they want, to acquire property, to buy, sell the goods they want to buy and sell, and even the freedom to fail. B. Economic, the Constitution, the Bill of Rights, and the Declaration of Independence 1. The Constitution, the Bill of Rights, and the Declaration of Independence contain evidence about private property, choice, competition, and freedom. C. Economic rights and responsibilities in a free-enterprise economy 1. The right to voluntary exchange comes with the responsibility to give the other person accurate about what is being exchanged.. The right to private property comes with the responsibility of using one s property only for purposes. 3. People have a responsibility to compete in a truthful, legitimate manner. IV. Entrepreneurs A. It is not easy to be an entrepreneur. 1. An entrepreneur searches out and takes advantage of new business opportunities, develops new products, or develops new ways of doing things.. An entrepreneur takes to develop new products or new ways of doing things, and the public benefits from this risk taking. 3. An entrepreneur has an ethical responsibility to people. B. Entrepreneurs, profit, and risk 1. Entrepreneurs risk their own time and money to try to develop new products and to innovate, so they can earn.. Many entrepreneurs risk their time and and end up with nothing. V. The Role of Government in a Free-Enterprise Economy A. Government can be an of contracts. B. Government can be a provider of non-excludable goods. 1. A public good is a good that, once produced and provided, benefits more than one person. More importantly, it is a good whose benefits cannot be to anyone.. are persons who receive the benefits of a good without paying for it. Study Guide 17 NTC/Contemporary Publishing Group, Inc.

3 3. In free enterprise, private firms will not be willing to produce public goods. VI. The Circular Flow of Economic Activity A. The circular flow of economic activity shows the relationships between (a) businesses and households, (b) government and households, (c) government and business, (d) households and foreign economies, and (e) foreigners and the U.S. economy 1. The U.S. economy is composed of businesses, government, and households.. sell resources to businesses, and businesses pay for these resources. 3. sell goods and services to households, and households pay for these goods and services. 4. Households pay taxes to government, and government provides goods and services to households. 5. Businesses pay taxes to government, and government provides goods and services to businesses. Study Guide 18 NTC/Contemporary Publishing Group, Inc.

4 Building Vocabulary Match the term below with the phrase that best describes it by placing the correct letter in the space. A. average cost B. circular flow of economic activity C. contract D. entrepreneur E. ethics F. free rider G. household H. incentive I. loss J. private good K. private property L. public good M. public property N. profit O. total cost P. total revenue 1. The price of a good times the number of units sold (of the good). Something that motivates a person to do something 3. Principles of right and wrong, morality and immorality, good and bad 4. Any good that the government owns 5. Someone who has a special talent for searching out and taking advantage of new business opportunities, and developing new products and new ways of doing things 6. When a firm s total revenues exceed its total cost 7. When two or more people agree to something 8. Once produced and provided, the benefits of this good cannot be denied to anyone 9. A good or product whose benefits can be denied to people 10. A business firm receives this when its total revenues are less than its total costs Study Guide 19 NTC/Contemporary Publishing Group, Inc.

5 AS YOU STUDY Illustrating Economic Skills Below are prices, the amount sold, average cost, total cost and profits for a small business that makes snowboards. Use the given information to complete the table. Price Amount Sold Average Cost Total Cost Profit $30 0 $5 $ $100 $0 5 $ $500 $0 $15 35 $10 $350 $175 $1 40 $ $440 $ $10 $9 $540 $60 Study Guide 0 NTC/Contemporary Publishing Group, Inc.

6 Using Economic Concepts The five major features of free enterprise are private property, freedom of choice, voluntary exchange, competition, and economic incentives. Each of the following statements refers to one of these five features. On the blank line write the feature that best describes the statement. One of the features will be used more than once. 1. You now work for XYZ computer software company, and another company makes you a job offer.. Your friend offers you $5 for a CD that you do not listen to anymore. You decide to make the trade with her. 3. The car that you own. 4. Higher earnings in the law profession attract more people to become lawyers. 5. You and a friend discuss whether to eat lunch at a fast food burger restaurant or a sandwich shop. 6. Sellers try to attract more customers by offering lower prices. Study Guide 1 NTC/Contemporary Publishing Group, Inc.

7 Using Economic Concepts The Circular Flow of Economic Activity shows the economic relationships that exist between different economic groups in the economy. The economic groups are businesses, households, and government. In the diagram below, fill in the blanks to complete the model. sell goods and services to households Households pay for goods and services they buy from Businesses pay Households pay Government Government provides provides BUSINESSES certain GOVERNMENT certain HOUSEHOLDS benefits to benefits to businesses Businesses pay for resources they buy from Households sell to businesses Study Guide NTC/Contemporary Publishing Group, Inc.

8 AS YOU REVIEW Practicing for the Test Multiple Choice: Choose the best answer for each of the following ten questions and write the corresponding letter in the blank. 1. Which of the following is NOT a main feature of a free-enterprise economy? a. competition b. voluntary exchange c. public property d. economic incentives.. According to the supporters of free enterprise, the government should a. enforce contracts. b. provide private goods. c. plan economic activity. d. own all of society s resources. 3. A good is a good in which one person s consumption does not take away from another s consumption. a. private b. excludable c. public d. resource 4. Which of the following is NOT one of the three key economic questions? a. How will goods be produced? b. For whom will goods be produced? c. What goods will be produced? d. How many firms will make a profit? 5. Any good that is owned by an individual or a business is referred to as a. private property. b. public property. c. entrepreneur property. d. free-rider property. 6. Pat s firm made $100,000 in total revenues last year, and its total costs were $50,000. How much profit did Pat s firm make? a. $0,000 b. $50,000 c. $100,000 d. $150,000 Study Guide 3 NTC/Contemporary Publishing Group, Inc.

9 7. is total cost divided by quantity. a. Average cost b. A loss c. Total revenue d. Total cost 8. A free rider is someone who a. rides in a friend s care without paying for gas. b. does not charge a price for selling a product. c. works for free. d. receives the benefits of a good without paying for it. 9. Price times the number of units of a good sold is equal to. a. total cost b. average revenue c. total revenue d. total profit 10. A firm s total profit is equal to. a. average cost minus total revenue b. price minus total costs c. total revenue minus total cost d. total cost minus average cost Short Answer: 1. Do you think you would work harder on homework assignments if they were not graded? Explain why or why not using the economic concepts from this chapter. Study Guide 4 NTC/Contemporary Publishing Group, Inc.