Economics Unit I Test



Economics Unit I Test

Basic Economic Concepts

(Chapters 1,2,3)

Review

Answer the following questions completely on notebook paper, attaching this sheet to the back of your answers. Remember that you will not be able to do test corrections unless you turn in this review on the day of the test. A completed review will be worth 10 points added to your test grade. Also, this review will be a valuable study aid for your final exam! *Remember that you must know all your vocabulary terms!*

1. Define scarcity. Why is it important to understanding the study of economics?

2. What are the four economic resources (factors of production)? Give an example of each.

3. What are the three basic economic questions every society must answer?

4. What is opportunity cost? Why is there no such thing as a free lunch?

5. Explain cost-benefit analysis. What are trade-offs?

6. What is a market?

7. Describe circular flow (draw a diagram!) Why is each part dependent on all other parts?

8. What is the difference between goods and services? Give an example of each.

9. What is specialization and why is it important?

10. Describe a production possibilities frontier (draw a graph!) What do points inside, outside and on the curve represent? How does it illustrate opportunity cost and trade-offs?

11. What are the two types of efficiency, and how are they represented on the PPF?

12. What is economic growth? How can it be achieved? Show growth on your PPF.

13. What is investment and why is it important?

14. What is an economic system?

15. Describe traditional, command and market economic systems, including the advantages and disadvantages of each.

16. How is the United States a mixed economy?

17. Briefly describe the 7 economic goals. Explain how they may be interpreted differently by different societies, and how some may conflict.

18. What are the characteristics of a free-enterprise (capitalist) economy?

19. What makes the United States a modified free-enterprise economy?

20. Why is the study of economics important?

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