1. If you could choose between two nearly identical products one that is free and one that you have to pay for which would you choose? Why?

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1 /114 Packet: /10 Unit 1 BPQ: Econ Unit 1: Chapter 1-3 -Economic Basic Principles- Unit 1 BIG PICTURE Questions (BPQ) /10 Name Date Period /124 Total Points What is BIG PICTURE for Unit 1? To find the answer, we, as economists, must start by quickly summarizing the Unit 1 three essential questions presented in your notes (EQ 1 point each): 1. What is economics and why do we study it? 2. Explain and elaborate on the three main types of economic systems? 3. Elaborate on the American Free-enterprise system. Work with your partner to summarize what the BIG PICTURE is for Unit 1 (7 points): Unit 1 Problem Sets: Chapter 1 Problem Sets Economic Basics PPF Graph Problem Set Opportunity Costs Problem Set Chapter 1 Materials Objectives: Examine the causal relationship between scarcity and the need for choices (12.1.1) Explain opportunity cost and marginal benefit and marginal cost (12.1.2) Explain the role of profit as the incentive to entrepreneurs in a market economy (12.2.8) Preview /2 Respond to each question. Provide a thorough explanation for each decision. Chapter 2 Problem Sets Three Economic Viewpoints Problem Set Chapter 3 Problem Sets Kelo v. City of New London Problem Set Providing Public Goods Problem Set 1. If you could choose between two nearly identical products one that is free and one that you have to pay for which would you choose? Why? 2. If you were opening a new business, would you select a location closer to or farther away from a business that sold a similar or even identical product? Why?

2 Chapter 1 Vocabulary Chart /20 Term Textbook Definition Personal Connection Symbol Need Want Economics Good Services Scarcity Shortages Factors of Production Physical Capital Human Capital Entrepreneur Trade-off Guns or butter Opportunity Cost Thinking at the Margin Production Possibilities Curve Growth (not a term, but you will find it) Efficiency Underutilization Cost Chapter 1 Questions Answer the questions as you work through the reading. /15 1. Why is the idea of scarcity a starting point for thinking economically? 2. How is scarcity different from shortages?

3 3. List and describe the four factors of production. What is the difference between physical and human capital? 4. Critical Thinking: Why might an economist look at hundreds of cars moving along an assembly line and say, There is an example of scarcity? 5. Why must the opportunity cost of a decision always be something desirable? 6. How do economists use the phrase guns or butter? 7. What does it mean to think at the margin? Give a recent example. 8. How is underutilization depicted on a production possibilities frontier? 9. Explain how a production possibilities curve illustrates the efficiency an economy. 10. How does a production possibilities curve illustrate opportunity cost? 11. Critical Thinking: Describe a specific event that would make each of the following happen to a production possibilities curve: a. What is happening with the economy at point A? b. What is happening with the economy at point C? c. Explain the state of the economy at point B? \ i. What does this tell us about the state of foreign affairs for this country? D d. Explain why the economy would shift from point B to point D.

4 Chapter 2 Materials Objectives: Identify the difference between monetary and nonmonetary incentives and how changes in incentives cause changes in behavior (12.1.3) Analyze the role of a market economy in establishing and preserving political and personal liberty (12.1.5) Explain the role of profit as the incentive to entrepreneurs in a market economy (12.2.8) Understand the role of government in a market economy (12.3.1) Preview /3 Respond to each question. Provide a thorough explanation for each decision. 1. How do economies figure out what to produce? 2. If I gave you $1,000 right now, what would you spend it on? Explain why. 3. What does the term invisible hand mean to you? Explain why. Chapter 2 Vocabulary Chart /17 Term Textbook Definition Personal Connection Symbol Economic System Factor Payments Standard of Living Market Specialization Household Firm Factor Market Product Market Profit Self-Interest Incentive Competition Invisible Hand

5 Laissez Faire Private Property Free Enterprise Chapter 2 Questions Answer the questions as you work through the reading. /11 1. What is an economic system? Use three vocabulary terms in your response and underline them. 2. Complete the following chart. List ONE pro and ONE con for each! Type of Economic System Pro Con Traditional Economy Market Economy Centrally Planned/Command Economy Mixed Economy 3. Why aren t all people paid the same amount in factor payments for the resources they provide? Give two examples of uneven factor payments. 4. How does specialization make us more efficient? 5. What is the difference between the factor market and the product market? 6. What are the roles of households and firms in a market economy? 7. How does competition among firms benefit consumers? 8. How do socialism and communism differ?

6 Chapter 3 Materials Objectives: Analyze the role of a market economy in establishing and preserving political and personal liberty (12.1.5) Explain the roles of property rights, competition, and profit in a market economy (12.2.3) Explain the role of profit as the incentive to entrepreneurs in a market economy (12.2.8) Understand the various aspects of government in a market economy (12.3.1) Identify factors that may cause the costs of government actions to outweigh the benefits (12.3.2) Describe the aims of government fiscal policies and their influence on production/employment and price levels (12.3.3) Preview /4 Respond to each question. Provide a thorough explanation for each decision. 1. Explain what free enterprise means to you. Give an example 2. How can an economy provide growth and security, or do opportunity costs exist? 3. What kind of goods does the government provide to us? 4. Explain how a safety net could be considered a disadvantage in a free market economy. Chapter 3 Vocabulary /15 Term Textbook Definition Personal Connection Symbol Profit Motive Open Opportunity Private Property Rights Free Contract Voluntary Exchange Public Disclosure Laws Public Interest Public Good Public Sector Private Sector Free Rider Market Failure Externality Poverty Threshold

7 Welfare Chapter 3 Questions Answer the questions as you work through the reading. /27 1. Name and describe two constitutional guarantees underlie the American free enterprise system. 2. Explain the importance of the following terms in the U.S. free enterprise system Term Importance Advantage Disadvantage Profit Motive Voluntary Exchange Private Property Rights Competition 3. Critical Thinking: What are some opportunity costs of a greater government role in the economy? 4. Use the following chart to compare Micro/Macroeconomics in their relationship to YOU. EXAMPLES (x3) MACRO Definition ttt YOU MICRO Definition EXAMPLES (x3) 5. How does gross domestic product (GDP) provide a means to analyze economic growth? 6. What does GDP tell economists about business cycles?

8 7. Explain how: a. Patents and copyrights promote innovation. b. Innovation help the economy? 8. Critical Thinking: Explain how scientific discoveries and technological innovations create the need for rules and regulations to protect individuals and businesses? 9. Why is a free rider a type of market failure? 10. What is the difference between the public sector and the private sector? Give an example of each. 11. Critical Thinking: Is the criminal justice system (police and the courts) a public good? Explain. 12. Why does poverty exist in a free market economy? 13. How is Social Security an example of income redistribution? 14. Explain how in-kind benefits work. 15. Explain what a cash transfer is.

9 Unit 1 Closure This section of the packet is not graded and is done in class. For the three types of economic systems, draw what you think is the correct PPF with the correct point A for full economic efficiency and then EXPLAIN what MIGHT BE HAPPENING in that specific economic system. Traditional Economy -Zombie Apocalypse- Mixed Economy -USA, USA!!!- Centrally Planned/Command Economy -North Korea-

10 Graphing a Production Possibilities Frontier (PPF) Follow these steps to create a graph. Draw a coordinate system with an x (ALWAYS HORIZONTAL) and y (ALWAYS VERTICAL- the "tail of the Y" goes down)-axis. Examine the data to be graphed (in the table below). Determine an appropriate title for each axis. Determine appropriate scale for each axis. Graph the data. Remember to always graph X first! Connect each point to create a curve. Guns or Butter? Point A B C D E F Butter (X) Guns (Y) 1. What does this graph tell us about our classroom economy? 2. What should our class concentrate our efforts on, guns or butter? Explain why. 3. In your opinion, how is this graph connected to the U.S. economy? 4. If an economy is producing only guns, where are they getting their butter? a. Explain how this effects that relationship among countries. 5. Based on what we have covered, what do you think the PPF represents as far as employment is concerned? a. Explain why this is true.

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