THE AMERICAN BACCALAUREATE SCHOOL
Assignment Name: Chapter 3 Economics Study Guide
Teacher: Ms. Murray Course/Grade: ___________________
Student Name: _______________________
Date: __________
You need to know the following terms in order to answer them in a True or False
format:
Free enterprise system
Open opportunity
Legal equality
Free contract
Profit motive
Profit
Modified free enterprise economy
Market failure
Public goods
Free rider
Externality
Positive externality
Negative externality
Subsidy
Safety net
Transfer payment
Public transfer payment
THE AMERICAN BACCALAUREATE SCHOOL
NOTE: You need to know what a free enterprise system is AND EVERYTHING about
how the free enterprise system works. This is an essay portion and is not easy. You
will fail the test if you do not study this portion.
Concepts:

How does the free enterprise system allow for economic freedom?

What are the legal rights of a free enterprise system and how to the follow
the guidelines of a free enterprise system?
 Open opportunity
 Legal equality
 Free contract
 Profit motive

Explain the role of profit motive and competition in the free enterprise
system.

How do producers and consumers help to allocate resources in a free
enterprise system?

Explain the relationship between the government, households, businesses,
the factor market, and the product market

What is the role of the government in a modified free enterprise system?
 Public goods
 Transfer Payments

What is market failure and what are 3 examples the demonstrate market
failure?
 Public goods
 Free riders

Explain the relationship of the government with positive and negative
externalities