Essay Examination 1
|These questions are from the test bank. An "A" answer requires at
least three or four intelligent sentences. Some questions may require
more sentences if they have multiple parts. |
Lecture 1 - An Introduction to Economics
1. What is the difference between Microeconomics and Macroeconomics?
2. What is opportunity cost?
(a) You quit your job and used your savings to open a business. If your salary was $20,000 per year and you earned $500 per year in interest, what is the opportunity cost of your business?
Lecture 2 - The Market System and Circular Flow
3. What is Socialism/Communism?
4. What is capitalism?
5. What is the Index of Economic Freedom?
Lectures 3 - Supply, Demand, and the Market Process
6. What is the Law of Demand?
7. Why does the demand function have a negative slope?
8. Please draw the demand functions for two people: Person 1 and Person 2. Show graphically and explain in words how to derive the market demand function.
9. Please draw the supply functions for two firms: Firm 1 and Firm 2. Show graphically and explain in words how to derive the market supply function.
10. Please draw the supply and demand functions for cookies and set the equilibrium price at $3. Make sure you label all the axes, and the supply and demand functions. Assume the government does not impose any price controls on the cookie market.
11. Please draw a market for soda drinks (like Pepsi and Coca-Cola). A political disruption interferes with the production facilities of the soda industry, ceteris paribus. Show graph and explain in words.
12. Please draw a market for the sugar market. Consumers expect sugar prices to be higher, ceteris paribus. Show graph and explain in words.
13. Please draw a market for coffee. An unusual drought for the last three years hits the region where Colombia grows coffee, ceteris paribus. Unfortunately, this story is true. Show graph and explain in words.
14. Many corn farmers are going out of business. Government decides to help the corn farmers by imposing a price floor.
15. Many bread producers are charging high prices for bread. Consequently, government wants to help appease the public and imposes a price ceiling on the bread market.
16. Why do black markets form? Give three reasons.
Lecture 5 - The Global Economy
17. What are imports and exports? Also indicate which direction the money and products flow.
18. What are the four reasons why international trade is rapidly growing after World War II?
19. Please define an exchange rate?
20. You have two countries: Bosnia and Herzegovina and Colombia. Both countries grow tobacco and coffee. The two countries can produce a maximum that is recorded in the table, given their resources.
21. What is a trade agreement?
22. What is the General Agreement on Tariffs and Trade (GATT)?
23. What are two reasons why a country imposes trade restrictions?
24. What are the four methods a country can use to restrict trade?