Economics Chapter 3 Section 1 Review (this is NOT an assignment)
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1 Name: Class: Date: ID: A Economics Chapter 3 Section 1 Review (this is NOT an assignment) Completion Complete each statement. 1. The right of allows people to buy or sell what they choose. 2. A woman has the right of, so she can sign an agreement with her employer to work for one year. 3. People who want to exert influence on policymakers may form an. 4. The government may take private property by, but it must compensate owners. 5. Americans expect their government to set econonomic policy that promotes the. 6. Congress passed that require companies to inform consumers about the products they sell. Multiple Choice Identify the choice that best completes the statement or answers the question. Directions: Write the letter of the correct answer. 7. Why has America been referred to as the land of opportunity? a. It provides anyone the possibility of success through hard work. b. It provides jobs for all citizens. c. It provides farmers farmland without levying taxes on the land. d. It provides money for all citizens. 8. What basic principles are fundamental to American free enterprise? a. state-owned property, contracts, voluntary exchange, self-interest b. economic freedom, private property, protection from competition c. open opportunity, private property, contracts, voluntary exchange d. economic freedom, private property, mandatory exchange Main Ideas Directions: Write the letter of the correct answer in the blank provided. 9. In a free enterprise system, what is the most common way that consumers make their desires known to businesses? a. ing or texting the companies b. protesting and boycotting products c. buying or not buying products d. hiring lobbyists to speak for them 1
2 Name: ID: A 10. Which statement best describes the role of government in a free enterprise system? a. It controls all decisions about business activities, including profit levels. b. It forms companies and then allows individual managers to run them. c. It regulates businesses when the public interest is involved. d. It follows a strict policy of laissez-faire. 11. Why is legal equality important to the free enterprise system? a. Ensuring that all businesses have the same legal rights will create competition in the marketplace. b. Making all lawyers obtain the same education will ensure competent legal representation for businesses. c. Protecting legal equality makes sure that all people may decide what legal agreements they want to enter into. d. Guaranteeing all people the same legal rights will maximize human capital on the free market. 12. In what way does the Bill of Rights protect individuals freedom to engage in business activities? a. It recognizes property rights. b. It denies the government the ability to regulate commerce. c. It provides free contracts. d. It provides each industry with a competitive edge. 13. Under a system of voluntary exchange, final decisions are made by a. producers. b. consumers. c. the government. d. free riders. 14. Why has the federal government passed laws requiring businesses to disclose product information to the public? a. to make buyers more knowledgeable and safer b. to make it hard for businesses to make an excess profit c. to make it easier for consumers to own property d. to make it easy for businesses to have good information 15. What is considered a negative effect of government regulations? a. They cut into company profits. b. They stifle competition. c. They cause higher prices for consumers. d. All of the above. 2
3 Name: ID: A Matching Key Terms and Concepts Directions: Match the terms with the descriptions. Write the letter of the correct answer in the blank provided. Not all of the choices will be used. a. profit motive j. patent b. open opportunity k. work ethic c. legal equality l. public good d. private property rights m. market failure e. free contract n. externality f. voluntary exchange o. welfare g. eminent domain p. cash transfers h. gross domestic product q. in-kind benefits i. referendum r. grant 16. principle that people may decide what agreements they want to enter into 17. principle that anyone can compete in the marketplace 18. principle that people may decide what, when, and how they want to buy and sell 19. incentive that drives businesses to make decisions that improve their material well-being 20. principle that people have the right to control their possessions and use them as they wish 21. the principle that everyone has the same legal rights 22. right of a government to take private property for public use Short Answer: You MUST answer TWO QUESTIONS for FIVE POINTS EACH. Additional correct answers earn one point of extra credit. Critical Thinking and Writing Directions: Use complete sentences to answer the questions below. 23. What are five basic principles of the U.S. free enterprise system? 24. How do consumers influence the U.S. economy? 3
4 Economics Chapter 3 Section 1 Review (this is NOT an assignment) Answer Section COMPLETION 1. ANS: voluntary exchange PTS: 2 DIF: L3 REF: A.51 NAT: 4.1 TOP: Free Enterprise Voluntary Exchange 2. ANS: free contract PTS: 2 DIF: L3 REF: A.51 NAT: 4.1 TOP: Free Enterprise Free Contract 3. ANS: interest group PTS: 2 DIF: L3 REF: A.52 NAT: 4.1 TOP: Free Enterprise Interest Group 4. ANS: eminent domain PTS: 2 DIF: L3 REF: A.52 STA: B.1 B.2 TOP: Free Enterprise Eminent Domain 5. ANS: public interest PTS: 2 DIF: L3 REF: A.53 NAT: STA: F.1 TOP: Free Enterprise Public Interest 6. ANS: public disclosure laws PTS: 2 DIF: L3 REF: A.54 NAT: STA: F.1 TOP: Free Enterprise Public Disclosure MULTIPLE CHOICE 7. ANS: A The American tradition of free enterprise allows people to try out their business ideas. PTS: 3 DIF: L3 REF: A.49 NAT: STA: B.2 TOP: Free Enterprise Opportunity 1
5 8. ANS: C The fundamental priciples of the American free enterprise system are the open opportunity, private property rights, voluntary exchange, the profit motive, legal equality, the right of free contract, and competition. NAT: STA: B.2 TOP: Free Enterprise Principles 9. ANS: C Almost everyone in the free enterprise system is a consumer. Every time consumers choose to buy or not buy products, they send signals to businesses that will adjust their production levels in order to maximize profits. NAT: 4.1 TOP: Free Enterprise Consumers 10. ANS: C The Free Enterprise system is based on the belief that desire for profits will motivate individual choices that help the economy overall. The system works best with little interference from government; however, the government may intervene in the public interest. NAT: STA: B.2 TOP: Free Enterprise Free Enterprise 11. ANS: D By making sure everyone has the same legal rights, governments allow everyone to participate fully in the free enterprise system. Otherwise, the economy would lose the productivity potential of the group whose rights are limited. STA: B.1 B.2 TOP: Free Enterprise Legal Equality 12. ANS: A The Fifth Amendment protects private property rights. PTS: 3 DIF: L3 REF: A.52 STA: B.1 B.2 TOP: Free Enterprise Bill of Rights 13. ANS: B Consumers make decisions in the system of voluntary exchange. PTS: 3 DIF: L3 REF: A.52 NAT: 4.1 TOP: Free Enterprise Voluntary Exchange 2
6 14. ANS: A Public disclosure laws are designed to make sure that businesses reveal enough information about their products to enable consumers to make better choices. PTS: 3 DIF: L3 REF: A.54 NAT: STA: F.1 TOP: Free Enterprise Public Disclosure Laws 15. ANS: D Government regulations can increase costs, stifle competition, and lead to higher prices. PTS: 3 DIF: L3 REF: A.55 STA: B.1 B.2 TOP: Free Enterprise Government Regulation MATCHING 16. ANS: E PTS: 2 DIF: L3 REF: A.51 NAT: STA: B.2 TOP: Free Enterprise Free Contract 17. ANS: B PTS: 2 DIF: L3 REF: A.51 STA: B.1 B.2 TOP: Free Enterprise Open Opportunity 18. ANS: F PTS: 2 DIF: L3 REF: A.51 NAT: STA: B.2 TOP: Free Enterprise Voluntary Exchange 19. ANS: A PTS: 2 DIF: L3 REF: A.51 NAT: STA: B.2 TOP: Free Enterprise Profit Motive 20. ANS: D PTS: 2 DIF: L3 REF: A.51 STA: B.1 B.2 TOP: Free Enterprise Private Property 21. ANS: C PTS: 2 DIF: L3 REF: A.51 STA: B.1 B.2 TOP: Free Enterprise Legal Equality 22. ANS: G PTS: 2 DIF: L3 REF: A.52 NAT: STA: F.1 TOP: Free Enterprise Eminent Domain SHORT ANSWER 23. ANS: The most basic principles include profit motive, open opportunity, legal equality, private property, competition, and voluntary exchange. PTS: 5 DIF: L3 REF: A.51 NAT: STA: B.2 TOP: Free Enterprise Free Market 3
7 24. ANS: The most basic principle of our free enterprise system is that consumers have the freedom to make their own economic choices. When they make such choices, they send signals to producers that tell them what products to make and in what quantities. PTS: 5 DIF: L3 REF: A.51 NAT: 4.1 TOP: Free Enterprise Consumers 4
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