Economic Systems and Decision Makers

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A comprehensive set of flashcards covering key concepts in economic systems and decision makers, focusing on the roles of various entities including individuals, firms, and the government.

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16 Terms

1
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What defines an economic system?

A set of institutional arrangements that differ based on the ownership of economic resources and the method of directing, coordinating, and motivating the economy.

2
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What does LFPR stand for?

Labor Force Participation Rate.

3
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What is FDI?

Foreign Direct Investment.

4
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What is the main goal of a firm in an economic system?

To maximize profits.

5
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What role does a household (HH) play in the economy?

Suppliers of economic resources in resource markets and main consumers of finished goods and services.

6
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What is a sole proprietor?

A one-person or family-run business that is the simplest form of business organization.

7
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What happens to a sole proprietorship if the owner dies?

The business ends.

8
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What is the main disadvantage of a sole proprietorship?

Unlimited liability, meaning business debts can affect the owner's personal assets.

9
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What is a partnership?

A business formed by two or more people who share profits and liabilities.

10
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What does 'utility' refer to in economics?

The satisfaction a consumer gets from a good or service.

11
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What is a corporation?

A legal entity set up to maximize profits or shareholders' stock value, separate from its owners.

12
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How are shares related to corporations?

The value of a corporation is sliced into shares, and each share gives one vote to its holder.

13
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What is a key advantage of a corporation?

Limited liability, allowing shareholders to risk only their investment.

14
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What is meant by the separation of ownership and control in a corporation?

Management has control over the corporation, often leading to smaller shareholders being neglected.

15
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What role does the government play in the economy?

Elected representatives aiming to maximize their chances for re-election while striving to maximize their sources of revenue.

16
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What are some sources of government revenue?

Taxes, including personal income tax, corporate business tax, poll tax, and sales tax.