After reading this chapter, you should be able to:

• Define market economy.
• Compare and contrast socialism with capitalism.
• Describe how businesses, households, and government interact in a market economy.
• Summarize briefly the advantages and disadvantages of various types of businesses.
• Explain why, even though households have the ultimate power, much of the economic decision making is done by business and government.
• Distinguish the government's role as an actor from its role as a referee.
• Explain how globalization has changed competition.