Chapter 2 DOK Lecture Questions and Summary (CCSS RSfLi History/Social Studies 9-12)

In all of the following, explain, give examples, discuss the context, and answer the who, what, when, where, why, and hows. At
a minimum, be sure to cite textual evidence from the textbook; perfect scores will cite textual evidence from other primary
and secondary sources as well.
CHAPTER 2.1: ANSWERING THE THREE ECONOMIC QUESTIONS
1) Explain the “three key economic questions.”
- What goods and services should be produced?
- How should these foods and services be produced?
- Who consumes these goods and services?

2) Explain what an economic system is and give examples of different ones (CC #3).
- An economic system is the method used by a society to produce and distribute goods and services.
- Traditional Economies
- Centrally planned economy
- Market economy
- Mixed Economies
3) Explain the difference between factor payments and product payments (see pg. 31 for product payment). What’s
the economic definition of profit?
- In economics, factor payments are the income people receive for supplying the factors of production: land, labor, capital, or
entrepreneurship.

4) Explain the five economic goals and two societal values (Be sure to include safety net, standard of living, and
innovation in your definitions) (CC #6).
- Economic Efficiency; Using all FOPs to maximize output.
- Economic Freedom: Level of government intervention in the production and distribution of goods and services.
- Economic Security and predictability: Assurance that goods and services will be available, payments will be made on time,
and safety net will protect individuals in times of economic disaster.
- Economic Equity: The degree to which incomes are made more equal.
- Economic growth and innovation: Innovation leads to economic growth, and economic growth leads to a higher standard of
living.

5) Explain “traditional economy.” Give a few real world examples.

- Tend to be primitive, not technologically advanced.rely on custom, habit, and ritual, tend to involve communities of families.
Tend to involve concerns over basic needs. These communities could join the greater civilizations near them, but they don't
want to.

CHAPTER 2.2: THE FREE MARKET

6) In economics terms, with examples, explain market, specialization, and free market economy.
- A market is an arrangement that allows buyers and sellers to exchange goods and services. Specialization is the concentration
of the productive efforts of individuals and firms on a limited number of activities. A free market economy is where the
interaction of buyers and sellers in the marketplace answer the three economic questions.
7) Explain the free market economy model on page 31. Be sure to include the terms household, firm, factor market,
and product market.
- In a free market economy, households and business firms use markets to exchange money and products. Households own the
factors of production and consumption.

8) With regards to the free market’s “invisible hand,” explain what it is, what it does, who theorized it, and in what book
did he theorize it. Be sure to include how self interest and competition operate in it.
- The invisible hand is an unseen force that regulates the free market, according to Adam Smith in the wealth of nations.
- In every transaction, the buyer and seller consider only their self interest, or their own personal gain. Self interest is the
motivating force in the free market.
- Producers in a free market struggle for the dollars of consumers. This is known as competition, and is the regulating force of
the free market.
- The interaction of buyers and sellers, motivated by self interest and regulated by competition, all happens without a central
plan. The phenomenon is called “the invisible hand of the marketplace.”

9)
Explain how or if the previous (question #4) economic questions are answered in a free market economy. Explain
what power consumers have in a free market.
- Consumer Sovereignty

CHAPTER 2.3: CENTRALLY PLANNED (OR COMMAND) ECONOMIES

10) Explain how centrally planned or command economies work. Give real world examples and be sure to include and
explain the terms communism, socialism, and authoritarian.
 - In a centrally planned economy, the government owns both land and capital. The government decides what to produce, how
much to produce, and how much to charge.

11) Explain how or if the previous (question #4) economic questions are answered in a centrally planned economy.
Explain some additional goals that centrally planned economies may have.
- A centrally planned economy is an economic system in which decisions are made by a central authority rather than by market
participants. In a market economy the market sets rates, while in a command economy, governments control the resources
and determine activity.

CHAPTER 2.4: MIXED ECONOMIES

12) What does laissez-faire mean? In real life, what might laissez-faire look like?
- Laissez faire is the doctrine that the government generally should not interfere in the marketplace. Governments create laws
protecting property rights and enforcing contracts. They also encourage innovation through patent laws.

13) What reasons does the book give for the government getting involved in the marketplace? Be sure to include in
your explanation the terms private property and mixed economy.
- A mixed economic system protects some private property and allows a level of economic freedom in the use of capital, but
also allows for governments to intervene in economic activities in order to achieve social aims and for the public good.

14) Looking at the chart on page 40, summarize and explain the key areas where the government gets involved in
society and why does it do these things?
- “Federal” means that there is both a national government and governments of the 50 states. A “republic” is a form of
government in which the people hold power, but elect representatives to exercise that power.

15) Are there any pure free market or centrally planned economies in the world today? If not, what are they all? What
sets them apart from each other then? Explain a few different countries as examples.
- No, if they are, they are all mixed.

16) Explain economic transition in terms of the former Soviet Union. Be sure to include the term privatization. What is
the term for the opposite of privatization? Give a real world example for this opposite.
- Privatization- Centrally planned for a free market economy. The return of state enterprises to private ownership and control.

17) What is a synonym for free market? Explain how or if the previous (question #4) economic questions are answered
in a mixed economy. Explain how these answers to these goals vary depending on where the economy is on the
“continuum.”
- It typically entails support for highly competitive markets, private ownership of productive enterprises. Laissez-faire is a more
extensive form of free-market economy where the role of the state is limited to protecting property rights.

Ch. 1 REFLECTION AND SUMMARIZATION: Please use the space below and/or on back for extra note-taking, to clarify and expand
on concepts, and/or to reflect on any pertinent or new information to go along with this chapter.

ATTENTION: USE THE FOLLOWING TABLE TO RECORD YOUR ANSWERS FROM QUESTIONS 9, 11, AND 17.

ECONOMIC
ECONOMIC SYSTEM TYPES
GOALS AND
VALUES CENTRALLY PLANNED FREE MARKET MIXED
Most, to maximize the Least, not enough Free market is the most
profit resources and machines efficient
are broke and old school
ECONOMIC EFFICIENCY
Most, no government Least, government tells Free market has the most
involvement you what to do and how to freedom
 do it
ECONOMIC FREEDOM
Least, no government Least Security Centrally, planned has the
involvement because there's no safety most security
net.
ECONOMIC SECURITY
Least, no government to In theory, most in practice, Centrally planned has the
equalize incomes and government more wealth most equity
standard of living. than population
ECONOMIC EQUITY
Most, technology Least, there are no Free market has the most
advancements always suggestions because you growth
happen can get in trouble, and you
ECONOMIC GROWTH make no money out of it.
Most, economic world to become the world's the free market has the
domination in your industry best military superpower most potential with
ADDITIONAL GOALS OF economic world
EACH SYSTEM domination.