Question

a. key terms and concepts directions: match each item with one of the descriptions below.
_____ 1. an individual’s personal gain a. consumer sovereignty
_____ 2. an arrangement for buyers and sellers to exchange things b. factor market
_____ 3. where firms purchase the factors of production c. specialization
_____ 4. a hope of reward that encourages someone to behave in a certain way d. incentive
_____ 5. consumers have power over what is produced e. market
_____ 6. producing only what you are good at f. self - interest
b. main ideas directions: write the letter of the correct answer in the blank provided.
_____ 7. why do people need to buy and sell goods or services?
a. people need to make a profit.
b. people need a competitive society.
c. no one is completely independent.
d. people need to provide the market with goods.
_____ 8. who owns the factors of production?
a. individuals c. firms
b. households d. the market
_____ 9. what “invisible hand” directs the free market?
a. incentives and efficiency c. circular flow
b. specialization d. competition
_____10. why are free market economies able to grow?
a. consumers can buy all needed goods.
b. competition encourages innovation.
c. everyone acts in their own interest.
d. firms keep producing incentives.

Explanation:

Part A: Matching

1. Item 1: "an individual’s personal gain" matches "f. self - interest" (self - interest refers to personal gain).
2. Item 2: "an arrangement for buyers and sellers to exchange things" matches "e. market" (a market is where buyers and sellers exchange goods/services).
3. Item 3: "where firms purchase the factors of production" matches "b. factor market" (factor market is for buying production factors).
4. Item 4: "a hope of reward that encourages someone to behave in a certain way" matches "d. incentive" (incentive is a reward - based encouragement).
5. Item 5: "consumers have power over what is produced" matches "a. consumer sovereignty" (consumer sovereignty is consumer's production - related power).
6. Item 6: "producing only what you are good at" matches "c. specialization" (specialization is producing what one is good at).

Part B: Multiple Choice

1. Question 7: People buy and sell because "c. No one is completely independent" (people can't produce everything they need, so they trade).
2. Question 8: The factors of production are owned by "b. households" (households supply labor, capital, etc. - factors of production).
3. Question 9: The "invisible hand" of the free market is "d. competition" (competition drives the free market's self - regulating nature).
4. Question 10: Free market economies grow because "b. Competition encourages innovation" (competition pushes firms to innovate, leading to growth).

Answer:

s:
A. 1. f; 2. e; 3. b; 4. d; 5. a; 6. c
B. 7. c; 8. b; 9. d; 10. b