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Where private citizens many of whom are entrepreneurs, own the factors of production



Another term used to describe the American economy

Free enterprise


What is the first characteristic of capitalism?

Economic freedom


Economic freedom allows what?

For people to choose their occupation and their employer, if they want to have their own business or to work for someone else, people can leave jobs and move onto others to offer greater opportunity, businesses are free to hire the best workers, and they have the freedom to produce the goods and services they feel will be the most profitable, businesses make as many or as few goods and services as they want, businesses can sell their goods and services wherever they please, businesses have the right to charge whatever price they feel is profitable, and businesses are free to risk success or failure


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

Voluntary exchange; the second characteristic of capitalism


The privilege that entitles people to own and control their possessions as they wish

Private property rights; third characteristic of capitalism


Private property includes what?

Tangible items such as houses and cars and intangible items such as skills and talents


Those who risk entering business in hopes of earning a profit



The extent to which persons or organizations are better off at the end of the period than they were at the beginning



The driving force encourages people and organizations to improve their material well-being

Profit motive


The struggle among sellers to attract consumers while lowering costs

Competition; the fourth characteristic of capitalism


Why are entrepreneurs one of the most important roles in the economy?

They organize and manage land, capital, and labor in order to seek the reward called profit, they are the ones who start new businesses, the entrepreneur is both the spark plug in the catalyst of the free enterprise economy when an entrepreneur is successful everybody benefits


What is consumer sovereignty?

The role of the consumer as a sovereign, or ruler, of the market


What role does the government play in the economy?

The government is a protector, provider of goods and services, consumer, regulator, and promoter of national goals


How does the government act as a protector?

It's enforces laws such as those against false and misleading advertising, and seafood and drugs, environmental hazards, and unsafe automobiles, it also enforces laws against abuses of individual freedoms


How does the government fit the role of a provider and consumer?

The government provides goods and services for its citizens and the government consumes factors of production just like any other form of business


How does the government play the role of a regulator?

The government is charge with preserving competition in the marketplace, overseas interstate commerce, communications, and even entire industries


How does the government fit the role of promoter of national goals?

The government reflects the will of a majority of its people


People carry on their economic affairs freely, but are subject to some government intervention and regulation

Mixed economy or a modified private enterprise economy