Economics
Unit 1 Study Guide
Test Date: Wednesday, February 3/ Thursday, February 4
Study Session Date:
Test Format: 42 Matching, Multiple Choice, & Short Answer (90%); 1 Essay (10%)
Textbook Sections Covered: Chapters 1-3
I. Vocabulary to Know: opportunity cost, scarcity, efficiency, goods, trade-off, production
possibilities graph, services, shortage, underutilization, labor, factors of production,
standard of living, privatize, economic system, self-interest, safety net, communism, laissezfaire, collective, factor payments, gross domestic product, free rider, public interest, private
sector, in-kind benefits, macroeconomics, poverty threshold, market failure, welfare, public
disclosure laws, land, labor, capital, entrepreneur, “guns or butter”, centrally-planned
economy, competition, specialization, incentives, Adam Smith, Karl Marx, traditional
economy, market economy, externality (positive/negative), public good
II. Economies to Know: former Soviet Union, United States, China, Cuba, North Korea
III. Concepts/General Knowledge Needed
1. Basic economic questions (3)
2. Purpose of the production possibilities graph
3. What does it mean to be an efficient economy?
4. Different types of economic systems
5. Government intervention to provide for needs the market does not address
6. Public good vs. Private good (Benefit to the whole society vs. individuals)
7. How do consumers drive the economy?
8. Business Cycle vs. day-to-day ups and downs
9. Impact of technology
IV. Essay Possibilities
A. Explain how the introduction of physical capital, in the form of a
computer, could benefit a family. Are there some ways in which a
computer might not benefit a family?
B. Explain what has happened to most of the large centrally planned
economies. Include examples and state why this has happened?
C. List the 3 basic economic questions that systems must answer and
briefly describe the ways particular systems function.