ANSWER KEY
Chapter 1
Chapter 1–1

II.D.

the accumulation of those economic products that are tangible, scarce, useful, and transferable

1. scarcity of resources, which results from society not

III.A.

the market

having enough resources to produce all of the things people would like to have

III.B.

the markets in which productive resources are bought and sold

2. A need is a basic requirement for survival and

III.C.

in product markets

IV.A.

the amount of output produced by a given amount of inputs in a specific period of time

IV.B.

They increase productivity.

IV.C.

Government can help provide education and health care; businesses can provide training; individuals can further their own
capitalism
9. competition
10. free enterprise
11. consumer sovereignty
12. mixed economy

seven

I.B.1.

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I.A.1.

goods and services

I.G.1.

a rise in the general level of prices

I.G.2.

They find it harder to meet their bills and plan for the future.

I.H.

13. modified private enterprise economy

Chapter 3
Chapter 3–1
1. Advantages: It is easy to start up; there is a relative ease of management; the owner does not have to share profits; the business is exempt from taxes on income; owners have a sense of personal satisfaction; the business can be closed down easily.
Disadvantages: The owner has unlimited liability; financial capital may be difficult to raise; sole proprietors often have limited capital and limited inventory; the owner may not have good managerial experience; it may be difficult to attract qualified employees; the business ceases to exist when the owner dies, quits, or sells the business.

2. In a general partnership, all partners are responsible for the management and financial obligations of the business. In a limited partnership, at least one partner is not active in the daily affairs of the business. 3. a court-granted permission to an individual or business to cease or delay debt payments

4. Advantages: Capital is easy to raise by selling stock;

so that people can continue to have adequate

Guided Reading Activities

owners can hire