EC-907
This economic system is based on traditions passed down through generations and is often called a subsistence system.
What is a Traditional Economy?
In a private enterprise system, these two groups answer the basic economic questions rather than the government.
Who are individuals and businesses?
This is the monetary reward for taking a risk and investing in a business; calculated as Income minus Expenses.
What is Profit?
These are the four main classifications of business risk.
What are Hazard, Operational, Strategic, and Financial?
This type of competition occurs between businesses that offer dissimilar goods or services, such as a movie theater vs. a bowling alley.
What is Indirect Competition?
In this type of command economy, the government owns almost all means of production and does all central planning.
What is Communism?
This characteristic of private enterprise drives businesses to provide better products at lower prices to win customers.
What is Competition?
This is the formula used to calculate Gross Profit.
What is Income from Sales minus Cost of Goods?
This type of risk involves two possibilities: loss or no loss (e.g., a tornado), and is generally insurable.
What is Pure Risk?
These are the four main types of market structures
What are Perfect Competition, Monopolistic Competition, Oligopoly, and Monopoly?
These are the three basic questions every economic system must answer regarding products.
What are "What will be produced?", "How will it be produced?", and "How will it be allocated?"
These are the three specific economic freedoms found in a private enterprise system.
What are the freedom to choose, the freedom to own/sell property, and the freedom to compete?
This is the actual profit a business keeps after subtracting both the cost of goods and all operating expenses.
What is Net Profit?
This specific risk classification deals with daily business activities, human errors, and production problems.
What is Operational Risk?
Competing on the basis of quality, outstanding customer service, or modern facilities rather than price is known as this.
What is Nonprice Competition?
Socialist countries are often called this because they provide free medical care and education paid for by high taxes.
What are Welfare States?
Laws, taxes, and personal choices act as these within a free market system.
What are Limits to Freedom?
hese three external factors can significantly affect a business's profit margin regardless of internal management.
What are the economy, demand, and chance?
This risk classification involves long-term plans, competition, and products becoming obsolete
What is Strategic Risk?
This 1890 Act was the first piece of government legislation created to prevent monopolies and promote fair competition.
What is the Sherman Antitrust Act?
In a market economy, the allocation of resources is primarily controlled by this.
What is the Market (or Supply and Demand)?
These are three major disadvantages of the private enterprise system mentioned in the objectives.
What are unemployment, poverty, and unequal distribution of wealth?
To increase profit, a business must either increase sales or do this.
What is decrease expenses?
These are the four basic ways businesses handle risk.
What are Avoiding, Preventing/Controlling, Transferring, and Retaining?
These are two ways competition benefits society as a whole
What are Creating a higher standard of living and creating prosperity/jobs?