Economics and Free Enterprise

Because of scarcity, what are the three questions a nation must ask themselves?

Answer explanation

1. What should we produce?

2. How should we produce it?

3. For whom should we produce?

The ________________________ focuses exclusively on goods and services that are directly related to its beliefs, traditions, and needs (Primitive).

The _____________________ is characterized by a centralized power. The government makes most decisions.

The _____________________ relies completely on free markets and does not allow any kind of government involvement (Rare)

The ________________________ is any kind of mixture of a market and a command economic system (most common and successful)

List two (2) examples of a sin tax.

Answer explanation

- Tobacco Products

- Alcohol Products

- Gambling

How are externalities addressed?

Answer explanation

To help reduce the negative effects of certain externalities, such as pollution, alcoholic consuption, and substance consumption, governments can impose a tax on the goods causing the externalities.

List three (3) freedoms the free enterprise system guarantees citizens.

Answer explanation

1. Right to private ownership

2. Freedom of choice

3. Competition among businesses

4. Consumer influence or economic activity

5. Limited government role in economy

List the five (5) processes that the government manages in a mixed economy.

Answer explanation

1. Manages the Economy

2. Provides Public Goods and Services

3. Provides a Legal Framework

4. Promotes Competition

5. Corrects for Externalities

Higher demand causes __________ prices and lower demand causes________ prices.

• higher; lower

• lower; higher

• lower; lower

• higher; higher