UNIT 1: ECONOMICS REVIEW What is Economics? Economic Concepts Economic Systems and Goals Capitalism and International Trade Production Possibilities Curve

Q: The condition that results from society not having enough resources to produce all the things people would like to have. 100

A: Scarcity 100

Q: “THERE IS NO SUCH THING AS A FREE LUNCH” focuses on what major concept? 200

A: A cost must be factored in to all decision-making 200

Q: What are the three basic questions we must answer about the ways our limited resources will be used? 300

A: 1. WHAT to produce 2. HOW to produce 3. FOR WHOM to produce 300

Q: NAME and DESCRIBE the four Factors of Production. 400

A: 1. Land-refers to the “gifts of nature,” or natural resources. 2. Capital-the tools, equipment, machinery, and factories used in the production of goods and services. 3. Labor-people with all their efforts, abilities, and skills. 4. Entrepreneurs-a risk-taker in search of profits who does something new with existing resources. 400

Q: Economics is the study of human efforts to satisfy what appear to be unlimited and competing wants through the careful use of relatively scarce resources. As such, it is a social science because it deals with the behavior of people as they deal with this basic issue. There are four key elements to this study. NAME and DESCRIBE these elements. 500

A: 1. Description-Gross Domestic Product (GDP)-the dollar value of all final goods and services, and structures produced within a country’s borders in a 12-month period 2. Analysis-answers the questions…Why are price of some items high whole others are low? Why do some people earn higher incomes than others? How do taxes affect people’s desire to work and save? 3. Explanation-A way to communicate knowledge determined through analysis to others to create a common understanding 4. Prediction-The study of economics can help to make the best decision in various situations. The study of what is or what tends to be can help predict what may happen, as well as likely consequences of different courses of action. 500

Q: Describe the difference between a consumer goods and capital goods. 100

A: Consumer goods-intended for final use by individuals Capital goods-used to produce other goods and services 100

Q: Define Wealth 200

A: the accumulation of those products that are tangible, scarce, useful, ad transferable from one person to another. 200

Q: DEFINE and PROVIDE AN EXAMPLE for the Paradox of Value 300

A: Describes the contradiction between necessities and value. The situation where some necessities, such as water, have little monetary value, whereas some non-necessities, such as diamonds, have a much higher value. Describes the contradiction between necessities and value. 300

A: Which part of the circular flow model deals with individuals selling land, labor, capital, and entrepreneur abilities to the businesses for income? 400

A: Factor Markets 400

Q: Division of Labor and Specialization can improve productivity. Define these two factors. 500

A: Division of Labor – work is arranged so that individual workers do fewer tasks than before. Specialization – when factors of production perform the tasks they can do relatively efficiently. 500

Q: Describe Economic Security as a social goal. 100

A: Protection from such adverse economic events as layoffs and illness. States have set up funds to help workers who lose heir jobs. Many employers have insurance plans to cover the injuries and illnesses of their workers. On the national level, Congress has set up Social Security which is a federal program of disability and retirement benefits that covers most working people. 100

Q: Name and provide an example for each type of economic system. 200

A: 1. Traditional, Command, and Market Economies 200

Q: Name all 8 economic and social goals. 300

A: 1. Economic Freedom 2. Economic Efficiency 3. Economic Equity 4. Economic Security 5. Full Employment 6. Rice Stability 7. Economic Growth 8. Future Goals 300

Q: Name 2 total advantages and disadvantages of a traditional economic system. 400

A: Advantages: 1. Sets forth certain economic roles for all members of the community. 2. Stable, predictable, and continuous life. Disadvantages: 1. Discourages new ideas and new ways of doing things 2. Stagnation and lack of progress 3. Lower standard of living 400

Q: Name 3 total advantages and disadvantages of a command economic system. 500

AQ: Advantages: 1. Capable of dramatic change in a short time 2. many basic education, public, health, and other public services available at little or no cost Disadvantages: 1. Does not meet wants and needs of consumers 2. Lacks effective incentives to get people to work 3. Requires large bureaucracy, which consumes resources 4. Has little flexibility to deal with small, day-to-day changes 5. New and different ideas discouraged, no room for individuality 500

Q: DEFINE and COMPARE a protective and revenue tariff. 100

A: 1. Protective Tariff- a tariff high enough to protect 2. Revenue Tariff- a tariff high enough to generate revenue for the government without prohibiting imports 100

Q: Name the five characteristics of a “Free Enterprise” or Capitalist system. 200

A: 1. Economic Freedom 2. Private Property Rights 3. Voluntary Exchange 4. Profit Motive 5. Competition 200

Q: List at least three other types of barriers to trade other than a tariff or a quota. 300

A: 1. Heavier Health Inspections 2. Licenses to import 3. Health issues (i.e. Some countries refuse to import genetically altered crops.) 4. Nationalism 300

Q: What is NAFTA stand for and describe it gain goals and outcomes. 400

A: The North America Free Trade Agreement is an agreement to liberalize free trade by reducing tariffs among the three major countries of Canada, Mexico, and the United States. Main gals are to stimulate economic growth and provide a variety of products to all nations involved. 400

Q: Name and provide an example for the four Roles of Government in a Free Enterprise System. 500

A: 1. Protector (Enforces laws against false and misleading advertising, unsafe food and drugs, environmental hazards, unsafe automobiles, and laws against individual freedoms.) 2. Provider and Consumer (Defense services, education, public welfare, parks, libraries, and bus services.)3. Regulator (Preserving competition in the market place, interstate commerce, communications, and eve entire industries such as baking and nuclear power.) 4. Promoter of National Goals (Reflects the will of the majority. i.e. social goals) 500

Q: Define a trade-off 100

A: Alternative choices, whenever an economic decision is made. 100

Q: The Production Possibilities Curve is a popular model that economists use to illustrate what major concept? Define this concept. 200

A: Opportunity Cost-the cost of the next best alternative use of money, time, or resources when one choice is made rather than another 200

Q: Draw a Productions Possibilities Frontier Curve on the board and label.. (A.) Maximum production (efficient) (B.) Inefficiency (C.) Economic Growth (not possible given out current resources) 300

A: 300

Q: Define both Absolute and Comparative Advantage 400

A: 1. Absolute Advantage-when a country can produce a product more efficiently (with greater output per unit of input) than another country 2. Comparative Advantage-when a country can produce a product relatively more efficiently, or at a lower opportunity cost. 400

Q: Using the graph to be drawn on the board, determine who has the absolute and comparative advantages. 500

A: 500