Unit 1 ReviewUnit 1 ReviewBasic TermsBasic Terms

Economic SystemsEconomic SystemsCapitalism & Free EnterpriseCapitalism & Free Enterprise

Economic GoalsEconomic GoalsGovernment RolesGovernment Roles

Business FormsBusiness Forms

The universal condition affecting all The universal condition affecting all societies and economies requiring societies and economies requiring decisions and trade offs about decisions and trade offs about production:production:

Scarcity Scarcity

A good used by consumers as an end A good used by consumers as an end productproduct

Final goodFinal good

A good used to produce a final goodA good used to produce a final good

Capital goodCapital goodPhysical capitalPhysical capital

What are the 4 factors of production?What are the 4 factors of production?

LandLandCapitalCapitalLaborLaborEntrepreneur Entrepreneur

What are the 3 types of capital?What are the 3 types of capital?

PhysicalPhysicalFinancialFinancialHuman Human

Which would NOT be considered “land”? Which would NOT be considered “land”? (write the number only)(write the number only)

1.1. A A riverriver that is dammed for energy production that is dammed for energy production2.2. WindWind used to power a windmill to grind used to power a windmill to grind

wheat into flourwheat into flour3.3. ConcreteConcrete used to lay the foundation for a used to lay the foundation for a

manufacturing plantmanufacturing plant4.4. An An iron oreiron ore deposit mined and used to deposit mined and used to

create steal beams for the new World Trade create steal beams for the new World Trade CenterCenter

#3#3

Nothing of value is free:Nothing of value is free:

TINSTAAFLTINSTAAFL

What term suggests that making What term suggests that making something free only shifts the burden something free only shifts the burden of the cost to other shoulders?of the cost to other shoulders?

TINSTAAFLTINSTAAFL

What says that all resources are What says that all resources are limited, but have relatively unlimited limited, but have relatively unlimited wants and needs fro them?wants and needs fro them?

ScarcityScarcity

What is the worth of a product as What is the worth of a product as measured by its price?measured by its price?

Value Value

What are the 4 ways to increase What are the 4 ways to increase productivity?productivity?

Division of laborDivision of laborSpecializationSpecialization Invest in workers’ human capital Invest in workers’ human capital

(training)(training) Invest in technologyInvest in technology

Where are the factors of production Where are the factors of production purchased?purchased?

Factor marketFactor market

A way of improving productivity by A way of improving productivity by organizing labor so that each worker organizing labor so that each worker has fewer tasks than before:has fewer tasks than before:

Division of laborDivision of labor

A specific representation of a need is A specific representation of a need is called:called:

A want A want

Which is NOT a need?Which is NOT a need?

1.1. HouseHouse2.2. FoodFood3.3. ClothingClothing4.4. HealthHealth

#1#1

Other uses of a resource are Other uses of a resource are sacrificed when one use is decided sacrificed when one use is decided on. These are called:on. These are called:

Trade-offsTrade-offs

The capacity of a product to provide The capacity of a product to provide its purchaser or user with usefulness its purchaser or user with usefulness and/or satisfaction:and/or satisfaction:

Utility Utility

What does a production possibilities What does a production possibilities frontier demonstrate?frontier demonstrate?

The opportunity cost between two The opportunity cost between two products (or areas of production)products (or areas of production)

Due to this, decisions about what to Due to this, decisions about what to produce, how to produce it, and how produce, how to produce it, and how to allocate it must be made:to allocate it must be made:

ScarcityScarcity

Which is LEAST likely a capital Which is LEAST likely a capital (physical) good?(physical) good?

1.1. An extension ladderAn extension ladder2.2. A taxi cabA taxi cab3.3. An industrial ovenAn industrial oven4.4. A factoryA factory5.5. An intercom systemAn intercom system6.6. A CD playerA CD player

#6#6

When labor is arranged to improve When labor is arranged to improve productivity by assigning those productivity by assigning those better at a task the responsibility of better at a task the responsibility of performing that task:performing that task:

SpecializationSpecialization

Where are productive resources Where are productive resources (such as labor) bought and sold?(such as labor) bought and sold?

Factor marketFactor market

The term that describes the benefit The term that describes the benefit received from the use of a product:received from the use of a product:

Utility Utility

The cost of the next best alternative The cost of the next best alternative use of a resource is called:use of a resource is called:

Opportunity costOpportunity cost

What term best describes the federal What term best describes the federal government decision to cut military government decision to cut military spending under President Clinton to spending under President Clinton to increase federal funding of various increase federal funding of various social programs? social programs?

Opportunity costOpportunity costTrade-off Trade-off

What best describes Henry Ford’s What best describes Henry Ford’s use of the assembly line to increase use of the assembly line to increase productivity?productivity?

Division of laborDivision of labor

Which basic economic system is Which basic economic system is LEAST able to adapt, change, and LEAST able to adapt, change, and improve standards of living for its improve standards of living for its people?people?

TraditionalTraditional

Which econ system deals with Which econ system deals with scarcity by relying on central scarcity by relying on central planning by government agencies?planning by government agencies?

Command Command

Which system provides the most Which system provides the most ineffective incentives to work hard, ineffective incentives to work hard, save and invest?save and invest?

CommandCommand

Which system provides least for its Which system provides least for its unproductive members?unproductive members?

Market Market

Which system satisfies consumers Which system satisfies consumers most?most?

MarketMarket

Which system requires the largest Which system requires the largest bureaucracy?bureaucracy?

CommandCommand

Which is an example of a market Which is an example of a market system?system?

1.1. N. KoreaN. Korea2.2. Australia’s aboriginesAustralia’s aborigines3.3. ChinaChina4.4. EnglandEngland

#4#4

Which BEST describes the U.S.?Which BEST describes the U.S.?

1.1. Pure market economyPure market economy2.2. Command economyCommand economy3.3. Mixed traditional economyMixed traditional economy4.4. Mixed market economyMixed market economy5.5. Centrally planned economyCentrally planned economy

#4#4

The private ownership of the factors The private ownership of the factors of production:of production:

Capitalism Capitalism

What characteristic of a free What characteristic of a free enterprise system acts as collateral enterprise system acts as collateral for entrepreneurs to access financial for entrepreneurs to access financial capital to start businesses?capital to start businesses?

Private property rightsPrivate property rights

Which free market characteristic acts Which free market characteristic acts as the motor to the economy and as as the motor to the economy and as an incentive for workers to work an incentive for workers to work hard, save, and invest in hopes of hard, save, and invest in hopes of improving their economic conditions?improving their economic conditions?

Profit motiveProfit motive

What 4 benefits to consumers does What 4 benefits to consumers does competition tend to produce?competition tend to produce?

Lower pricesLower pricesBetter productsBetter productsGreater variety of goods and servicesGreater variety of goods and services Improved use of resources to cut Improved use of resources to cut

costscosts

What is the condition of a free What is the condition of a free market that suggests that all market that suggests that all transactions benefit both seller and transactions benefit both seller and buyer?buyer?

Voluntary exchangeVoluntary exchange

When productive resources are When productive resources are privately owned and operated:privately owned and operated:

CapitalismCapitalism

What characteristic of a free What characteristic of a free enterprise system enterprise system allowsallows for for experimentation and innovation experimentation and innovation within the market?within the market?

Economic freedomEconomic freedom

At about what percent of At about what percent of unemployment do economists unemployment do economists consider an economy to be consider an economy to be functioning at full employment?functioning at full employment?

5%5%

Which economic goal do most Which economic goal do most Americans share that provides the Americans share that provides the elderly with Social Security and the elderly with Social Security and the poor with a variety of welfare poor with a variety of welfare services?services?

Economic securityEconomic security

What is a general rise in prices What is a general rise in prices throughout the economy?throughout the economy?

InflationInflation

Who does inflation hurt Who does inflation hurt most?most?

Those on fixed incomesThose on fixed incomes

““Equal pay for an equal day’s work” Equal pay for an equal day’s work” is best reflected in which economic is best reflected in which economic goal?goal?

Economic equityEconomic equity

What is the necessary result of not What is the necessary result of not being able to have absolute being able to have absolute economic freedom and, at the same economic freedom and, at the same time, absolute economic equity or time, absolute economic equity or security?security?

Trade-offs among competing goalsTrade-offs among competing goals

What role is the government playing What role is the government playing when it passes public disclosure laws when it passes public disclosure laws requiring companies to post nutrition requiring companies to post nutrition information?information?

Providing a legal/social frameworkProviding a legal/social framework

What role is being played when the What role is being played when the government passes and enforces government passes and enforces anti-trust laws?anti-trust laws?

Enforcing competitionEnforcing competition

When California decides to spend When California decides to spend more on education and law more on education and law enforcement, state government is enforcement, state government is engaged in:engaged in:

Providing public goods and servicesProviding public goods and services

When the government requires a When the government requires a company to reduce the amount of company to reduce the amount of fluorocarbons it emits into the fluorocarbons it emits into the atmosphere, it is engaged in:atmosphere, it is engaged in:

Correcting for negative externalities Correcting for negative externalities

When the government employs fiscal When the government employs fiscal policy tools to fight inflation, what policy tools to fight inflation, what role is it playing?role is it playing?

Stabilizing the economyStabilizing the economy

What role is the government playing What role is the government playing when it prosecutes violators of when it prosecutes violators of patents and copy rights?patents and copy rights?

Protecting private propertyProtecting private property

What business form is the most What business form is the most numerous in the U.S.?numerous in the U.S.?

ProprietorshipProprietorship

What business form has the What business form has the disadvantage of double taxation?disadvantage of double taxation?

Corporation Corporation

What form accounts for 90% of all What form accounts for 90% of all sales in the U.S.?sales in the U.S.?

CorporationCorporation

What form has the greatest amount What form has the greatest amount of control by owners?of control by owners?

ProprietorshipProprietorship

What business form is Disney and What business form is Disney and Target?Target?

CorporationCorporation

What is it called when the personal What is it called when the personal assets of the owners of a company assets of the owners of a company cannot be used to satisfy the debts cannot be used to satisfy the debts of a corporation?of a corporation?

Limited liabilityLimited liability