Objectives Assessed on Unit 1 Test
What is economics?
- Define the “economizing problem” or the “economic way of thinking.”
- Identify the three fundamental questions all economic systems must answer.
- Define scarcity.
- Explain the ceteris paribus assumption and its importance in economics.
- Distinguish between microeconomics and macroeconomics.
- Distinguish between positive and normative economics.
Economic systems
- Distinguish between a market economy and a command economy.
- Explain how resources are allocated in a market economy. Include rational self-interest,
competition, and the guiding function of prices.
Marginal utility and marginal analysis
- Define marginal utility.
- Explain how marginal utility is used in making rational economic decisions.
- Explain the law of diminishing marginal utility.
- Explain how allocative efficiency is achieved.
Opportunity cost
- Define and calculate opportunity cost.
Production possibilities curves
- Use a PPC to determine the opportunity cost of shifting resources from the production of one
good to another.
- Explain why a typical PPC is bowed out.
- Explain the characteristics of a PPC that is represented by a straight line.
- Explain how a PPC can be used to demonstrate economic growth.
- Identify the factors that would cause a leftward shift of a PPC.
- Identify the factors that would cause a rightward shift of a PPC.
- Differentiate between points that lie on a PPC and those that lie inside or outside of it.
Comparative advantage, specialization, and trade
- Explain the concept of comparative advantage.
- Given a table of production data for two countries, determine the opportunity cost each
country faces in producing either good.
- Given a table of production data for two countries, determine which country has the absolute
advantage in producing either product.
- Given a table of production data for two countries, determine which country has the
comparative advantage in producing either product.
- Given production data for two countries, determine what product those two countries should
specialize in.
- Given production data for two countries, determine the terms of trade that are beneficial to
both countries.
- Perform each of the above tasks using both the output and the input method.
Graphs
- Identify independent and dependent variables on a graph.
- Define positive relationship, direct relationship, and inverse relationship and explain how
they relate to the shape of a curve.
- Calculate the slope of both linear and non-linear curves.
- Given a set of data, construct a correctly labeled graph.