Economics Unit 1-3 Test

Unit 1 Review

Key concepts

Scarcity: the basic economic problem

  • In what way does scarcity affect both consumers and producers?

    • Scarcity impacts both Consumers & Producers. The way scarcity impacts consumers is that the goods and services they want (or need) is limited to them. That means that the prices of said limited resource increases.
    • how much the price increases is based on how limited the resource is
    • Scarcity also impacts producers because they have a limited amount of resources they can provide for their consumers. Although they can capitalize off scarcity, it also puts the producer at risk of losing money.
    • Not enough resources= not enough product= less money gained

  • What are four factors of production and how do they relate to scarcity?

  • **Land-**Natural resources used to make goods and services

    • population pressure, social inequality, environmental issues
    • i.e Natural disasters such as hurricane sandy, COVID-19, foreign relationships with China

  • Labor- The effort people devote to a task in which they get paid

    • The demand for workers for a specific job is greater than the supply of qualified employees the employer has
    • Education and health services

  • Capital- any human made resource that is used to produce other goods and services

    • There is a lack of financial resources to support the business and it’s product development

  • Entrepreneurship- Process of running, developing, and organizing a business in order to generate profit while taking on financial risk

    • The ‘entrepreneur’ is ignorant of the theoretical yield in their return of what they are producing and how the consumers will react to what they are producing

Economic Choice Today: Opportunity Cost

  • What does the phrase: “There is no such thing as a free lunch,” mean in economic terms?
    • Nothing is truly free. Everything comes with a price; even if something is free, there is always something to be gained and lost that is the opportunity cost
  • Why is important to consider marginal benefits and cost when you do a cost-benefit analysis?
    • As we know, marginal benefit increases as consumption decrease. Marginal benefit helps economist optimize the benefit of their goods and products

Analyzing Production Possibilities

  • What are three things a Production Possibilities Curve (PPC) shows?
    • the variety of outcomes there can be when a product is produced.
  • What factors could lead to economic growth?
    • Increase in capital goods and resources
    • technology and innovation
    • Increase in employment

The Economist’ Toolbox

  • What are some tools the economist use to draw meaning from large amounts of data?
    • pie charts, bar graphs, and line graphs and PPC graphs
  • What are the differences between microeconomics and macroeconomics?
    • Microeconomics- studies the behavior of individuals and firms in making decisions regarding the allocation of scarce resources and the interactions among these individuals and firms
    • Macroeconomics- deals with the performance, structure, behavior, and decision-making of an economy as a whole.

Analyzing Economic Concepts

The bar graph (pg.34) below shows the relationship between educational level and weekly wages

  • Describe the relationship between education and earnings for male in 1979
    • in 1979 males who had an education made about 20% more than the males who did not have an educational degree
  • Explain why the earning gap between colleges and high school graduates have changed between 1979 and 2004
    • Education is investment. many high paying jobs are white-collared jobs and demand that a person has some form of experience in order to get a better pay. The higher the education the more pay someone will get. 1979 was also the year the department of education was built to increase the amount of educational programs in the country. More people went to school and went to college therefore getting better jobs

Critical Thinking

Evaluating Economic Decision

  • you plan to open a restaurant that specializes in meals cooked with organic products. You realize that location is very important for this kind of business. You have two option: you can rent an expensive site downtown or you can buy an inexpensive building in a quiet neighborhood. What are the benefits and the opportunity cost for each option?
    • Expensive Site Downtown
    • more people=more business
    • more money will be made
    • More money spent on building
    • Cheaper building quiet neighborhood
    • cheaper building
    • less business=less return rate

Conducting Cost-Benefit Analysis

  • You are considering taking a part time job after school at a local veterinary surgical center. Create a decision making grid to analyze your potential choices.
    • receptionist- not much experience ,little pay, flexible hours
    • assistant- more experience needed (might not have experience) maybe flexible hours, higher pay
    • Clubs at school- no pay, but better time management, more time to study, better grades

Challenge

  • You own a small factory that makes widgets and you want to increase production, so you hire new workers. Each new worker increases productivity but each must also be paid. When will you stop hiring new workers
    • I will stop hiring new workers when my small factory has an efficient amount of people that can make widgets at a reasonable pace. I will hire more people when i have more money, but obviously it will better for my business if I don’t just hire anybody randomly, but choose the most qualified person for the job.

Unit 2 Review

Reviewing Key Concepts

Introduction to Economic Systems

  • What are the three types of Economic Systems?
    • Command Economy
    • Market Economy
    • Traditional Economy
  • What are the features of a Traditional Economy?
    • depend on agriculture, fishing, hunting, gathering
    • Barter
    • Based on culture and traditions

Command Economy

  • What role does government play in a Command Economy?
    • They control the economy. they have full power over products, pay and business
  • What are the advantages and disadvantages of a Command Economy?
    • equality in employment and pay, replacing the importance of profit with equality
    • lack of innovation, lack of competition, somehow usually leads to authoritarianism and fascism

Market Economy

  • What are the features of a Market Economy?
    • Private property, economic freedom, profit
  • What are the advantages and disadvantages of a Market Economy?
    • there is increased proficiency and innovation the economy however there is inequality within workers whomst may not get paid the amount they deserve

Market Economic in Global Age

  • What are the features in a mixed economy?
    • Private property is protected, free market, driven by the self interest of people (also has government intervention)
  • What trends are shaping modern economies?
    • how the government handles ownership and property, population growth, modern innovations (such as the internet), foreign relationships, etc.

Applying Economic Concepts

look at the chart below showing statistics for four nations. Answer the following questions

  • Which country appears to have the most productive economy?
    • Poland
  • Does a high percentage of GDP from agriculture make a country more or less productive?
    • If a country has a high percentage of GDP one cannot assume it will show the productivity of the country. China and North Korea has a high GDP from agriculture however according to the statistics on the chart, they are not that productive

Critical Thinking

Evaluating economic decision

  • Using information in figure 2.8 (Previous question table) why do you think Namibia and Poland have relatively high growth rates?
    • As answered before from the case study, command economies don’t have high productivity or innovation but a market economy does. This is because Poland and Namibia are free markets which allow their citizens to work in an environment where they can work in whichever way they want. Statistics show that being in a free market increases productivity

Explaining an economic concept

  • In most of the former command economies in Eastern Europe, one of the first economic changes instituted was establishing the right to own private property. why do you think the leader of these countries considered the feature of market economies so important?
    • Citizens who live under the rule of a command economy are shown to be less motivated and less productive which then affects the output of money the country makes. Some government in Eastern Europe realized this and saw that countries that were in a free market economy were thriving, thus switching to a more free market economy

Unit 3 Review

Reviewing Key Concepts

Advantages of the Free Enterprise System

  • What is a free enterprise system?
    • The Free Enterprise System is a system in which privately owned businesses operates in competition with other businesses and they have little government interference
  • What are some of the rights that must be protected for a free enterprise system to work?
    • Some rights that need to be protected are: fair wages, labor laws, employee safety, etc.

How Does Free Enterprise Allocate Resources?

  • What are the roles of consumers and producers in allocating resources?
    • Figuring out what will bring them the most profit. The producers control what resources will be allocated.
  • What role does government play in the economy’s circular flow?
    • The government acts as a buyer in both the product and resource market. They provide their people goods, services, and they handle payment

Government and Free Enterprise

  • What problems make public goods necessary?
    • When market failure happens, the people will not benefit from the marketplace, thus why public goods are necessary
  • Besides providing public goods, what two purposes can a government serve in a market economy?
    • Government can provide public services and labor laws to ensure the safety of their civilians

Applying Economic Concepts

Use the information in the table to answer the following questions about changes in the nation since the passage of the Clean Air Act in 1970

  • How would you use these statistics to argue that the government has effectively managed a negative externality?
    • The environment of the United States became slightly healthier. looking at the table we see that Lead Emission has went down by 98%. Lead is very poisonous and we would not need it in our everyday products. The Clean Air Acts takes care of not only the environment, but also the american people.
  • Recently, there has been pressure to loosen clean air standards. Use Economic Arguments to support or oppose this proposed action.
    • Clean Air Standards should not be loosened. If anything, they should be tightened even more. The environmental impacts the availability of Natural Resources. In order for the government to want to make profit, they should care about their environment.

Critical Thinking

Distinguishing Facts from Opinion

  • Look again at the information on changes in the United States after the passage of the Clean Air Act. Which of the following statement is an opinion and which one is a fact? Explain why in your answer
    • Pollution has decreased in the 1970s
    • Fact because the statistics are showing that the pollution has decreased
    • Pollution has decreased as a result of the Clean Air Act
    • Opinion because there are other factors to consider. It is subjective and cannot be proven that pollution has decreased BECAUSE of the Clean Air Act or if there were other factors
    • The Government can ease restriction now that pollution is lower
    • Opinion because we do not know the outcome. They can also not change restrictions and it may or may not be just as effective.

Applying Economic Concepts

  • In the 1990s efforts were made to reform the healthcare system in the United States so that much of it came under government control. Explain in terms of economic concepts you have learned in this chapter why these effort failed
    • The United States is a free enterprise market which means that the government, in theory should have very little to no government interventions. The government should be there to enforce laws to protect the citizens. The United States treats Healthcare not as a necessity but as a privilege, thus why it is a privately (not publicly) owned business. The Government trying to interfere with a private business interferes with laws that protects the business from having the government interfering with healthcare.

Challenge

  • Milton Friedman Wrote: “Many people want the government to protect the consumer. A much more urgent problem is to protect the consumer from the government.” Explain what you think Friedman meant by this
    • Friedman is alluding to the fact that many government under a command economy does not have much freedom. Economic systems deal with money which creates a grey area of ethical issues in a society. Friedman is criticizing left-wing ideology for wanting to have a classless government. Friedman does not think that is possible because he believes that economy is driven by the self-interest of people, thus why he wants to protect the consumers from the government

Case Study

Contrasting Economies: North Korea and South Korea

Thinking Economically: Synthesizing

  • Based on document A and C, in which country does the government appear to be more involved in controlling business and the economy?
    • North Korea
  • Based on document A and C, what can you infer about the effects of government activities on the productivity in two nations?
    • The people in North Korea were in an unproductive work environment not because they did not want to work; but because they were forced to work in an environment where their government starved their people to death because they were suffering in a famine
    • The people in South Korea can be considered unproductive because they are just lounging around because they have nothing else to do; because the people in the South Korea have a choice and their choice is to innovate something, capitalize off of it, and then do nothing !
  • In today’s global economy is a command or a market economy more likely to succeed?
    • A market economy. We can see that in South Korea, although it seems like they can be unproductive because they are lounging around while the people in North Korea are suffering, at least the citizens in South Korea are not forced to die of starvation! Having freedom allows for citizens to properly survive while also being able to have their own material possessions