Unit 3 Review Sheet

Question 1

Economics

Answer 1

society has unlimited wants but limited resources, economics is the study of how society manages these scarce resources

Question 2

Scarcity

Answer 2

a situation in which the amount of something actually available would not be sufficient to satisfy the desire for it if it were provided free of charge

Question 3

Factors of Production

Answer 3

natural resources (land), labor, capital (physical or human) and entrepreneurship

Question 4

Entrepreneur

Answer 4

a person who takes a risk in combining land, labor, and capital to create a new good

Question 5

Trade-off

Answer 5

alternatives that we must give up when we make a choice

Question 6

Opportunity Cost

Answer 6

the most desirable of the options you pass up

Question 7

Efficiency

Answer 7

when you utilize resources to produce the maximum amount of goods, represented by any point on the line of a production possibilities curve

Question 8

Standard of living

Answer 8

Level of economic prosperity for the people of an area. A nation’s economy must grow, innovate to improve its standard of living

Question 9

Free Enterprise System

Answer 9

another name for capitalism. You are free to start a business that provides usefulness to consumers

Question 10

“Guns or Butter”

Answer 10

the choice between producing military or consumer goods

Question 11

Profit

Answer 11

The motive for businesses in a free enterprise system, the desire to make money

Question 12

What is the purpose of a production possibilities curve?

Answer 12

shows alternatives to what an economy can produce

Question 13

What are some ways a country can improve its standard of living?

Answer 13

A nation’s economy must grow to improve its standard of living. Especially if its population is growing. New jobs and income need to be provided. Innovation plays a huge role.

Question 14

What are the characteristics of a free enterprise system?

Answer 14

capitalism, economic freedom, private property, profit motive, competition

Question 15

What are the characteristics of a command economy?

Answer 15

the central government makes all decisions about the production and consumption of goods and services

Question 16

What are the characteristics of a market economy?

Answer 16

economic decisions (production and consumption) are made by individuals and are based on voluntary exchange or trade. Also called free markets or capitalism.

Question 17

What are the characteristics of a mixed economy?

Answer 17

are systems that combine tradition and the free market with limited government intervention

Question 18

What are the characteristics of a traditional economy?

Answer 18

rely on habit, custom, or ritual to decide what to produce, how to produce it, and to whom to distribute it (consumption)

Question 19

What type of economy does the United States have?

Answer 19

modified free enterprise system (capitalism with government intervention)

Question 20

What is the Law of Increasing Cost? How does it affect production of goods?

Answer 20

As production increases for one item, more and more resources are necessary to increase production of the second item.

Question 21

What role do competition and self interest play in a market economy?

Answer 21

Competition is the regulating force in the free market. Self-interest is the motivating force in the free market.

Question 22

Explain a Socialist’s view of the economy

Answer 22

A social and political philosophy based on the belief that democratic means should be used to distribute wealth evenly throughout society.

Question 23

What are the three main categories of resources?

Answer 23

Land, labor, and capital

Question 24

How is resource allocation determined in a market system?

Answer 24

We allocate our money or set it aside to fulfill wants that we feel are most important. Prioritization of resources.

Question 25

What is public interest?

Answer 25

The well-being of the general public, which is good for the masses.

Question 26

Be able to label efficiency, inefficiency and unattainable points on a PPG.

Answer 26

On the line is efficiency. Below the line is inefficient. Above the line is unattainable.