Foundations of Economics Review

According to Adam Smith, SELF-INTEREST...

• was HARMFUL to society

• led businesses to produce low quality products

• led to government involvement

• pushed businesses to produce good quality products at low prices

Which type of economy has NO government involvement?

• free market

• communism

• socialism

• traditional

SCARCITY is a condition that:

• exits only in POOR nations

• only POOR countries experience

• ALL people have to deal with

• rich people NEVER deal with

Name of the economic model that shows how resources, products & money are exchanged in an economy.

• production possibilities model

• circular flow model

• capitalism-communism axis

• trade-off model

What is the difference between a pure FREE MARKET and CAPITALISM

• gov't runs everything in capitalism and nothing in free markets

• individuals have choice in one and not the other

• there is no difference

• in capitalism there is limited gov't involvement, in free markets there is no gov't

If a barrel of crude oil is used to make gasoline, the opportunity cost would be...

• the price you pay for the gasoline

• the price of the crude oil

• value of anything else you could have made besides gasoline

• the gasoline produced

Production Possibilities Graphs...

• enable a country to win a war

• show alternative ways for an economy to use its resources

• make it possible for an economy to grow

• keeps an economy from growing too large

an efficient economy...

• has few people not working for a living

• uses its resources to make the most goods & services

• ensures safety of all citizens

• always creates the newest technology

timber, water, fruits & veggies would be considered...

• labor

• land

• entrepreneurs

• capital

Hammers, computers, phones, buildings, a grill, would all be examples of...

• land

• labor

• capital

• entreprenuers