Questions and Answers
What is another name for capitalism?
Three features of a free contract economy are open opportunity, legal equality, and __________.
the right to enter into agreements of one's choice
What is the driving force in a free enterprise system?
Profit motive
Producers, seeking __________, move their resources into the most productive areas.
Signup and view all the answers
The United States has a __________ economy, mixing government involvement with market forces.
Signup and view all the answers
One role for the government is to provide __________, such as national defense.
Signup and view all the answers
Without a strong __________ in place, modern economies cannot function.
Signup and view all the answers
The government addresses problems created by a __________, such as pollution from a factory.
Signup and view all the answers
What type of externality is associated with better health through vaccinations?
Signup and view all the answers
The government also makes direct __________ in the form of social security and unemployment compensation.
Signup and view all the answers
What is open opportunity?
Signup and view all the answers
What does legal equality mean?
Signup and view all the answers
What is free contract?
Signup and view all the answers
What is the difference in open opportunity?
Signup and view all the answers
What is the difference in legal equality?
Signup and view all the answers
What is the difference in free contract?
Signup and view all the answers
What is the role of the profit motive in the American free enterprise system?
Signup and view all the answers
What describes the profit motive?
Signup and view all the answers
How is a free enterprise system linked to economic freedom?
Signup and view all the answers
Give examples of three different economic freedoms in a free enterprise system.
Signup and view all the answers
What force acts as a balance to the profit motive in the American free enterprise system?
Signup and view all the answers
Explain how a free enterprise system works.
Signup and view all the answers
Study Notes
Free Enterprise System
- Known as capitalism, relies on private ownership of productive resources.
Free Contract
- Characterized by open opportunity, legal equality, and the right to personal agreements.
Profit Motive
- Acts as a driving force in a free enterprise system, motivating entrepreneurs to engage in market activities.
Profit
- Producers aim for profit by shifting resources into productive areas, influenced by consumer choices.
Modified Free Enterprise Economy
- A blend of government involvement and market forces, addressing social issues capitalism alone cannot solve.
Public Goods
- Government's role includes providing essential services like national defense.
Infrastructure
- A strong infrastructure is essential for modern economies to operate effectively.
Negative Externality
- Problems like pollution are managed by the government to protect affected communities.
Positive Externality and Subsidy
- Government supports beneficial outcomes, such as public health through subsidies for vaccinations.
Public Transfer Payments
- Direct financial assistance from the government, including social security and unemployment benefits.
Open Opportunity
- Everyone has the ability to participate in the market through free choice.
Legal Equality
- Ensures that every individual has the same economic rights under the law.
Free Contract
- Individuals have the autonomy to enter into legal agreements of their choice.
Economic Freedom in Free Enterprise
- Includes the freedom to buy, sell, and own property of choice, allowing diverse market participation.
Competition
- Balances profit motives by driving down prices, ensuring fair pricing for consumers and profitability for producers.
Functioning of a Free Enterprise System
- Central to a capitalist economy, it thrives on open opportunity, reflecting diverse interests and fostering efficiency and productivity among individuals.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Description
This quiz explores key concepts of the free enterprise system, including capitalism, profit motivation, and the role of government in a modified economy. You'll learn about public goods, externalities, and the importance of infrastructure in supporting economic activities.
