UNIT 1 OUT£IN€
CHAPTER$ 1-3
Directions: Define the following terms on a separate sheet of paper. Be sure to define these terms in language that you can comprehend and that you will be able to understand.
a. capital
b. entrepreneur
c. goods
d. “guns or butter”
e. land
f. labor
g. opportunity cost
h. scarcity
i. trade-offs
j. underutilization
k. competition
l. mixed economy
m. command economy
n. market economy
o. laissez faire
p. self-interest
q. externality
r. free rider
s. public good
t. socialism
u. capitalism
Directions: Using the information provided in the chapters as well as your own vast personal knowledge, answer the following questions in complete sentences, unless otherwise indicated (Ex. List)
1. Using examples of land, labor, and capital, explain why economists believe that all goods & services are scarce.
2. Explain how each of the following people would talk about scarcity and trade-offs: (a) the President of the United States (b) the leader of a developing nation (c) a U.S. citizen whose income is in the bottom 5%.
3. What 3 important pieces of information can we learn by reading a production possibilities graph?
4. Review the typical benefits of physical capital described in Chapter 1 Section 1. Give Specific examples of how the first railroads in the United States created or did not create the benefits of physical capital.
5. Describe 3 services that the government provides to its citizens. Identify some of the opportunity costs of providing each service.
6. Some economists consider entrepreneurship to be a fourth factor of production in addition to land, labor, and capital. Other economists consider entrepreneurship to be a special category of labor. Which group of economists do you agree with? Why?
7. Explain how a factory assembly line is an example of specialization.
8. Suppose that your household is its own society. How are the 3 key economic questions answered?
9. Think of 3 ways your life would change if the United States began using a pure free market system OR a pure centrally planned system instead of the free enterprise system.
10. Review the advantages and disadvantages of both free market economies and centrally planned economies. Assess the way each system values economic freedom and economic equity.
11. How does the government support free enterprise and protect public interest?
12. Explain the basic principles of free enterprise in your own words.
13. Why does the US Government track and influence business cycles?
14. Explain whether each of the following is either a cash transfer or an in-kind payment and why. (a) unemployment insurance (b) Social Security (c) food stamps.
15. How might the invention of a new, powerful fuel source for cars and trucks affect the country’s production possibilities frontier? How might the new fuel affect GDP?