Chapter 1 – Section 3Name:
Date:
Hour:
STUDY GUIDE (ANSWERS)
1) The production possibilities frontier (PPF) is a diagram that displays what?
The combination of goods and services when all resources are used.
2) A company cannot hit full ______potential______if some resources are not fully used.
3) A free enterprise economy is a market economy in which who decides to produce the majority for the HOW, WHAT, and FOR WHOM?
Consumers and privately owned business
5) Give an actual example comparing the cost(s) of an action to the benefits received (apply cost benefit analysis here).
If product B costs less than product A, product B would be the better choice because of more satisfaction per dollar per spent.
6) An example of a business in the free enterprise economy is
a) Dell Inc.
b) Medicaid
c) Social Security
d) FAFSA
7) As citizens, the study of economics helps us become better?
Decision-makers
8) Opportunity cost always has a monetary value to it. True or False
9) An economic model is an equation, graph, or figure that is?
Simplified
10) What is the opportunity cost of watching a game Friday night?
a) going out to dinner b) going to a movie c) both a. and b. d) neither a. and b.
11) Standard of living is the quality of life based on the ownership of what two things?
Necessities (needs) and luxuries (wants)
12) Economists use cost-benefit analysis to evaluate choices. True or False
13) Economics includes the study of how things are
Made, sold, bought and used
14) A better definition of opportunity cost is?
It is the cost of passing up the next best choice when making a decision
15) What is an exchange for one thing in return for another?
Trade-offs
16) Use the table to create a production possibilities frontier (all labels, numbers, and an appropriate curvemust be shown on the graph)
watches (y-axis) / rings(x-axis) / label the points on the graph
850 / 0 / A
600 / 200 / B
400 / 400 / C
300 / 500 / D
200 / 600 / E
0 / 850 / F
-Change made to label A
850
700
600
500
400
300
200
0 200 300 400 500 600 700 850
17) Why wouldn’t it work for a business or company if a point was outside the curve of the PPF graph?
There are no available resources to produce an amount outside the curve.