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. e-mailing or texting the companies
b. protesting and boycotting products
c. buying or not buying products
d. hiring lobbyists to speak for them
1
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
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
ID: A
Economics Chapter 3 Section 1 Review (this is NOT an assignment)
Answer Section
COMPLETION
1. ANS: voluntary exchange
PTS:
OBJ:
NAT:
2. ANS:
2
DIF: L3
REF: A.51
3.1.2 Describe the role of the consumer in the American economy.
4.1
TOP: Free Enterprise | Voluntary Exchange
free contract
PTS:
OBJ:
NAT:
3. ANS:
2
DIF: L3
REF: A.51
3.1.2 Describe the role of the consumer in the American economy.
4.1
TOP: Free Enterprise | Free Contract
interest group
PTS:
OBJ:
NAT:
4. ANS:
2
DIF: L3
REF: A.52
3.1.2 Describe the role of the consumer in the American economy.
4.1
TOP: Free Enterprise | Interest Group
eminent domain
PTS:
OBJ:
STA:
5. ANS:
2
DIF: L3
REF: A.52
3.1.3 Identify the constitutional protections that underlie free enterprise.
B.1| B.2
TOP: Free Enterprise | Eminent Domain
public interest
PTS:
OBJ:
NAT:
6. ANS:
2
DIF: L3
REF: A.53
3.1.4 Explain why the government may intervene in the marketplace.
16.5| 16.7
STA: F.1
TOP: Free Enterprise | Public Interest
public disclosure laws
PTS: 2
DIF: L3
REF: A.54
OBJ: 3.1.4 Explain why the government may intervene in the marketplace.
NAT: 16.5| 16.7
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
OBJ: 3.1.1 Define the basic principles of the U.S. free enterprise system.
NAT: 16.1| 16.2
STA: B.2
TOP: Free Enterprise | Opportunity
1
ID: A
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.
PTS: 3
DIF: L3
REF: A.51
OBJ: 3.1.1 Define the basic principles of the U.S. free enterprise system.
NAT: 16.1| 16.2
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.
PTS: 3
DIF: L3
REF: A.51
OBJ: 3.1.2 Describe the role of the consumer in the American economy.
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.
PTS: 3
DIF: L3
REF: A.51
OBJ: 3.1.1 Define the basic principles of the U.S. free enterprise system.
NAT: 16.1| 16.2
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.
PTS: 3
DIF: L3
REF: A.51
OBJ: 3.1.3 Identify the constitutional protections that underlie free enterprise.
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
OBJ: 3.1.3 Identify the constitutional protections that underlie free enterprise.
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
OBJ: 3.1.2 Describe the role of the consumer in the American economy.
NAT: 4.1
TOP: Free Enterprise | Voluntary Exchange
2
ID: A
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
OBJ: 3.1.4 Explain why the government may intervene in the marketplace.
NAT: 16.5| 16.7
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
OBJ: 3.1.3 Identify the constitutional protections that underlie free enterprise.
STA: B.1| B.2
TOP: Free Enterprise | Government Regulation
MATCHING
16. ANS:
OBJ:
NAT:
17. ANS:
OBJ:
STA:
18. ANS:
OBJ:
NAT:
19. ANS:
OBJ:
NAT:
20. ANS:
OBJ:
STA:
21. ANS:
OBJ:
STA:
22. ANS:
OBJ:
NAT:
E
PTS: 2
DIF: L3
REF: A.51
3.1.1 Define the basic principles of the U.S. free enterprise system.
16.1| 16.2
STA: B.2
TOP: Free Enterprise | Free Contract
B
PTS: 2
DIF: L3
REF: A.51
3.1.3 Identify the constitutional protections that underlie free enterprise.
B.1| B.2
TOP: Free Enterprise | Open Opportunity
F
PTS: 2
DIF: L3
REF: A.51
3.1.1 Define the basic principles of the U.S. free enterprise system.
16.1| 16.2
STA: B.2
TOP: Free Enterprise | Voluntary Exchange
A
PTS: 2
DIF: L3
REF: A.51
3.1.1 Define the basic principles of the U.S. free enterprise system.
16.1| 16.2
STA: B.2
TOP: Free Enterprise | Profit Motive
D
PTS: 2
DIF: L3
REF: A.51
3.1.3 Identify the constitutional protections that underlie free enterprise.
B.1| B.2
TOP: Free Enterprise | Private Property
C
PTS: 2
DIF: L3
REF: A.51
3.1.3 Identify the constitutional protections that underlie free enterprise.
B.1| B.2
TOP: Free Enterprise | Legal Equality
G
PTS: 2
DIF: L3
REF: A.52
3.1.4 Explain why the government may intervene in the marketplace.
16.5| 16.7
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
OBJ: 3.1.1 Define the basic principles of the U.S. free enterprise system.
NAT: 16.1| 16.2
STA: B.2
TOP: Free Enterprise | Free Market
3
ID: A
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
OBJ: 3.1.2 Describe the role of the consumer in the American economy.
NAT: 4.1
TOP: Free Enterprise | Consumers
4