Part 2 short answer:

Directions: Answer the following questions using COMPLETE sentences.

1. What are the THREE fundamental questions of economics?

1.

2.

3.

2. What is the biggest challenge of economics? Why does this challenge exist?

3. What are the economic goals of a mixed free market economy (8)?

4. Who answers the three fundamental economic questions in a:

1. Traditional Economy:

2. Command Economy:

3. Market Economy:

4. Mixed Economy:

5. What are the different ways to allocate scarce resources (9)?

6. When do rational decisions occur?

7. What are different ways people respond to positive and negative incentives?

8. What is the government's role in providing public goods and services, redistributing income, protecting property rights, resolving market failures, and regulation in a mixed free market economy?

9. When does economic growth occur? Why is productivity important to economic growth?

10. Describe the factors of production. Give a real world example of each.

Factor of Production	Description	Real World Example
1.
2.
3.
4.
5.

11. How can investments in human capital lead to a higher standard of living?

12. How can investment in equipment and technology lead to economic growth?

Part 3: Graphing

Directions:In the space provided, draw a Production Possibilities Curve (PPC) for each of the following prompts. Label your axes with any two goods that use similar resources.

1. Efficient PPC 2. Inefficient PPC

3. Unattainable PPC 4. Economic Growth (using a PPC)

5. Answer the following questions about the following PPC graph. (scroll down)

1. At point A, what is the quantity of dogs and cats produced?

2. What is the opportunity cost if we want to increase production of cats from 25 units to 50 units? What is the opportunity benefit?

3. What do we give up if we want to produce 100 units of cats?

4. Can we produce at point D? If not, what would we need to produce more at point D?

5. What is wrong with producing at point E?