Chapter 3-The American Free Enterprise System

Free contract means that people can chose

• for themselves what legal agreements to enter into

• for themselves what positive externalities to support

• to enter and compete in the marketplace

• to enter into open opportunities

The incentive to improve material well-being by seeking to gain from economic activities is called

• legal equality

• marginal benefit

• open opportunity

• profit motive

Individual booksellers that have competed well against chain booksellers have often

• expanded into chains themselves

• focused on local needs

• ignored customer service

• undercut the prices of the chains

In the marketplace, producers are looking to

• buy goods for personal use

• earn a profit

• find incentives

• find the latest fad

Producers determine the allocation of scarce resources by seeking

• incentives and responding to consumer votes on a product

• incentives and responding to all open opportunities

• profits and responding to consumer votes on a product

• profits and responding to all open opportunities

Typically, when households are shown on the on the right side of a circular flow model of a modified free enterprise, businesses are located

• on the left

• in the center

• at the top

• at the bottom

The center of a typical circular flow model showing a modified free enterprise is occupied by

• businesses

• products

• government

• resources

In the resource market of modified free enterprise, the government buys

• productive resources

• military equipment

• products

• services

The money left after production costs are subtracted from revenue is called

• free rider

• profit

• subsidy

• scarcity

A market failure occurs when people who are not part of a marketplace interaction

• are not affected by it

• make no profit from it

• benefit from it

• pay none of the costs of it