Unit I: Economic Fundamentals
Chapters 1-3
1
Unit I
Fundamental Economic Concepts
SSEF1 The student will explain why limited productive resources and unlimited wants result in scarcity,
opportunity costs, and tradeoffs for individuals, businesses, and governments.
a.
b.
c.
d.
Define scarcity as a basic condition that exists when unlimited wants exceed limited productive resources.
Define and give examples of productive resources (e.g., land (natural), labor (human), capital (capital goods),
entrepreneurship).
List a variety of strategies for allocating scarce resources.
Define opportunity cost as the next best alternative given up when individuals, businesses, and governments confront scarcity
by making choices.
SSEF2 The student will give examples of how rational decision making entails comparing the marginal
benefits and the marginal costs of an action.
a. Illustrate by means of a production possibilities curve the trade-offs between two options.
b. Explain that rational decisions occur when the marginal benefits of an action equal or exceed the marginal costs.
SSEF3 The student will explain how specialization and voluntary exchange between buyers and sellers
increase the satisfaction of both parties.
a.
b.
Give examples of how individuals and businesses specialize.
Explain that both parties gain as a result of voluntary, non-fraudulent exchange.
SSEF4 The student will compare and contrast different economic systems and explain how they answer the
three basic economic questions of what to produce, how to produce, and for whom to produce.
a.
b.
Compare command, market, and mixed economic systems with regard to private ownership, profit motive, consumer
sovereignty, competition, and government regulation.
Evaluate how well each type of system answers the three economic questions and meets the broad social and economic goals
of freedom, security, equity, growth, efficiency, and stability.
SSEF5 The student will describe the roles of government in a market economy.
a.
b.
Explain why government provides public goods and services, redistributes income, protects property rights, and resolves
market failures.
Give examples of government regulation and deregulation and their effects on consumers and producers.
SSEF6 The student will explain how productivity, economic growth, and future standards of living are
influenced by investment in factories, machinery, new technology, and the health, education, and training of
people.
a. Define productivity as the relationship of inputs to outputs.
b. Give illustrations of investment in equipment and technology and explain their relationship to economic growth.
c. Give examples of how investment in education can lead to a higher standard of living.
SSEMI1 The student will describe how households, businesses, and governments are interdependent and
interact through flows of goods, services, and money.
a.
b.
Illustrate by means of a circular flow diagram, the Product market; the Resource market; the real flow of goods and services
between and among businesses, households, and government; and the flow of money.
Explain the role of money and how it facilitates exchange.
Unit I: Fundamental Concepts
Chapter
Chapter 1
Chapter 2
Chapter 3
Standards
EF1a,b,d EF2a,b
EF3a, EF4a,b, EMI1a
EF3b, EF4a, EF5a, EF6a,b,c
2
Standards Update Sheet
Name:________________________________Class:_______________Instructor:___________________
+
mastery
Standard
- needs improvement
Activity
Activity
Activity
Activity
Activity
SSEF1a
SSEF1b
SSEF1c
SSEF1d
SSEF2a
SSEF2b
SSEF3a
SSEF3b
SSEF4a
SSEF4b
SSEF5a
SSEF5b
SSEF5c
SSEF6a
SSEF6b
SSEF6c
SSEMI1a
3
Activity
Activity
Activity
Activity
Chapter 1.1: Scarcity, Factors of Production, Opportunity Cost, PPC,
SSEF1 The student will explain why limited productive resources and unlimited wants result in scarcity, opportunity costs, and
tradeoffs for individuals, businesses, and governments.
a. Define scarcity as a basic condition that exists when unlimited wants exceed limited productive resources.
Essential Question:
How do limited productive resources and unlimited wants result in scarcity?
Activating Strategy:
Frayer Model Vocabulary
Teaching Strategies:
Cloze Notes, Graphic Organizer
Summarizing Strategy:
Ch. 1.1 Study Guide and Quiz
Written Response Area:
4
Unit 1: Fundamental Economic Concepts
Chapter 1.1: Scarcity, Factors of Production, Opportunity Cost, PPC,
Definition
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
During the holiday season of 1996, a children's toy appeared on Good Morning America. The toy,
produced by Mattel, had sat on the shelves with very little sales until it appeared on the show. After the
toys appearance, its popularity improved and it became the most sought after product of the holiday season.
Unfortunately, Mattel did not anticipate the doll’s popularity, only producing 400,000 units, and were not
able provide the product in a timely manner at the store level (over 1,000,000 were in demand).

List the problem that each of the following faced:
o The Consumers (You and I) __________________________________________________________________
o The Producer (Mattel) ______________________________________________________________________
o The Stores (Babies R Us) ____________________________________________________________________

Scarcity – is the fundamental problem facing
__________________________________________________________
_____________________________________________________________________________________________

No one can have an_______________________________________________________________________

Scarcity applies to_________________________________________________________________________
 e.g. - money, ____________________________, ____________________________,etc.
6
-
Application Question

List three things that you feel are scarce in your life, what has caused them to become scarce?
1. _____________________________________________________________________________________
2. _____________________________________________________________________________________
3. _____________________________________________________________________________________
What is Economics?

Economics – the study of ___________________________how individuals and groups seek to satisfy their
_______________________________________________________________________________________
Needs vs. Wants

Need – a _______________________________________________________________________________
 Eg. Food, ________________________________________________________

Want – not a basic requirement __________________________________________, a means of expressing
a ____________________
 E.g. cheeseburger, __________________________________________________________________
Goods and Services
 Good – a _________________________________________________________________________ product

i.e. – Automobiles, Video Games, Cell Phones, CD’s, Tickle Me Elmo, etc…
 Service – a __________________________________________________________________ that is
performed for someone else
 i.e – Financial Advisor, Stock Broker, Movies, Dentist, Teachers, etc..
Factors of Production
 Factors of Production - resources required to produce____________________________________________



Land _____________________________________________________________________________
Labor_____________________________________________________________________________
Capital__________________________________________________________________________

Physical – also known as __________________________________, human made objects
that are used to ______________________________________________________________


Human capital – collective amount of ____________________________________________
and specialized _________________________________________________________
Entrepreneurship___________________________________________________________________
Goods and Services Chart
Item Advertised
Good/Service
Want/Need
7
Market Audience
Daily Assignment Questions
1. Why is scarcity not a problem that is limited to just the “have-nots”? __________________________________
___________________________________________________________________________________________
2. List a good and a service that you have purchased in the past month.
Good ____________________________________ Service
____________________________________________
3. What is something that you have that might be considered a want by other societies? ____________________
Explain why ________________________________________________________________________________
4. Last year, you were trying to make a decision on what kind of car you wanted your parents to buy you for
your birthday. You had two choices: 1) 1984, Honda Accord for $2,000, or 2) 2010 fully stocked Infiniti
G37 for $52,000. Which one of these would be considered a want, and which one a need and why?
______________________________________________________________________________________
______________________________________________________________________________________
5. “Hank” works two jobs, one in the morning and one at night. At his morning job he sells furniture at a
furniture store. At his night job he works as a computer technician. Which one of his jobs creates a good
and which provides a service?
Furniture Store _______________________
Computer Technician _____________________________
6. Microsoft offers all of their employees the opportunity to attend the local university for a higher education,
free of charge. What would be the motivation for investing in human capital? ________________________
________________________________________________________________________________________
7. Which factor of production is represented by each of the following?
 An office building _________________________________________________
 An assembly line worker _________________________________________________
 A tree used to make paper_________________________________________________
 Unused soil_________________________________________________
 Oprah Winfrey _________________________________________________
8
Chapter 1.2: Scarcity, Factors of Production, Opportunity Cost, PPC,
SSEF2 The student will give examples of how rational decision making entails comparing the marginal benefits and the marginal
costs of an action.
b. Define and give examples of productive resources (e.g., land (natural), labor (human), capital (capital goods),
entrepreneurship).
c. List a variety of strategies for allocating scarce resources.
d. Define opportunity cost as the next best alternative given up when individuals, businesses, and governments confront scarcity
by making choices.
Essential Question:
1. Why does everything you do involve a trade-off and opportunity cost ?
2. Why is it important to think at the margin?
3. How does the market decide to allocate resources?
Activating Strategy:
Frayer Model Vocabulary
Teaching Strategies:
Cloze Notes, Graphic Organizer
Summarizing Strategy:
Ch. 1.2 Study Guide and Quiz
1.2: Opportunity Cost
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9
How People Make Decisions
Choice
Alternative Choices
1. Coming to
Economics Class
What you would have done if you
didn’t come to class
1.
1.
2.
3.

Trade-off–alternatives
that
we
______________________________
whenever
we
choose
___________________________________________________________________________________
 We always ________________________________________________________ to get something
else
 “There is no ___________________________________________________________________”
 Individuals, households and society all face tradeoffs

Opportunity Cost – used by economists to __________________________________________; value of the most
_________________________________________________________



Next best alternative ___________________________________________________
(Highest- __________________________________ forgone)
Individuals and Trade-Offs
_______________________________________________________________________________________
_______________________________________________________________________________________
Businesses and Trade-offs
_______________________________________________________________________________________
Society and Trade-offs
_______________________________________________________________________________________


Alternatives
Criteria
Immediate
Satisfaction
Long-Term
Benefits
Entertaining
Immediate
Financial Benefits
Necessary for
Long-term
success
Sleep
Economics
Thinking at the Margin
 Margin - an edge and the ____________________________________________________; a ________________
 Thinking at the margin – analyzing the costs and benefits of ___________________________________________
____________________________________________________________________________________________
 Production Possibilities Model – used to graph _________________________________________; shows
alternative __________________________________________________________________________________
10
Chapter 1.3: Scarcity, Factors of Production, Opportunity Cost, PPC,
SSEF2 The student will give examples of how rational decision making entails comparing the marginal benefits and the marginal
costs of an action.
b. Define and give examples of productive resources (e.g., land (natural), labor (human), capital (capital goods),
entrepreneurship).
c. List a variety of strategies for allocating scarce resources.
d. Define opportunity cost as the next best alternative given up when individuals, businesses, and governments confront scarcity
by making choices.
Essential Question:
1. What does the PPC show in regards to trade-offs and opportunity costs of an individual, business or society?
Activating Strategy:
Frayer Model Vocabulary
Teaching Strategies:
Cloze Notes, Graphic Organizer
Summarizing Strategy:
Ch. 1.1 Study Guide and Quiz
1.3: Production Possibilities Curve
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11
Definition
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Production Possibilities Curves

Production Possibilities Frontier Model – shows combinations
of___________________________________________________________________________________
o


Used to visually represent_______________________________________________________________
Production Possibilities Curve (PPC) – shows combinations of
______________________________________________________________________________________
Efficiency – using resources in such a way as to
_____________________________________________________
o
Points ____________________________

Underutilization (Inefficiency) – using fewer resources than an
________________________________________

Growth (future technology) – the change in ability to ________________________________, reflects a

New __________________________________________ (usually as a result of new technology)
o
Point ________ (Inefficient use of resources)
________________________________________________________
12
Good A
Good B
0
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1
10
2
8
3
6
4
4
5
2
6
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Daily Assignment Questions Ch. 1 Sec. 2 Page 8 – 11
1. Write one example, of your own, of how individuals, businesses and societies make tradeoffs.



Individuals
___________________________________________________________________________
Businesses
___________________________________________________________________________
Society
______________________________________________________________________________
2. Why is opportunity cost not the cost of every available alternative of a decision? __________________________
___________________________________________________________________________________________
3. What were Karen’s two alternatives in figure 1.2. ___________________________________________________
4. What did Karen ultimately give up by sleeping late/waking up early to study for the test? ___________________
5. In figure 1.3, at what point does the added benefit of study time not increase as much? ____________________
6. What does it say Karen should think about when making a decision at the margin? ________________________
___________________________________________________________________________________________
7. How does comparing the cost and benefit at the margin help make us a better decision maker?
___________________________________________________________________________________________
8. Suppose that you can save $50 by buying your car in a different city. If the trip requires only $10 dollars in
gasoline, is the trip worthwhile? Why or why not? ______________________________________________
_______________________________________________________________________________________
13
9. Determine an opportunity cost for each of the following:
a) Eating a pizza ______________________________________________________________________________
b) Going to see a movie after school______________________________________________________________
c) Working an after school job___________________________________________________________________
d) Reading your economics book until you go to sleep tonight _________________________________________
Review - Guns or Butter PPF Application Questions
1. How many guns can be produced when no butter is produced? ____________
2. The opportunity cost of increasing the production of Butter from 0 to 30 units is ________ units of Guns.
3. What would it say about this society if the production decision was to produce at the (45, 20) point; assuming
that it takes 30 units of butter to provide basic foodstuffs to society and 40 units of Guns to protect their
society?_____________________________________________________________________________________
Answer the following questions based on the model above:
1. What do the points along the curve represent? ____________________________________________________
2. What does the point at letter a represent? ________________________________________________________
3. Why is letter b currently unattainable; what could allow this society to reach letter b? _____________________
14
Study Guide
Chapter 1 – What is Economics?
Section 1 – Scarcity and the Science of Economics
1. ____________________________ is the fundamental problem of economics, that people have unlimited wants
but limited resources to satisfy those wants.
2. Why can we argue that scarcity affects both the rich and the poor?
___________________________________________________________________________________________
3. Economics is the
________________________________________________________________________________
4. Explain the difference between a need and a want
___________________________________________________________________________________________
5. Explain the difference between a good and a service and provide an example of
each________________________________________________________________________________________
6. The Factors of Production are resources required to
___________________________________________________
7. Provide an example of each of the Factors of Production:
a. Land
___________________________________________________________________________________
b. Labor
__________________________________________________________________________________
c. Capital
_________________________________________________________________________________
d. Entrepreneur__________________________________________________________________________
8. Explain the difference between physical and human capital
___________________________________________________________________________________________
Section 2 – Opportunity Cost
9. Why do decisions involve tradeoffs?
________________________________________________________________
10. ___________________________________ cost is the most desirable alternative given up as the result of a
decision.
11. Explain why “there is no such thing as a free lunch” _________________________________________
___________________________________________________________________________________________
12. How is thinking at the margin helpful?
______________________________________________________________
13. Apple’s decision to produce less of the iPod , but more of the iPhone represents a _____________________
tradeoff.
14. North Korea’s decision to neglect the health of their citizens to build up their military is an example of a
___________________________ tradeoff.
15. The decision to come to economics class or to sleep in is a _____________________________ tradeoff.
16. One method of comparing the cost of an action to the benefit received is a
_________________________________
17. What does the production possibilities curve show?
__________________________________________________
18. Give an example of how the production possibilities frontier can grow (shift to the right)
15
19. Give an example of how of underutilization of resources might occur
20. Illustrate by means of a production possibilities curve the trade-offs between two options.
a. Label your curve PPF
Butter
15
Possibility
a
b
c
d
e
f
Guns
0
1
2
3
4
5
Butter
15
14
12
9
5
0
60
a) Why is the PPF curved when charted on a graph?
b)
c)
d)
e)
f)
Guns
How many guns can you produce if you produce no4butter? _________________
How much butter do you produce when you produce no guns? _________________
How many guns do you give up if you produce 12 butter? ________________
How much butter do you give up if you produce 4 guns?
________________
2
Any point inside the PPF line indicates the ______________________________ of resources, whereas any point
outside the line indicates _________________________ in the production possibilities frontier.
END OF CHAPTER 1
16
Chapter 2: Economic Systems
SSEF4 The student will compare and contrast different economic systems and explain how they answer the three
basic economic questions of what to produce, how to produce, and for whom to produce.
a.
Compare command, market, and mixed economic systems with regard to private ownership, profit motive, consumer
sovereignty, competition, and government regulation.
b. Evaluate how well each type of system answers the three economic questions and meets the broad social and economic goals
of freedom, security, equity, growth, efficiency, and stability.
Essential Question:
1. How do the four economic systems answer the four basic Economic questions?
2. What comparisons can be made about the four economic systems?
Activating Strategy:
W.R. Speculate how each economic system would regulate their economy.
Teaching Strategies:
Cloze Notes, Graphic Organizer
Summarizing Strategy:
Ch. 2.1 Daily Assignment Questions and Study Guide.
Written Response Area:
17
Chapter 2 – Economic Systems
Section 1 – Answering the Four Economic Questions

Economic system – is the method used by society to
________________________________________________

The Four Key Economic Questions are
o What and How Much____________________________________________________________________
o Who ____________________________________________________________________________
o How ____________________________________________________________________________
o For Whom _______________________________________________________________________
Four Types of economic systems
1. Traditional Economy – relies on __________________________________________________
to decide the three economic questions.
2. Market Economy – economic decisions are made by
____________________________________ and are based on _________________________
3. Command Economies – in a centrally planned economy the
____________________________________ alone decides how to answer the three economic
questions.
4. Mixed Economy – most modern economies are mixed economies, ________________________
- based economic systems in which the government ____________________________________
Using the Chart Below, describe each of the Economic Goals and Societal Values. Then provide a real-life example of
each.
Economic Goal and
Summary
Example
Societal Value
1. Economic
Efficiency
2. Economic Freedom
3. Economic Security
and Predictability
4. Economic Equity
5. Economic Growth
and Innovation
6. Other Goals
18
Review Economic Goals
Situation
1. Last week I willingly enrolled in college courses at Coastal. I
am so happy that I make my decisions about my future.
2. My uncle lost his job, but thankfully he is able to receive
unemployment checks.
3. Wal-Mart recently upgraded all of their registers to touch
screen monitors.
4. General Motors replaced all of their human workers with
robots in order to increase productivity.
5. As a result of the internet and technology, our economy
has experienced significant expansion over the past 30
years.
6. I can always expect Publix to have the food I like!
Economic Goal
7. Hopefully in the future we will have full employment.
8. With every degree/skill I earn, I improve my ability to
make money

Daily Assignment Chapter 2 Section 1 – pgs. 26-27
1. How does a traditional economy answer the three economic questions?
2. Describe traditional economies and their communities.
3. What is a disadvantage to a traditional economy?
4. How are the three economic questions answered in a market economy?
5. What are other names for market economies?
6. How are the three economic questions answered in a command economy?
7. Why are they referred to as command economies?
8. Why are most modern economies referred to as mixed economies?
19
Chapter 2: Economic Systems
SSEMI1 The student will describe how households, businesses, and governments are interdependent and
interact through flows of goods, services, and money.
c.
Illustrate by means of a circular flow diagram, the Product market; the Resource market; the real flow of goods and services
between and among businesses, households, and government; and the flow of money.
Essential Question:
1. How can you track the flow of goods and services using the Circular Flow Model?
Activating Strategy:
Walmart activity
Teaching Strategies:
Cloze Notes, Graphic Organizer
Summarizing Strategy:
Ch. 2.2 Daily Assignment Questions and Study Guide.










Section 2 – The Free Market
Imagine that you are walking into Walmart. List 3 items that you could purchase and the departments that you
would find them in.
Item
Department
Market – buyers and sellers ____________________________________________________________________
Market Economy – economic decisions, __________________________________________________________
are made by __________________________ and _________________________________based on exchange of
_______________________________________________________
Capitalism (free enterprise) – Individuals and businesses own the ______________________________________
and can profit on them
Specialization – the separation of _________________________________________________; people focus on a
______________________________________________________
Division of Labor – workers perform ____________________________________________________ in order to
____________________________________________________
Household – ________________________________________________________________ living in a residence
o Consumers - use the _____________________________________________ to satisfy wants and needs
Firm – _____________________________________________ that uses resources to
___________________________________________, which it then sells
o Suppliers – transform “________________________” (F.O.P.) into
“__________________________” (consumer products)
Product Markets – _______________________________________________ interact; producers sell their
________________________________________________________
o Households are ____________________________________ of goods and services
o Firms are _____________________________________ of goods and services
Factor Markets – the markets where productive resources (F.O.P) are bought and sold
o
o
o
Labor - Firms (businesses) _________________________________________________________
Land - _________________________________________________________ land
Capital - Use money from ____________________________________________
(_______________________, investment, etc) to purchase _____________________________________
20

Circular Flow Model - shows the flow of _________________________ and ____________________________
from and to _________________________and _________________________
Application Question
1. In the factor market, what do businesses provide households? __________________________________
2. The flow of goods and services in the product market is represented by which firm and products on the
model below? ______________________________________________
3. When you apply for a job at the local Starbucks which market are you in? _________________________
4. Which color arrows represent the flow of money; what color arrows represent the flow of inputs and
outputs. __________________________________





Competition Article
1. Do you agree with Vincent Lombardi’s assertion that people are born with the desire to compete why or
why not? ________________________________________________________________________________
________________________________________________________________________________________
2. What areas do you see competition in the economy of the United States ? ___________________________
________________________________________________________________________________________
3. How is competition beneficial to our economy/society? ___________________________________________
4. How is it harmful to our economy/society? _____________________________________________________
Competition – efforts among _________________________________________ to attract consumers at various
prices
o At the heart of ________________________________________
Incentive – an expectation that __________________________________________________________________
(positive and negative)
Businesses respond to __________________________________
Consumers respond to __________________________________
21
Chapter 2: Economic Systems
SSEF4 The student will compare and contrast different economic systems and explain how they answer the three
basic economic questions of what to produce, how to produce, and for whom to produce.
a.
Compare command, market, and mixed economic systems with regard to private ownership, profit motive, consumer
sovereignty, competition, and government regulation.
b. Evaluate how well each type of system answers the three economic questions and meets the broad social and economic
goals of freedom, security, equity, growth, efficiency, and stability.
Essential Question:
1. How are the four basic economic questions answered according to a Centrally Planned Economy?
Activating Strategy:
North Korea Video and Written Response. http://www.youtube.com/watch?feature=player_detailpage&v=wM1sKwW_Ogk
Teaching Strategies:
Cloze Notes, Graphic Organizer
Summarizing Strategy:
Ch. 2.3 Daily Assignment Questions and Study Guide.
Section 3 – Centrally Planned Economies


Command – ____________________________________________________________ the Factors of Production
Centrally Planned Economy – central government answers the
______________________________________________; ________________ to produce, ________________to
produce, and ________________to produce
o Oppose _________________________, free market pricing, economic ___________________
Socialism and Communism

Karl Marx – German ___________________________________________ that studied
______________________________________ in Europe
o Communist Manifesto – written by Marx and
__________________________________________ became basis for modern-day
__________________________________________
o Thought capitalism would fail because it
__________________________________________________________
o Believed in a ___________________________system, where all share in
_____________________________________
o Socialism – distribution of __________________________________________ equally amongst
society
o Communism – political and economic system with
____________________________________________
o Authoritarian Government – exact _________________________________________from their
citizens; do not allow __________________________________________
22
Chapter 2 Section 3 – Daily Assignment Questions “The Former Soviet Union”, pgs. 36-38
How did the Soviet arise?
1. Where did Soviet planners allocate the factors of production?
2.
How did the Soviet Union control agriculture?
3.
What three industries did Soviet Planners favor?
4.
How did the Soviet Union view entrepreneurial endeavors?
5.
What was the quote used by Soviet consumers as a joke?
6.
Why were Soviet Consumers’ left unsatisfied?
Page 39 – Russia in Crisis
7. How did many Russians initially respond to the Communist collapse?
8.
What happened over the next decade?
9.
How did Russia deal with corruption?
10. What were some characteristics of Russia’s financial problems?
11. What evidence can be seen that success is in sight?
Chapter 2 Section 2 – Daily Assignment: Economic Profile Adam Smith pgs. 33
1.
What was Adam Smith’s ethnic and professional background?
2.
What was the name of the book that he published; when was it published?
3.
What did Smith identify in the book?
4.
What did he assert about specialization and division of labor?
5.
What did he believe about the role of government in the economy?
6.
Define the French term Laissez Faire; why did Smith believe in Laissez-Faire economics?
7.
What is meant by his metaphor of the Invisible Hand?
8.
How do both consumers and businesses benefit from this philosophy?
23
Chapter 2: Economic Systems
SSEF4 The student will compare and contrast different economic systems and explain how they answer the three
basic economic questions of what to produce, how to produce, and for whom to produce.
c.
Compare command, market, and mixed economic systems with regard to private ownership, profit motive, consumer
sovereignty, competition, and government regulation.
d. Evaluate how well each type of system answers the three economic questions and meets the broad social and economic
goals of freedom, security, equity, growth, efficiency, and stability.
Essential Question:
2. How are the four basic economic questions answered according to a Centrally Planned Economy?
Activating Strategy:
Modern America video: 33:20 http://www.youtube.com/watch?feature=player_detailpage&v=hET-zSJDbgA#t=2003
Teaching Strategies:
Cloze Notes, Graphic Organizer
Summarizing Strategy:
Ch. 2.4 Daily Assignment Questions and Study Guide.
Section 4 – Modern Economies

Free Enterprise – __________________________in the marketplace is allowed to flourish with
_______________________________________________________________________________
 Modified Free Enterprise (mixed economy) – businesses are free to compete with _________________________
___________________________________________________________________________________________
Laissez Faire in a Modern Economy
 Laissez Faire – no _____________________________________________________________________________
 History has shown that _______________________________________________________ is necessary in the
economy; some needs are ______________________________________________________________________
o National defense, __________________________, ___________________________________, etc
o Government acts a ____________________________________________________________________
of the economy
Government Revenue
 Taxes from both ________________________and __________________________
o Federal ________________________, state_________________________, social security,
___________________________/Medicaid, ______________________________________, etc.
Government in the Factor Market

Government purchases _________________________, __________________________, and
________________________________ from households
o US government pays _____________ employees, _______________ billion for labor
Government in the Factor Market

Government purchases _________________________, __________________________, from
________________________________
o Buildings, ___________________________, telephones, ___________________________, etc.
END OF CHAPTER 2
24
Chapter 3: The American Free Enterprise System, 3.1: Free Enterprise
SSEF3 The student will explain how specialization and voluntary exchange between buyers and sellers increase
the satisfaction of both parties.
a.
b.
Give examples of how individuals and businesses specialize.
Explain that both parties gain as a result of voluntary, non-fraudulent exchange.
SSEF5 The student will describe the roles of government in a market economy.
b.Give examples of government regulation and deregulation and their effects on consumers and producers.
Essential Question:
1. What is the origin of the American Free Enterprise System?
2. How does the American Free Enterprise System work effectively?
Activating Strategy:
Modern America video: 33:20 http://www.youtube.com/watch?feature=player_detailpage&v=hET-zSJDbgA#t=2003
Teaching Strategies:
Cloze Notes and Activities
Summarizing Strategy:
Ch. 3.1 Daily Assignment Questions and Study Guide.
Chapter 3: The American Free Enterprise System
SSEF3b, SSEF4a, SSEF5a, SSEF6a,b,c
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Written Response Area:
25
3.1: Free Enterprise
A tradition of Free Enterprise
Over 18 million unincorporated businesses in America.
America, “the land of opportunity,” a place where anyone from any background could achieve success through hard work
Why has America been so successful?
Open land, natural resources and uninterrupted flow of immigrants.
Free Enterprise – social and political commitment to giving people the freedom and flexibility to try out their business ideas and
compete in the marketplace. Pursuit of Happyness : http://www.youtube.com/watch?v=_xcZTtlGweQ
Constitutional Protections:
_________ ___ ______________ – guarantees certain individual freedoms. I.E.: freedom of speech, religion
__________________ ________________ – protected under the 5th amendment; no person shall be deprived of life, liberty, or
property without due process of law; nor shall private property be taken for public use without just compensation
Taxation
Article I – gives Congress the power to levy taxes, Sections 2 and 9 taxes apportioned according to population so that everyone will
pay the same amount.
___________________ ___________________ (1913) – gave Congress the right to set taxes based on Income
Income Tax Rates: http://www.bankrate.com/finance/taxes/2011-tax-bracket-rates.aspx
Article I, Section 10 – individuals or business cannot use political process to get excused from their contracts, no law can be passed
that would change the terms of someone’s business agreement.
Basic Principles of Free Enterprise
________________ ___________________ – the force that encourages people and organizations to improve their material well-being
It rewards innovation, and improves productivity
__________________ _____________________ – the concept that everyone can compete in the marketplace
Economic Rights –
Legal equality – everyone has the same legal rights, it allows everyone to compete in the economic marketplace
________________ _______________ _____________ – people have the right and privilege to control their possessions as they wish.
Free contract – allows people to decide what agreements they want to enter into.
______________________ ____________ – allows people to decide what and when they want to buy and sell.
____________________ – rivalry among sellers to attract customers while lowering costs. Provides consumers with the choice of a
larger variety of goods.
Role of the Consumer – make their desires known through economic dealings with producers (silly bands, vans, i-pods)
Role of the Government
Information and Free Enterprise
Public Disclosure Laws- require companies to give consumers important information about their products
Credit card disclosure laws http://www.youtube.com/watch?v=6X9Ku5F2J-o
Protecting Health, Safety and Well Being – zoning laws, environmental protection, food, ,medicine…
26
On page 55 list the Major Federal Regulatory Agencies and their role in the American Free Enterprise System
Major Federal Regulatory Agencies:
Agency and Date Created
Role
27
3.2: Promoting Growth and Stability
SSEF3 The student will explain how specialization and voluntary exchange between buyers and sellers increase
the satisfaction of both parties.
a.
b.
Give examples of how individuals and businesses specialize.
Explain that both parties gain as a result of voluntary, non-fraudulent exchange.
SSEF5 The student will describe the roles of government in a market economy.
a. Give examples of government regulation and deregulation and their effects on consumers and producers.
Essential Question:
1. What are three ways of promoting growth and stability?
2. What does the business cycle represent?
Activating Strategy:
Fraye rVocab
Teaching Strategies:
Cloze Notes and Activities
Summarizing Strategy:
Ch. 3.2 Daily Assignment Questions and Study Guide.
3.2: Promoting Growth and Stability
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Tracking Business Cycles
______________________ – the study of the economic behavior and decision making of small units, such as individuals, families and
businesses (individuals)
_____________________ – the study of the behavior and the decision making of entire economies. (The nation)
American Free Enterprise – Government plays a role in attempting to prevent wild swings in economic behavior.
Business Cycle – a period of macroeconomic expansion by a period of contraction
Promoting Economic Strength
1. High Employment – unemployment rate of 4-6%
2. Growth – higher standard of living for each generation
3. Economic Citizenship – Influence the system by voting
Technology and Productivity (p.59)
America has a high standard of living in comparison to the majority of the rest of the world
GDP/capita statistics: http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capita
28
_____________ ________________ – purposeful activity and commitment to value
____________________ – process used to produce a good or service
Innovations help us create more for less.
Time Magazine 2010 Inventions http://www.youtube.com/watch?v=yTRkdm-hi04&feature=related,
Governments Roll:
Provides Incentive for innovation
Morrill Acts of 1862 and 1890 – land-grant money to pursue the study of agriculture. I.E. MIT and Texas A&M University
NASA –
US Patents – gives the inventor the exclusive right to produce and sell for 20 years
Copyright – exclusive rights to publish and sell creative works
R&D – Research and Development
29
3.3: Providing Public Goods and 3.4 Providing a Safety Net
SSEF5 The student will describe the roles of government in a market economy.
a.
b.
Explain why government provides public goods and services, redistributes income, protects property rights, and resolves
market failures.
Give examples of government regulation and deregulation and their effects on consumers and producers.
Essential Question:
1. How does the government provide for market failures?
2. How does the government help provide for a proper standard of living?
Activating Strategy:
Fraye rVocab
Teaching Strategies:
Cloze Notes and Activities
Summarizing Strategy:
Ch. 3.3,4 Daily Assignment Questions and Study Guide.
3.3: Providing Public Goods
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_____________ _____________ – a shared good or service for which it would be inefficient or impractical to make consumers pay
individually and to exclude non-payers.
I.E. Cleaning Mt. Rushmore, launching a space shuttle, Interstate highway, Parks
Why would each of the above be considered a public good?
__________________ _____ ___________ – the benefit must outweigh the cost when deciding to move forward with a public good
1. The benefit to each individual is less than the cost that each would have to pay if it were provided privately.
2. The total benefits to society are greater than the total cost.
30
List 3 Public Goods in Glynn County that prove to benefit society more than it costs. Explain why.
Public Good
Explain why it benefits society more than it costs society
______________ _______________ – a situation in which the market does not distribute resources efficiently.
I.E.: Roads – if a company built it they would have to charge a fee for its use in order to make a profit. In addition, if the population
was sparse, then the company would have no incentive to produce it due to lack of profit.
___________ ___________ – someone who would not choose to pay for a certain good or service, but would get the benefits of it
anyway if it were provided as a public good. I.E. Fire Protection, Army helmets, Roads.
We are all free riders. If you use a road that is out of state, then you become a free-rider. You paid nothing towards the road, but
still use it.
__________________ – an economic side effect of a good or service that generates benefits or costs to someone other than the
person deciding how much to produce or consume
P

______________ Externality – an old house is purchased and fixed up – the neighborhood property value
increases due to this. The neighbors benefit without extending any energy towards the improvement of the old
house.

_____________ Externality – chemical waste is dumped in the river by a local pulp mill – the community is in
harms way of toxic waste. The community did not ask for the pollution, but is on the negative receiving end of the
pulp mill.
List Two Positive and Two Negative externalities in the community and explain why they are positive and negative.
Positive Externality
N
Negative Externality
31
3.4 Providing a Safety Net
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Fill in the appropriate information according to the powerpoint.
Persons
in Family
48 Contiguous
States and D.C.
Alaska
Hawaii
1
2
3
4
5
6
7
8
For each additional
person, add
Programs in place:
__________________________________________ (TANF) – program aims to move people from welfare dependence to the work
force.
Federal money issued to the state and the state runs their own welfare program.
_____________ ________________ – created in 1935 during the Great Depression. Provides cash transfers of retirement income.
32
Table 2: Americans Age 65 or
Older 1880-1990
Table 1: Life Expectancy for Social Security
Year
Cohort
Turned 65
1940
1950
1960
1970
1980
1990
Percentage of Population Surviving from Age
21 to Age 65
Average Remaining Life Expectancy for
Those Surviving to Age 65
Male
Female
Male
Female
53.9
56.2
60.1
63.7
67.8
72.3
60.6
65.5
71.3
76.9
80.9
83.6
12.7
13.1
13.2
13.8
14.6
15.3
14.7
16.2
17.4
18.6
19.1
19.6
Looking at the tables above, what Economic and Social implications can you foresee?
Year
Number of Americans Age
65 or Older
1880
1890
1900
1910
1920
1930
1940
1950
1960
1970
1980
1990
2000
1.7 million
2.4 million
3.0 million
3.9 million
4.9 million
6.7 million
9.0 million
12.7 million
17.2 million
20.9 million
26.1 million
31.9 million
34.9 million
________________ ________________ – cash transfer funded jointly by federal and state governments. Checks provide money to
eligible workers who have lost their jobs. http://www.bls.gov/lau/tables.htm
_________________ ___________________ – provides cash transfer of state funds to workers injured on the job. Most employers
must pay workers’ compensation insurance to cover any future claims their employees might make.
I.E. Mr. Martin’s torn ACL at open gym while working at EMHS.
In-Kind Benefits – goods and services provided for free or at greatly reduced prices. I.E. food stamps, subsidized housing, legal aid
Medical Benefits – United States government provides health insurance for the elderly, the disabled and the poor
________________ – over age of 65 and the disabled
________________ – covers some poor people who are unemployed or not covered by their employers insurance.
Education – Federal, state and local governments provide educational opportunities to the poor.
Faith Based Initiatives – religious organizations, US Dept of Health and Human Services -
33
1.
Daily Ten
EF 1-6 and EMI1 EF1a
EF1a: Any resources that are made by humans and used to create other goods and services are called
a. Services
b. Production
c. Capital
d. Labor
2.
EF1a: An example of a shortage is limited amounts of
a. Water available for irrigating a crop because it is used for other crops
b. Labor available because the workers have other jobs
c. Food available because the trucks carrying it are on strike
d. Food available because few people want to buy it
3.
EF1a: The lack of which of the following represents a scarcity?
a. Orange juice because the trucks carrying it are on strike
b. Enough workers to finish two jobs because there’s a limited supply of workers
c. Enough workers to work at night because the pay is too low
d. Grapefruit juice because very few people want to buy it
4.
EF1a: Why are all goods and services scarce?
a. Some goods cost more than others
b. All resources are scarce
c. Some things are needs and others are wants
d. Some people want to have more goods than others
5.
EF1a: Which of the following is an example of scarcity, rather than shortage
a. A popular toy is sold out during the busy holiday season
b. You have spent your last penny and payday is a week away
c. A person wants an endless supply of everything but cannot have it
d. Gasoline was rationed in America during World War II
6.
EF1b:The resources used to make all goods and services are the
a. production possibilities
b. factors of production
c. production trade-offs
d. opportunity costs
7.
EF1b: What is a factory building an example of?
a. Human capital
b. Physical capital
c. An economic trade-off
d. Technology
8.
EF1b: One example of an entrepreneur is
a. A writer who is hired by a film studio to adapt a novel into a screenplay
b. A lawyer in a high-profile law firm that specializes in business law
c. An Olympic ice skater who later decides to join a professional ice show
d. An artist who runs a business painting murals in office buildings and restaurants
9.
EF1c: All of the following are types of decisions that can be made at the margin EXCEPT
a. Whether to grow beans or corn on a large farm
b. Whether or not to hire 100 new workers
c. Whether to leave early in the morning or late in the day for a trip
d. Whether or not to go on vacation
34
10. EF1c: The government of a country must make a decision between increasing military spending and subsidizing
wheat farmers. This kind of decision is a
a. Guns or butter
b. Decision at the margin
c. Global trade-off
d. Basic economic decision
11. EF1c: A nation’s automakers install new robotic machinery to build cars. Now, cars take only a day to make, and the
factories can produce many more cars than before. This is an example of growth caused by
a. Land and natural resources
b. Human capital
c. Technology
d. Production possibilities curves
12. EF1d: An efficient economy is one that
a. Has very few people who do not work for a living
b. Makes less use of all its goods and services
c. Uses its resources to make the most goods and services
d. Makes the least costly use of it resources
13. EF1d: The opportunity cost of a decision can be examined by using a
a. Production possibilities graph
b. Factors of production chart
c. Global trade-off grid
d. Graph of increasing costs
14. EF1d: Production possibilities frontiers curve when they are charted on a graph because they show
a. The underutilization of resources
b. The maximum output of goods and services
c. The increasing costs resulting in increasingly less output
d. The technological level of the economy’s productivity
15. EF2a:
a.
b.
c.
d.
e.
Refer to Figure. The opportunity cost of this economy moving from point A to point C is
zero.
75 baseballs.
125 baseballs.
baseballs
225
125 baseballs and 240 bananas.
A
200
240 bananas.
175
16. EF2a: Refer to Figure.
The opportunity cost of this economy moving from
point D to point B is
a. zero.
b. 50 baseballs.
c. 60 bananas.
d. 50 baseballs and 60 bananas.
e. 60 baseballs and 50 bananas.
B
150
125
D
100
C
75
50
25
F
30
60
90 120 150 180 210 240 270 300 330
bananas
17. EF2a: Refer to Figure. Which of the following would most likely have caused the production possibilities frontier to
shift outward from A to B?
a. a decrease in unemployment
b. a technological advance in the consumer goods industries
c. a general technological advance
d. an increase in the availability of capital-producing resources
e. an increase in demand by consumers.
35
18. EF2b: Refer to Table Above. Which option has the greatest opportunity cost?
a. work 5 hours
b. work 4 hours
c. work 3 hours
d. work 2 hours
19. EF2b: Refer to Table Above. Which option has the least benefit?
a. work 1 hour
b. work 2 hours
c. work 3 hours
d. work 4 hours
20. EF2b: Refer to Table Above. Which option will earn the most money the quickest?
a. work 5 hours
b. work 4 hours
c. work 3 hours
d. work 2 hours
U.S.
Mexico
Corn
Melons
5
1
2
1
21. EF3a: Which country has a comparative advantage in corn and melons?
a. United States - Corn and Mexico - Melons
b. United States – Melons and Mexico – Corn
c. United States should produce both Corn and Melons
d. None of the above
22. EF3b: How does voluntary exchange help everyone compete in the market place?
a. it allows them to decide what and when they want to buy and sell
b. it allows them to decide to buy a car at a particular price
c. it allows them to decide if the purchase is worth paying for
d. all of the above
23. EF3b: From the principle of voluntary exchange, we conclude that:
a. often buyers are made better off at the expense of sellers
b. often sellers are made better off at the expense of buyers
c. both the buyer and the seller must be better off as a result of a transaction
d. neither the buyer nor the seller are necessarily made better off as a result of a transaction
36
24. EF3b: The concept that people may decide what and when they want to buy and sell
a. voluntary exchange
b. fraudulent exchange
c. competition
d. economic integrity
25. EF4a: What incentive motivates a manufacturer to sell a product?
a. making profits on sales
b. putting others out of business
c. pleasing the consumer
d. popularity of the product
26. EF4a. What is one of the most important advantages of a free market?
a. it can change rapidly
b. it protects the less fortunate
c. it is easy to regulate
d. it encourages growth
27. EF4a: Why does the free market economy need some government intervention?
a. to provide for things that the marketplace does not address
b. to ensure the government has the freedom to tax as necessary
c. to make sure that the government can fulfill its needs for military personnel
d. so that the government has some control over factor resources
28. EF4a: In what kind of economy does the government make all the decision?
a. socialist
b. laissez faire
c. centrally planned
d. free enterprise
29. EF4b: What is the purpose of competition?
a. to act as a regulating force in the market place
b. to cause producers to attempt to put each other out of business
c. to cause buyers and sellers to be careful about spending their money
d. to act as a motivating force behind the free market
30. EF4b: What is the function of an economic system?
a. to make sure all people have equal access to goods
b. to produce and distribute goods and services
c. to give all producers the same access to consumers
d. to make sure people are paid for their labor
31. EF4b: You are an entrepreneur with an innovative idea for a new business. In which kind of economy would you
have the most opportunity to try to achieve success?
a. market economy
b. command economy
c. traditional economy
d. economy of scale
32. EF5a: Why does the government use it powers to make sure that businesses disclose so much information to the
public?
a. to make buyers more knowledgeable and safer
b. to make it hard for business to make an excess profit
c. to make it easier for consumers to save money
d. to make it easier for business to have good information
37
33. EF5a: What is a positive externality?
a. a way to generate trade that will benefit people who are from other countries
b. an economic side effect that generates unexpected benefits
c. a cash flow that will benefit both the government and the business who interact with it
d. an extra payment to welfare recipients
34. EF5a: Why are public goods considered to be a market failure?
a. because the it is inefficient for the market to produce it
b. there is no incentive for the individual to produce it
c. it is too costly for the individual to produce it
d. all of the above
35. EMI1a. Refer to Diagram Above. What does the upper line of monetary flow, marked “1” show?
a. households pay firms for goods and services
b. firms pay households for the factors of production
c. taxes
d. firms providing money for the households
36. EMI1a: Refer to Diagram Above.
What does the lower half, marked “2” represent?
a. factor market
b. product market
c. supply and demand
d. production possibilities frontier
37. EMI1a: Refer to Diagram Above. What is this model commonly referred to as?
a. Circular Flow Model
b. Production Possibilities Curve
c. Thinking at the Margin
d. Supply and Demand Curve
38. EMI1b: Which of the following is an example of money as a unit of account?
a. purchasing a toy for $8.99
b. lending a friend $25.00
c. opening a savings account at a bank
d. checking the price of a camera at several stores before buying it at the lowest price
39. EMI1b: Which of the following is an example of representative money?
a. a fur coat
b. diamonds
c. gold earrings
d. an IOU note
38
40. EMI1b: Which of the following is an example of a barter system?
a. Instead of paying rent, you clean the house for the owner.
b. Instead of paying cash for a computer, you use a credit card.
c. Instead of paying the full amount for a car, you pay 10 percent in cash and pay for the rest in
d. monthly installments
e. Instead of paying for a purchase in Mexico in pesos, you use dollars from the United States.
41. Which of the following is a private organization that attempts to influence public officials to act or vote in ways that
will benefit the group’s members?
a. a.
market research group c.
public policy group
b. b.
free enterprise group
d.
interest group
42. What is the most effective way for consumers to make their desires known to businesses?
a. through mail and phone surveys
b. by protesting and boycotting products
c. by the purchases they make
d. by hiring lobbyists and joining consumer groups
43. Why does the government use its powers to make sure that businesses disclose so much information to the public?
a. to make buyers more knowledgeable and safer
b. to make it hard for businesses to make an excess profit
c. to make it easier for consumers to save money
d. to make it easy for businesses to have good information
44. What is a positive externality?
a. a way to generate trade that will benefit people who are from other countries
b. an economic side effect that generates unexpected benefits
c. a cash flow that will benefit both the government and the businesses who interact with it
d. an extra payment to welfare recipients
45. What does the Temporary Assistance for Needy Families program provide?
a. retirement income for the elderly
b. cash to the states to help run their welfare programs
c. compensation to all who lose jobs
d. cash to workers injured on the job
46. What is the difference between a business cycle and the day-to-day ups and downs of the market?
a. The day-to-day ups and downs of the market can be much more extreme than a business cycle.
b. The day-to-day fluctuations are more likely to have an impact on people’s finances.
c. A business cycle is usually more restricted, whereas market fluctuations are worldwide.
d. A business cycle is a major, prolonged fluctuation rather than a day-to-day movement.
47. What best describes the role of government in a free enterprise system?
a. Control business activities.
b. Decide what companies will be formed and then allow the managers to run them.
c. Allow individuals to operate their businesses in ways they think will maximize their profits.
d. Require companies to disclose information to consumers.
48. What effect does new technology usually have on an economy?
a. It makes the economy stronger and more efficient.
b. It reduces the dependence of the economy on business.
c. It slows an economy down for at least a while.
d. It reduces the available jobs.
49. Which of the following is a critical rule for determining whether something is a public good?
a. The benefit to each individual who uses the facility is greater than the cost.
b. The benefits of the facility are greater for the society than for the individuals using it.
c. The total benefits to society are greater than the total cost.
d. The total cost is small for each individual taxpayer.
39
50. Which of the following is NOT an example of a public good?
a. a.
shopping malls c.
highways
b. b.
national parks
d.
municipal libraries
51. What protections does OSHA give to people in the United States?
a. a.
regulations on workplace safety and information about hazards in the workplace
b. consumer protection in buying foods
c. regulations about clean environment
d. protection for certain key industries such as logging
52. What is the term for the total value of all goods and services produced in a particular economy?
a. a.
net worth
c.
gross domestic product
b. b.
open market value
d.
standard of living
53. What is one benefit provided by Social Security?
a. medical care for the indigent
b. cash transfers to workers injured on the job
c. compensation for all who lose jobs
d. retirement income for the elderly
54. A person who consumes a good or service but does not pay for it is called which of the following?
a. a.
a free rider
c.
a private consumer
b. b.
a volunteer user d.
an entrepreneur
55. Automakers are required to comply with public disclosure laws. What is one example of a requirement of these laws?
a. Salespeople must provide information about their competitors’ cars, so customers can make informed
decisions.
b. Car dealers must prominently display a sticker with the fuel efficiency in the car window
c. Salespeople must be willing to sell cars to anyone who can afford them, regardless of gender, race, or
ethnicity.
d. Automakers must test all car models regularly for crash-worthiness.
56. An externality is
a. an economic side effect of a good or service that generates benefits or costs to someone other than the person
deciding how much to produce or consume.
b. the total cost to society of producing an additional unit of a good or service.
c. the amount a consumer pays to consume an additional amount of any particular good.
d. a situation in which the market, on its own, does not distribute resources efficiently.
57. In 1996, a new federal welfare program called Temporary Assistance for Needy Families (TANF) began assisting poor
families. Which of the following was NOT a provision of TANF?
a. a.
direct cash payments to recipients
c.
lifetime limit of benefits
b. b.
work incentives
d.
state-run welfare programs
58. The U.S. Constitution guarantees certain rights that allow people to engage in business activities. Which of the
following does the U.S. Constitution NOT guarantee?
a. the protection against monopolies and oligopolies
b. the recognition and protection of private property rights
c. a limitation on the kinds of taxes that Congress can impose
d. the right to make binding contracts
59. Why is legal equality important to the free enterprise system?
a. Ensuring that all businesses have the same legal rights will create healthy competition in the marketplace.
b. Requiring all lawyers to obtain the same education will ensure that all business clients receive competent legal
representation.
c. Protecting legal equality makes sure that all people may decide what legal agreements they want to enter into.
d. Guaranteeing all people the same legal rights will maximize the use of human capital.
40
60. A large telephone company has hired lobbyists to try to persuade lawmakers to reduce governmental regulation over
the telecommunications industry. Why might the company do this?
a. Some regulations are costly to implement and cut into profits.
b. Many regulations promote too much competition, driving down prices.
c. Certain regulations result in rapid business growth, which some companies find difficult to handle
d. All of the above
61. You read an article in a news magazine that explains how the economy expanded for several years, then went into a
period of contraction. What was the subject of this article?
a. a.
the gross domestic product
c.
the business cycle
b. b.
microeconomics
d.
voluntary exchange
62. To stabilize the economy, policymakers try to achieve three main outcomes: high employment, steady growth, and
a. a.
technological advancement.
c.
competition.
b. b.
stable prices.
d.
consumer confidence.
63. Why does the government protect inventors and authors by offering them patents and copyrights?
a. a.
to encourage free trade c.
to regulate the business cycle
b. b.
to promote innovation d.
to strengthen American culture
64. Which of the following is the best example of a public good?
a. a.
highway system c.
country club
b. b.
shopping mall
d.
movie theater
65. You will still be able to get public broadcasting whether or not you contribute to their fundraising campaign. You
decide not to contribute. This is an example of the
a. a.
public good problem.
c.
externality problem.
b. b.
public sector problem. d.
free-rider problem.
66. A new runway has opened up at the airport, and the flight path goes directly over your apartment. The noise of the
airplanes is a
a. a.
positive externality.
c.
negative externality.
b. b.
free-rider problem.
d.
market failure.
67. Each payday, some of your pay is withheld as payroll deductions for Social Security. What happens to the money that
is withheld?
a. It is redistributed as cash transfers to workers who are injured on the job.
b. It is put into an account under your name to earn interest until you retire.
c. It is used to provide medical benefits to Americans over 65.
d. It is redistributed as cash transfers to elderly and disabled people.
68. Jeff and Margaret qualify for Section 8 housing, a subsidized housing program from the federal government. What
kind of benefit are they receiving?
a. a.
cash transfer
c.
Social Security benefits
b. b.
in-kind benefit
d.
faith-based initiative
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