Economics Benchmark Review

Basic Concepts and Terms

Identify entrepreneur

• Creates a new business or product or improves an existing one

• Willing to take financial risk

• Looking for monetary gain

Define scarcity

• Basic problem of economics that results from the combination of unlimited wants and limited resources. It forces people to make choices.

Identify the three questions of production.

• What

• How

• For Whom

What is the opportunity cost of producing at C?

• Fish Caught

vFish Caught A

B C

Hours Taught

Identify the three factors that determine value.

• desirability

• scarcity

• utility

Identify the three systems of exchange• barter

• money

• credit

Identify three ways businesses try to increase efficiency.

• Division of labor

• Specialization

• Allocation of resources

The next best choice you can make describes?

• Opportunity Cost

Investing in education, training, morals, values, health and skills are examples of?

• Human capital

To focus on one area of production is an example of:

• specialization

What are the factors of production?

• natural

• human

• capital

• *Entrepreneurs

Market

• In this model economic system individuals make decisions about what, how, and for whom to produce.

Market

In this model economy

factors of production

are owned by

individuals

Market

Which model economy

would best accommodate

a pet psychic business?

Voluntary Exchange

• The unconditional and mutually beneficial transfer of products between producers and consumers

Self-interest

• Adam Smith’s theory: The impulse that encourages people to satisfy their wants and needs which consequently benefits society.

Identify the five features of the U.S. free enterprise system.

1. Private property &

contracts

2. Individual choice

3. competition

4. Self-interest & voluntary exchange

5. Limited government

The idea that money is worth more now than it will be in the future.

• Present value

1990 1990

2010 / less $ 2010 / more $

Identify eight different types of investments

• Savings account• Money market• Certificate of deposit• Bond• Blue-chip stock• Growth stock• Real estate• Commodities / Precious

metals, oil, crops, etc.

Identify the four things to consider when making an investment.

• rate of return

• risk/ diversification

• liquidity

• tax benefit.

compound interest• money earned on a sum of money that is invested plus

the interest paid on that money over time.• Time and rate of return have biggest impact!