Texes Social Studies Content Practice Exam

How is free enterprise defined?

1. A business adventure or undertaking

2. A business taking a risk to make a profit

3. A program administered by the Government

4. People in business trying to make a profit

The correct answer is: People in business trying to make a profit

Free enterprise is defined as an economic system where individuals and businesses have the freedom to operate and compete for profit with minimal government intervention. The essence of free enterprise lies in the ability of people to make choices about how to invest their resources, produce goods and services, and the way they conduct business. Thus, the focus is on individuals or groups in the market trying to make a profit based on their entrepreneurial activities. This dynamic encourages innovation, efficiency, and a variety of choices for consumers. The other options don't fully capture the distinctiveness of the free enterprise system. For instance, describing it merely as a business adventure doesn't encompass the competitive aspect and the profit-driven nature that characterize free enterprise. Similarly, while the idea of a business taking risks for profit touches on an aspect of entrepreneurship, it doesn't encapsulate the broader scope of multiple individuals or businesses engaging in the market. The notion of a government-administered program directly contradicts the principles of free enterprise, as it implies significant government control and regulation rather than the independence that defines a free market system. Thus, the correct answer accurately reflects the spirit of free enterprise within an economic context.