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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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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.
What does LFPR stand for?
Labor Force Participation Rate.
What is FDI?
Foreign Direct Investment.
What is the main goal of a firm in an economic system?
To maximize profits.
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.
What is a sole proprietor?
A one-person or family-run business that is the simplest form of business organization.
What happens to a sole proprietorship if the owner dies?
The business ends.
What is the main disadvantage of a sole proprietorship?
Unlimited liability, meaning business debts can affect the owner's personal assets.
What is a partnership?
A business formed by two or more people who share profits and liabilities.
What does 'utility' refer to in economics?
The satisfaction a consumer gets from a good or service.
What is a corporation?
A legal entity set up to maximize profits or shareholders' stock value, separate from its owners.
How are shares related to corporations?
The value of a corporation is sliced into shares, and each share gives one vote to its holder.
What is a key advantage of a corporation?
Limited liability, allowing shareholders to risk only their investment.
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.
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.
What are some sources of government revenue?
Taxes, including personal income tax, corporate business tax, poll tax, and sales tax.