1. Chapter Seventeen The American Economy The Economic System ~~~~~ Making Business Decisions

3. Economic Decisions nations and governments must decide what are we going to produce? how are we going to produce it? for whom are we producing?

4. Factors of Production business organizations sole proprietorships partnerships corporations business success depends mainly on decisions about the use of four factors of production, or available resources factors of production natural resources capital labor entrepreneurship

5. items provided by nature that can be used to produce goods and to provide services found on or in Earth, or in Earth's atmosphere land, water, raw materials considered a factor of production only when it is scarce and some payment is necessary for its use every business enterprise needs land 1.a place to locate a store, factory, or office rent or purchase property 2.source of raw materials from mines, fields, forests, rivers, lakes, oceans business decisions rent or buy property? where to locate? quality of raw materials? quantity of raw materials? cost of raw materials? Natural Resources

6. money invested in a business property and equipment used to produce goods or services capital goods tools, vehicles, machines, office equipment every business enterprise needs money many operation costs business decisions rent or buy tools and equipment? how to raise money? sole proprietorship savings bank loans partnership more people to invest bank loans corporation sell stock issue bonds Capital

7. all human effort used to produce goods and services workers every business enterprise needs workers sell their labor in exchange for money wages earnings that are paid on an hourly basis salaries fixed yearly earnings that are paid on a biweekly or monthly basis productivity the amount of work produced by a worker per hour business decisions number of workers? pay for workers? benefits for workers? Labor

8. Entrepreneurship entrepreneurs business owners every business enterprise needs someone to make decisions determines whether the business will succeed or fail wise decisions = prosper wrong decisions = closure when entrepreneurs make decisions they take risks managers entrepreneurs who run businesses management group of people who manage a single business business decisions must manage the three other factors of production how to distribute the product? how much to charge for the product? whether to hire more people?

9. Profits gross income total amount of money a firm receives from the sale of its goods or services must pay the costs of making and distributing its product must pay cost of materials and supplies used must pay rent or property taxes must set aside money for savings must pay interest on borrowed money must pay employees must pay utilities must pay insurance net income amount of money left over after all the costs have been paid must pay income taxes profit sole proprietorship = salary partnership = salaries corporation = distributed among the stockholders as dividends

10. Government’s Role government influences business in many ways ensures that big corporations do not destroy competition from small businesses protects a person's rights to own private property and to buy and sell in a free market many agencies of the federal government help businesses Small Business Administration helps small businesses as they compete in the economy government plays many other roles in business provides information and statistics useful in planning business activities provides loans and other types of assistance to businesses tries to keep the economy running smoothly protects workers' health and safety (OSHA) prevents pollution of the environment (EPA) protects buyers from dishonest practices and harmful products (CPSC) ensures that employers cannot discriminate against workers or job applicants (EEOC) too much government involvement? tens of thousands business regulations issued by the federal government may add to the cost of doing business costs can be passed on to consumers as higher prices