Unit 1 Study Guide

Topics: Economics, Opportunity cost, Economic system Pages: 3 (489 words) Published: September 24, 2014
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Unit 1 Study Guide

Fundamental Economic Concepts
1. Define scarcity- [1pt]
Limited quantities of resources to meet unlimited wants.
2. Give 3 examples of each resource (factors of production): [3pts]
Land (natural)
Labor (human)
Capital (capital goods)
a. Coal
b. Water
c. Forests
a. Doctor
b. Assembly line worker
c. Fireman
a. Buildings
b. Tools
c. Machinery

3. Define opportunity cost- [1pt]
The most desirable alternative given up as the result of a decision.

4. Give an example of a situation in which you had to make a trade-off between two possible choices (choosing one or the other) and how you weighed the opportunity cost of your final decision. [1pt]

I had to choose between hanging out with my friends or helping my mom when she really needed it one weekend and I chose to help my mom. I chose helping my mom over hanging out with my friends because my mom does a lot for me and the least I can do is help her when she needs it, even when she doesn’t ask.

5. Choose the correct description for each point on the Production Possibilities Curve below. [3pts]

a. Inefficient

b. Efficient

c. Unattainable

6. What is the role of Consumers, Businesses, and Government in a Market Economy? [1pt] The consumers determine the demand and supply and prices.
The businesses  the larger the business, the more other companies will want supplies from them. The government plays an important role in determining prices of salaries and final goods.

7. Label the circular flow diagram below: [3pts]

a. Households
b. Businesses
c. Resource (factor) market
d. Product Market
e. Consumer expenditure
f. Wages

8. What are the 3 economic questions? [3pts]
a. What goods and services should be produced?

b. How should these goods and services be produced?

c. Who consumes these goods and services?

9. Give an example of investments in equipment and technology and explain their...
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