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Chapter 17 The Economic System at Work

market economy
the freedom to buy and sell what we choose when we choose as long as the products are legal
command economy
opposite of a free economy. the government owns almost all of the capital, tools, and production equipment
traditional economy
an economy that is based primarily on customs and traditions. Economic roles are passed down from father to son, and from mother to daughter
free market
an economic system buyers and sellers are free to exchange goods and services as they choose. government regulation is limited
free competition
a system in which business owners compete among themselves for customers
financial gain of selling something for more than it took to make.
put money into
the exclusive right, granted by law, to publish or sell of written, musical, or artistic work
an exclusive right to make and sell an invention for a certain number of years
not having enough resources to produce all of the things we would like to have
law of supply
business will provide more products when they can sell at higher prices and less when they must sell them at lower prices
law of demand
buyers will demand more products when they can buy them at lower prices and will demand less when they have to buy them at higher prices
money invested in buildings, machines, and other forms of property used to produce goods and provide services
an economic system based on private or corporate ownership of capital. It encourages people to work and invest so that they will improve financially in life.
free-enterprise system
the freedom to compete without unreasonable governmental interference.
Corporations that gain complete control of the production of a single good or service.
two or more companies combining to form one company
business organization in which several companies create a board of trustees that ensures the companies no longer compete with one another
economies of scale
as a company produces larger numbers of a particular product, the cost of each of these products goes down, because goods can be produced more efficiently by larger companies
merger of businesses that produce, supply, or sell a number of unrelated goods like hotels, restaurants, car dealerships, etc.
public utilities
companies that provide essential services to the public like electric and gas companies
mixed economy
an economy which has a combination of free and command economies
shares of ownership of a business
corporation profits(money) paid to stockholders
money paid to use land or other property belonging to someone else
sole proprietorship
a business owned by one person or family. Advantages: own boss, keep all profits. Disadvantages: responsible for all debts and decisions
When corporations sell stocks, they are
raising money for their company, selling shares of ownership in their company, and agreeing to share their profits with stockholders
What are economic freedoms that Americans enjoy?
freedom to buy and sell, freedom to compete, freedom to earn a living, and the freedom to own property, freedom to earn a profit
What are some ways the government oversees the economy?
by preventing pollution, protecting workers’ health and safety, and protecting buyers from harmful products. They break up monopolies and create plans to stimulate the economy
What are some duties of a corporation’s board of directors?
represent stockholders in making decisions for the corporation and choosing executives to manage the company
When opening a business, one of the most important decisions to make is what?
The location of the business
common stock
riskier shares of corporate ownership
preferred stock
less risky shares in a company that receive profits first
licensed by state governments and owned by shareholders. Advantages: not responsible for all debts, unlimited life. Disadvantages: costly to organize
nonprofit organizations
charities and cultural programs often are examples
business owned by two or more individuals. Advantages: share in decision making, increased capital. Disadvantages: responsible for all debts, limited life
people who buy shares in a company
the most powerful person in a corporation
Four Factors of Production
1. Natural resources 2. Capital 3. Labor 4 Entrepreneurship (owners of business)
business owner
natural resources
trees, wheat, coal, wind, land, animals
human effort used to produce goods and services (the workers)
how much work a worker does. His/her output
profit motive
desire to make a profit
a certificate stating that the government has borrowed money from you and will pay it back with interest

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