Free Market

The USA has a ______market, meaning we have the right to choose what and what not to buy.

• free
• rich
• low
• high

incentive  is ______

• something that leads a person to make a certain choice.
• the amount of a good or service that customers will buy at all prices. 
• The amount of money earned by a buisness after cost are removed.
• The total amount of a good or service that is available to buy.

In a market economy, who decides on the prices of goods and services?

• government
• buyers and sellers
• firms
• local leaders

Which of the following describes the benefits of specialization in a free market?

• Specialization leads to higher prices.
• Specialization leads to decreased competition among producers.
• Specialization leads to lower overall output.
• Specialization leads to efficient use of capital, land, and labor.

Which of the following is not one of the three basic questions that all economies must answer? 

• What goods and services will be produced? 
• How will the goods and services be produced? 
• When will the goods and services be produced? 
• For whom will the goods and services be produced? 

Section of the economy made up of individuals or families

• Firms

• Households

• Businesses

• Factor

The act of buyers and sellers freely & willingly engaging in market transactions

• Opportunity Cost

• Scarcity

• Specialization

• Voluntary Exchange

How do self-interest and competition affect free markets?

• They work together to keep prices high.

• They work together to regulate supply, demand, and prices.

• They represent the opposing interests of consumers and producers.

• They help level the playing field between efficient and inefficient producers.

Which of the following is an explanation of what Adam Smith called the "invisible hand" of the marketplace?

• Advertising causes consumers to desire products that they otherwise would not want.

• Government regulations influence the decisions of consumers and producers in the market.

• Self-interest, competition, and incentives promote smoothly running markets.

• Unforeseen events disturb supplies of goods and services and affect prices in the marketplace.

In a free market system, the concept of consumer sovereignty means that

• consumers have the power to decide through their actions what goods and services get produced.

• producers are in an ongoing struggle with consumers over control of the marketplace.

• government must intervene to ensure fair competition between consumers and producers.

• consumers are not bound to accept the positive incentives offered by producers.