Exchange and Markets 6/5/2009. Economics: Principles, Applications, and Tools O Sullivan, Sheffrin, Perez 6/e.

Size: px
Start display at page:

Download "Exchange and Markets 6/5/2009. Economics: Principles, Applications, and Tools O Sullivan, Sheffrin, Perez 6/e."

Transcription

1 1 of 21 2 of 21 Mattel s Barbie, the most profitable doll in history, is sold in 140 countries around the world at a rate of two dolls per second. P R E P A R E D B Y FERNANDO QUIJANO, YVONN QUIJANO, AND XIAO XUAN XU 3 of 21 1

2 A P P L Y I N G T H E C O N C E P T S Does the protection of one domestic industry harm another? Candy Cane Makers Move to Mexico for Cheap Sugar What is the role of opportunity cost in the development of markets? Gold Farming for World of Warcraft Why do markets develop wherever people go? in a Prisoner of War Camp 4 of 21 Specialization and the Gains from Trade P R I N C I P L E O F O P P O RT U N I T Y C O S T The opportunity cost of something is what you sacrifice to get it. 5 of 21 FIGURE Specialization and the Gains from Trade comparative advantage The ability of one person or nation to produce a good at a lower opportunity cost than another person or nation. Fred has a comparative advantage in producing fish because his opportunity cost of fish is one-third coconut per fish, compared to 1 coconut per fish for Kate. Kate has a comparative advantage in harvesting coconuts because her opportunity cost of coconuts is 1 fish per coconut, compared to 3 fish per coconut for Fred. 6 of 21 2

3 P R I N C I P L E O F V O L U N T A R Y E X C H A N G E A voluntary exchange between two people makes both people better off. Comparative Advantage versus Absolute Advantage absolute advantage The ability of one person or nation to produce a product at a lower resource cost than another person or nation. 7 of 21 The Division of Labor and Exchange In his 1776 book An Inquiry into the Nature and Causes of the Wealth of Nations, Adam Smith noted that specialization actually increased productivity through the division of labor. Smith listed three reasons for productivity to increase with specialization, with each worker performing a single production task: 1 Repetition. The more times a worker performs a particular task, the more proficient the worker becomes at that task. 2 Continuity. A specialized worker doesn t spend time switching from one task to another. This is especially important if switching tasks requires a change in tools or location. 3 Innovation. A specialized worker gains insights into a particular task that lead to better production methods. 8 of AND INTERNATIONAL TRADE import A product produced in a foreign country and purchased by residents of the home country. export A product produced in the home country and sold in another country. 9 of 21 3

4 3.2 AND INTERNATIONAL TRADE Outsourcing When a domestic firm shifts part of its production to a different country, we say the firm is outsourcing or offshoring. Some recent studies of outsourcing have reached a number of conclusions: 1 The loss of domestic jobs resulting from outsourcing is a normal part of a healthy economy, because technology and consumer preferences change over time. 2 The jobs lost to outsourcing are at least partly offset by jobs gained through insourcing, jobs that are shifted from overseas to the United States. 3 The cost savings from outsourcing are substantial, leading to lower prices for consumers and more output for firms. The jobs gained from increased output at least partly offset the jobs lost to outsourcing. 10 of AND INTERNATIONAL TRADE Movie Exports FIGURE 3.2 International Box Office Revenue for U.S. Films, of 21 A P P L I C A T I O N 1 CANDY CANE MAKERS MOVE TO MEXICO FOR CHEAP SUGAR APPLYING THE CONCEPTS #1: Does the protection of one domestic industry harm another? About 90 percent of the world s candy canes are consumed in the United States, and until recently most were produced domestically. Domestic firms used their superior access to consumers to dominate the market. In recent years, the domestic production of candy canes has decreased. In 2003, Spangler Candy Company of Bryan, Ohio, shifted half its production to Mexico because the cost of sugar, the key ingredient in candy, is only $0.06 per pound in Mexico, compared to $0.21 in the United States. Since 1998, the Chicago area, the center of the U.S. confection industry, has lost about 3,000 candy-production jobs. Why is the price of sugar in the United States so high? The government protects the domestic sugar industry from foreign competition by restricting sugar imports. As a result, the supply of sugar in the United States is artificially low and the price is artificially high. In this case, the protection of jobs in one domestic industry reduces jobs in another domestic industry. 12 of 21 4

5 3.3 MARKETS market economy An economy in which people specialize and exchange goods and services in markets. Although it appears that markets arose naturally, a number of social and government inventions have made them work better: Contracts specify the terms of exchange, facilitating exchange between strangers. Insurance reduces the risk entrepreneurs face. Patents increase the profitability of inventions, encouraging firms to develop new products and production processes. Accounting rules provide potential investors with reliable information about the financial performance of a firm. 13 of MARKETS Virtues of centrally planned economy An economy in which a government bureaucracy decides how much of each good to produce, how to produce the good, and who gets the good. Under a market system, decisions are made by the millions of people who already have information about consumers desires, production technology, and resources. These decisions are guided by prices of inputs and outputs. Prices provide signals about the relative scarcity of a product and help an economy respond to scarcity. The market system works by getting each person, motivated by selfinterest, to produce products for other people. 14 of MARKETS The Role of Entrepreneurs Entrepreneurs play a key role in a market economy. Prices and profits provide signals to entrepreneurs about what to produce. If a product suddenly becomes popular, competition among consumers to obtain it will increase its price and increase the profits earned by firms producing it. Entrepreneurs will enter the market and increase production to meet the higher demand, switching resources from the production of other products. As entrepreneurs enter the market, they compete for customers, driving the price back down to the level that generates just enough profit for them to remain in business. 15 of 21 5

6 A P P L I C A T I O N 2 GOLD FARMING FOR WORLD OF WARCRAFT APPLYING THE CONCEPTS #2: What is the role of opportunity cost in the development of markets? As an example of a market that results from comparative advantage, consider the market for virtual currency. Firms in China pay workers (called gold farmers) to play the online game World of Warcraft (WoW). In the game, workers earn virtual currency in the form of gold coins by killing monsters. In the real world, firms pay the workers a piece rate of about $ per coin, which translates into a wage of about $0.30 per hour. The firm sells the coins to an online retailer for about $0.03 per coin, and the retailer then sells the coins to consumers for about $0.20 per coin. The consumers in this market are WoW gamers in the United States, who are willing to pay cash for game shortcuts they use the purchased coins to buy the equipment and magic spells required to battle virtual monsters and move to the next level of the game. Let s look at this exchange in terms of opportunity cost. Suppose a gamer in the United States is roughly half as productive as a gold farmer in earning gold in the game, getting 12 coins per hour. The gamer can either spend an hour to earn 12 coins or take a shortcut by paying $0.20 per coin, or $2.40. If the gamer s opportunity cost is greater than $2.40 per hour, buying the coins is sensible. 16 of 21 A P P L I C A T I O N 3 MARKETS IN A PRISONER OF WAR CAMP APPLYING THE CONCEPTS #3: Why do markets develop wherever people go? To illustrate the pervasiveness of exchange, consider the emergence of markets in prisoner of war (POW) camps during World War II, as documented by economist R. A. Radner. During World War II, the International Red Cross gave each Allied prisoner a weekly parcel with the same mix of products tinned milk, jam, butter, biscuits, corned beef, chocolate, sugar, and cigarettes. In addition, many prisoners received private parcels from family and friends. The prisoners used barter to exchange one good for another, and cigarettes emerged as the medium of exchange. Prisoners wandered through the camp calling out their offers of goods. For example, cheese for seven meant that the prisoner was willing to sell a cheese ration for seven cigarettes. In addition to food, the prisoners bought and sold clothing (80 cigarettes per shirt), laundry services (2 cigarettes per garment), and hot cups of coffee (2 cigarettes per cup). 17 of MARKET FAILURE AND THE ROLE OF GOVERNMENT Although markets often operate efficiently on their own, sometimes they do not. Market failure happens when a market doesn t generate the most efficient outcome. Later in the book, we ll explore several sources of market failure and discuss possible responses by government. Here is a preview of the topics: Pollution. Public goods. Imperfect information. Imperfect competition. 18 of 21 6

7 3.4 MARKET FAILURE AND THE ROLE OF GOVERNMENT Government Enforces the Rules of Exchange To facilitate exchange, the government helps to enforce contracts by maintaining a legal system that punishes people who violate them. This system allows people to trade with the confidence that the terms of the contracts they enter will be met. In the case of consumer goods, the implicit contract is that the product is safe to use. The government enforces this implicit contract through product liability or tort law. The government disseminates information about consumer products. The government uses antitrust policy to foster competition. 19 of MARKET FAILURE AND THE ROLE OF GOVERNMENT Government Can Reduce Economic Uncertainty Given the uncertainty of market economies, most governments fund a social safety net that provides for citizens who fare poorly in markets. Of course, there are private responses to economic uncertainty. For example, we can buy our own insurance to cover losses. Some types of insurance, however, are unavailable in the private insurance market. As a result, the government steps in to fill the void. 20 of 21 K E Y T E R M S absolute advantage centrally planned economy comparative advantage export import market economy 21 of 21 7

ECON MACROECONOMIC PRINCIPLES Instructor: Dr. Juergen Jung Towson University. J.Jung Chapter Introduction Towson University 1 / 69

ECON MACROECONOMIC PRINCIPLES Instructor: Dr. Juergen Jung Towson University. J.Jung Chapter Introduction Towson University 1 / 69 ECON 202 - MACROECONOMIC PRINCIPLES Instructor: Dr. Juergen Jung Towson University J.Jung Chapter 2-4 - Introduction Towson University 1 / 69 Disclaimer These lecture notes are customized for the Macroeconomics

More information

1. List the five factors of production and give and example of each. land labor capital entrepreneurship technology

1. List the five factors of production and give and example of each. land labor capital entrepreneurship technology Intro to Economics Review Name Hour 1. List the five factors of production and give and example of each. land labor capital entrepreneurship technology 2. Describe a situation and then explain the opportunity

More information

NAME DATE CLASS. In the first column, answer the questions based on what you know before you study. After this lesson, complete the last column.

NAME DATE CLASS. In the first column, answer the questions based on what you know before you study. After this lesson, complete the last column. NAME DATE CLASS Lesson 1: Gross Domestic Product ESSENTIAL QUESTION Why and how do people make economic choices? GUIDING QUESTIONS 1. Why is Gross Domestic Product important to a nation? 2. Why is GDP

More information

1. List the five factors of production and give and example of each. land labor capital entrepunuership human capital or technology

1. List the five factors of production and give and example of each. land labor capital entrepunuership human capital or technology Intro to Economics Review Name Hour 1. List the five factors of production and give and example of each. land labor capital entrepunuership human capital or technology 2. Describe a situation and then

More information

Economics Guided Reading Chapter Two Economic Systems Section 1 Answering the Three Economic Questions

Economics Guided Reading Chapter Two Economic Systems Section 1 Answering the Three Economic Questions Name: Date: Block # Economics Guided Reading Chapter Two Economic Systems Section 1 Answering the Three Economic Questions Directions Following the page and heading prompts to read your Economics textbook

More information

Econ Midterm One Practice Questions

Econ Midterm One Practice Questions Econ 101-008 Midterm One Practice Questions The following questions will help students prepare for the first midterm examination in Econ 101-008. Each question has one correct answer. However, Professor

More information

ECONOMICS (Povletich) Unit 1 Review Sheet Introduction to Economics

ECONOMICS (Povletich) Unit 1 Review Sheet Introduction to Economics ECONOMICS (Povletich) Unit 1 Review Sheet Introduction to Economics There will be 30-40 multiple choice questions and 4-5 free-response questions on your test that will take place on Tuesday 2/9 (periods

More information

Things people like and desire.

Things people like and desire. 1 Wants 1 Things people like and desire. 2 Needs 2 Things you must have to live. 3 Scarcity 3 When there is not enough for all who want it. 4 Choice 4 To make a decision. 5 Goods 5 Things that can satisfy

More information

JA BizTown Pretest/Posttest

JA BizTown Pretest/Posttest Write your answers on the Pretest/Posttest Answer Sheet in the Citizen Guide as instructed by your teacher SECTION 1: MULTIPLE CHOICE Circle the best answer (1 point each) 1 Which of the following best

More information

Problem Set 1 Suggested Answers

Problem Set 1 Suggested Answers Problem Set 1 Suggested Answers Problem 1. Think what is the cost of one can of Coca-cola. First try to figure out what is the accounting cost, i.e. the monetary cost. Next think what would be a total

More information

Types of Economic Systems

Types of Economic Systems Name: Period: Types of Economic Systems What is an Economy? Economy: or exchange of goods and services by a group : things to be traded, bought, or sold : work done in exchange for payment : work force,

More information

Economics Challenge Online State Qualification Practice Test. 1. An increase in aggregate demand would tend to result from

Economics Challenge Online State Qualification Practice Test. 1. An increase in aggregate demand would tend to result from 1. An increase in aggregate demand would tend to result from A. an increase in tax rates. B. a decrease in consumer spending. C. a decrease in net export spending. D. an increase in business investment.

More information

Chapter 5: Supply Section 3

Chapter 5: Supply Section 3 Chapter 5: Supply Section 3 Objectives 1. Explain how factors such as input costs create changes in supply. 2. Identify three ways that the government can influence the supply of goods. 3. Analyze other

More information

PRINCIPLES OF ECONOMICS. J. Mao

PRINCIPLES OF ECONOMICS. J. Mao PRINCIPLES OF ECONOMICS J. Mao Principle #1: People Face Tradeoffs All decisions involve trade offs. To get one thing we like, we usually have to give up another thing we like. Xbox or Iphone 6 Playing

More information

Chapter 5 International trade

Chapter 5 International trade Chapter 5 International trade International trade consists of buying and selling of exports and imports between countries. Why do we trade? The reason countries do not produce all their own goods to satisfy

More information

Ten Principles of Economics

Ten Principles of Economics Wojciech Gerson (1831-1901) Seventh Edition Principles of Economics N. Gregory Mankiw CHAPTER 1 Ten Principles of Economics In this chapter, look for the answers to these questions What kinds of questions

More information

Macroeconomics, 4e (Hubbard/O'Brien) Chapter 1 Economics: Foundations and Models. 1.3 Economic Models

Macroeconomics, 4e (Hubbard/O'Brien) Chapter 1 Economics: Foundations and Models. 1.3 Economic Models Macroeconomics, 4e (Hubbard/O'Brien) Chapter 1 Economics: Foundations and Models 1.3 Economic Models 1) Economic models do all of the following except A) answer economic questions. B) portray reality in

More information

AGS Economics Michigan High School Content Expectations for Economics

AGS Economics Michigan High School Content Expectations for Economics AGS 2005 Correlated to Michigan High School Content Expectations for 5910 Rice Creek Pkwy, Suite 1000 Shoreview, MN 55126 Copyright 2007 Pearson Education, Inc. or its affiliate(s). All rights reserved.

More information

Cambridge International Examinations Cambridge International Advanced Subsidiary and Advanced Level

Cambridge International Examinations Cambridge International Advanced Subsidiary and Advanced Level ambridge International Examinations ambridge International dvanced Subsidiary and dvanced Level *7128758381* ENMIS 9708/12 Paper 1 Multiple hoice February/March 2017 dditional Materials: RE THESE INSTRUTINS

More information

Ten Principles of Economics

Ten Principles of Economics C H A P T E R 1 Ten Principles of Economics Economics P R I N C I P L E S O F N. Gregory Mankiw Premium PowerPoint Slides by Ron Cronovich 2009 South-Western, a part of Cengage Learning, all rights reserved

More information

Chapter 2 Economic Systems and Decision Making

Chapter 2 Economic Systems and Decision Making Chapter 2 Economic Systems and Decision Making CHAPTER INTRODUCTION SECTION 1 SECTION 2 SECTION 3 Economic Systems Evaluating Economic Performance Capitalism and Economic Freedom CHAPTER SUMMARY CHAPTER

More information

Production Possibilities, Opportunity Cost, and Economic Growth

Production Possibilities, Opportunity Cost, and Economic Growth Chapter 2 Production Possibilities, Opportunity Cost, and Economic Growth CHAPTER SUMMARY The What, How and For Whom are introduced as the fundamental economic questions that must be addressed by all societies.

More information

EC101 DD/EE PRACTICE Midterm 1 October 3, 2017 Version 09

EC101 DD/EE PRACTICE Midterm 1 October 3, 2017 Version 09 EC101 DD/EE PRACTICE Midterm 1 October 3, 2017 Version 09 Name (last, first): Student ID: U - - Discussion Section: Signature EC101 DD/EE Practice Midterm 1 F17 INSTRUCTIONS (***Read Carefully***): ON

More information

EC 201 Lecture Notes 1 Page 1 of 1

EC 201 Lecture Notes 1 Page 1 of 1 EC 201 Lecture Notes 1 Page 1 of 1 ECON 201 - Macroeconomics Lecture Notes 1 Metropolitan State University Allen Bellas The textbooks for this course are Macroeconomics: Principles and Policy by William

More information

Ten Principles of Economics

Ten Principles of Economics C H A P T E R 1 Ten Principles of Economics Economics P R I N C I P L E S O F N. Gregory Mankiw Premium PowerPoint Slides by Ron Cronovich 2009 South-Western, a part of Cengage Learning, all rights reserved

More information

Bremen School District 228 Social Studies Common Assessment 2: Midterm

Bremen School District 228 Social Studies Common Assessment 2: Midterm Bremen School District 228 Social Studies Common Assessment 2: Midterm AP Microeconomics 55 Minutes 60 Questions Directions: Each of the questions or incomplete statements in this exam is followed by five

More information

Chapter 24. Introduction. Learning Objectives. Monopoly

Chapter 24. Introduction. Learning Objectives. Monopoly Chapter 24 Monopoly Introduction States have various licensing requirements for individuals who wish to practice specific professions. For example, Ohio requires a $100 license fee to become a kick boxer.

More information

UK Economy and Globalisation Revision Notes if you do one thing..

UK Economy and Globalisation Revision Notes if you do one thing.. Trade Benefits All? UK Economy and Globalisation Revision Notes if you do one thing.. This unit is about globalisation and international trade there are both benefits and drawbacks of international trade:

More information

Money, interest, and monetary policy. Rush February 2015

Money, interest, and monetary policy. Rush February 2015 Money, interest, and monetary policy Rush February 2015 Objectives Students describe how changes in the money supply can affect the average level of prices. Students explain how the Fed uses the major

More information

Practice S/D DO NOT WRITE ON THIS TEST! Multiple Choice Identify the choice that best completes the statement or answers the question.

Practice S/D DO NOT WRITE ON THIS TEST! Multiple Choice Identify the choice that best completes the statement or answers the question. DO NOT WRITE ON THIS TEST! Practice S/D Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The law of demand states that, other things equal: a. as the price

More information

In Section 1, you read how supply and

In Section 1, you read how supply and Preview Objectives After studying this section you will be able to: 1. Analyze the role of prices in a free market. 2. List the advantages of a price-based system. 3. Explain how a price-based system leads

More information

FROM CORN TO PLASTIC

FROM CORN TO PLASTIC FROM CORN TO PLASTIC Lesson Objective By the end of the lesson, students will be able to define the economic concept of scarcity and explain how scarcity and environmental concerns can lead to marketplace

More information

Exploring the World of Business and Economics

Exploring the World of Business and Economics Chapter 1 Exploring the World of Business and Economics 1 Discuss what you must do to be successful in the world of business. 2 Define business and identify potential risks and rewards. 3 Define economics

More information

1 Ten Principles of Economics CHAPTER 1 TEN PRINCIPLES OF ECONOMICS 0

1 Ten Principles of Economics CHAPTER 1 TEN PRINCIPLES OF ECONOMICS 0 1 Ten Principles of Economics CHAPTER 1 TEN PRINCIPLES OF ECONOMICS 0 In this chapter, look for the answers to these questions: What kinds of questions does economics address? What are the principles of

More information

Chapter 6:3: The Role of Prices

Chapter 6:3: The Role of Prices Chapter 6:3: The Role of Prices In this section, we will see how prices affect consumer behavior and how producers respond. 1Co_6:20 For ye are bought with a price: therefore glorify God in your body,

More information

Chapter 2 Market analysis

Chapter 2 Market analysis Chapter 2 Market analysis Market analysis is concerned with collecting and interpreting data about customers and the market so that businesses adopt a relevant marketing strategy. Businesses carry out

More information

Interdependence and the Gains from Trade

Interdependence and the Gains from Trade Chapter 3 Interdependence and the Gains from Trade Consider your typical day: You wake up to an alarm clock made in Korea. You pour yourself orange juice made from Florida oranges and coffee from beans

More information

Unit I: Basic Economic Concepts

Unit I: Basic Economic Concepts Unit I: Basic Economic Concepts What is Economics in General? Economics is the science of scarcity. Scarcity is the condition in which our wants are greater than our limited resources. Since we are unable

More information

Ten Principles of Economics. Chapter 1

Ten Principles of Economics. Chapter 1 Ten Principles of Economics Chapter 1 Economy...... The word economy comes from a Greek word for one who manages a household. A household and an economy face many decisions: Who will work? What goods and

More information

Unit 2 Economic Models: Trade-offs and Trade

Unit 2 Economic Models: Trade-offs and Trade Unit 2 Economic Models: Trade-offs and Trade Objectives Why models simplified representations of reality play a crucial role in economics Two simple but important models: the production possibility frontier

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. FIGURE 1-2

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. FIGURE 1-2 Questions of this SAMPLE exam were randomly chosen and may NOT be representative of the difficulty or focus of the actual examination. The professor did NOT review these questions. MULTIPLE CHOICE. Choose

More information

Unit 2 Economics. Chapter 3 Political and Economic Analysis Chapter 4 Global Analysis

Unit 2 Economics. Chapter 3 Political and Economic Analysis Chapter 4 Global Analysis Unit 2 Economics Chapter 3 Political and Economic Analysis Chapter 4 Global Analysis Chapter 3 Political and Economic Analysis Section 3.1 What Is an Economy? Section 3.2 Understanding the Economy What

More information

Sustainable Farms, Local Foods, Healthy Communities CENTER FOR ENVIRONMENTAL FARMING SYSTEMS. The Opportunity of Local Food Systems

Sustainable Farms, Local Foods, Healthy Communities CENTER FOR ENVIRONMENTAL FARMING SYSTEMS. The Opportunity of Local Food Systems Sustainable Farms, Local Foods, Healthy Communities CENTER FOR ENVIRONMENTAL FARMING SYSTEMS The Opportunity of Local Food Systems Today About the Center for Environmental Farming Systems Local and Regional

More information

1. Welfare economics is the study of a. the well-being of less fortunate people. b. welfare programs in the United States.

1. Welfare economics is the study of a. the well-being of less fortunate people. b. welfare programs in the United States. 1. Welfare economics is the study of a. the well-being of less fortunate people. b. welfare programs in the United States. c. the effect of income redistribution on work effort. d. how the allocation of

More information

Academic Standards for Economics

Academic Standards for Economics Academic Standards for FINAL Elementary Standards Grades Pre-K - 3 Pennsylvania Department of Education XVI. TABLE OF CONTENTS Introduction. XVII. THE ACADEMIC STANDARDS Scarcity and Choice..... A. Scarcity

More information

How is it decided which goods and services will be produced, how they will be produced, and who will buy them?

How is it decided which goods and services will be produced, how they will be produced, and who will buy them? Chapter 2: The Market System and Circular Flow Learning objectives: Differentiate between laissez-faire capitalism, the command system and the market system. List the main characteristics of the market

More information

Chapter 1. Introduction

Chapter 1. Introduction Chapter 1 You must have already been introduced to a study of basic microeconomics. This chapter begins by giving you a simplified account of how macroeconomics differs from the microeconomics that you

More information

Common Sense Economics: What Everyone Should Know About Wealth and Prosperity (Gwartney, Stroup, Lee, and Ferrarini ~ St. Martin s Press, 2010)

Common Sense Economics: What Everyone Should Know About Wealth and Prosperity (Gwartney, Stroup, Lee, and Ferrarini ~ St. Martin s Press, 2010) 1 Common Sense Economics: What Everyone Should Know About Wealth and Prosperity (Gwartney, Stroup, Lee, and Ferrarini ~ St. Martin s Press, 2010) Reading Guide Part III. Economic Progress and the Role

More information

Ch.1 Test. Name: Class: Date: ID: A. Multiple Choice Identify the choice that best completes the statement or answers the question.

Ch.1 Test. Name: Class: Date: ID: A. Multiple Choice Identify the choice that best completes the statement or answers the question. Class: Date: Ch.1 Test Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The situation in which some necessities have little value while some non-necessities

More information

6. In the early part of 1998, crude oil prices fell to a nine-year low at $13.28 a barrel.

6. In the early part of 1998, crude oil prices fell to a nine-year low at $13.28 a barrel. Questions 1. Delta Software earned $10 million this year. Suppose the growth rate of Delta's profits and the interest rate are both constant and Delta will be in business forever. Determine the value of

More information

MIDDLE SCHOOL ECONOMICS

MIDDLE SCHOOL ECONOMICS F O C U S MIDDLE SCHOOL ECONOMICS Mary C. Suiter, Chair Joanne Dempsey Mary Ann B. Pettit Mary Lynn Reiser EconomicsAmerica National Council on Economic Education A partnership of education, business,

More information

MICROECONOMICS SECTION I. Time - 70 minutes 60 Questions

MICROECONOMICS SECTION I. Time - 70 minutes 60 Questions MICROECONOMICS SECTION I Time - 70 minutes 60 Questions Directions: Each of the questions or incomplete statements below is followed by five suggested answers or completions. Select the one that is best

More information

The Key Principles of Economics

The Key Principles of Economics Chapter Summary 2 The Key Principles of Economics This chapter covers five key principles of economics, the simple, self-evident truths that most people readily accept. If you understand these principles,

More information

Multiple Choice Identify the letter of the choice that best completes the statement or answers the question.

Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. Final day 2 Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. 1. What determines how a change in prices will affect total revenue for a company?

More information

ECO201: PRINCIPLES OF MICROECONOMICS FIRST MIDTERM EXAMINATION

ECO201: PRINCIPLES OF MICROECONOMICS FIRST MIDTERM EXAMINATION YOUR NAME Row Number ECO201: PRINCIPLES OF MICROECONOMICS FIRST MIDTERM EXAMINATION Prof. Bill Even Novermber 12, 2014 FORM 1 Directions 1. Fill in your scantron with your unique-id and the form number

More information

ECO201: PRINCIPLES OF MICROECONOMICS FIRST MIDTERM EXAMINATION

ECO201: PRINCIPLES OF MICROECONOMICS FIRST MIDTERM EXAMINATION YOUR NAME Row Number ECO201: PRINCIPLES OF MICROECONOMICS FIRST MIDTERM EXAMINATION Prof. Bill Even Novermber 12, 2014 FORM 3 Directions 1. Fill in your scantron with your unique-id and the form number

More information

Chapter Summary and Learning Objectives

Chapter Summary and Learning Objectives CHAPTER 11 Firms in Perfectly Competitive Markets Chapter Summary and Learning Objectives 11.1 Perfectly Competitive Markets (pages 369 371) Explain what a perfectly competitive market is and why a perfect

More information

S11Microeconomics, Exam 3 Answer Key. Instruction:

S11Microeconomics, Exam 3 Answer Key. Instruction: S11Microeconomics, Exam 3 Answer Key Instruction: Exam 3 Student Name: Microeconomics, several versions Early May, 2011 Instructions: I) On your Scantron card you must print three things: 1) Full name

More information

CHAPTER 2 Production Possibilities Frontier Framework

CHAPTER 2 Production Possibilities Frontier Framework CHAPTER 2 Production Possibilities Frontier Framework Chapter 2 introduces the basics of the PPF, comparative advantage, and trade. This is not exactly a tools of economics chapter; instead it explores

More information

2. New words or definitions are highlighted in italics in the text. Other key points are highlighted in bold type.

2. New words or definitions are highlighted in italics in the text. Other key points are highlighted in bold type. 1 How to Study for Class 2 Class 2 introduces two important concepts. The first is that opportunity costs rise as more of something is done. The second involves the manner by which rational decisions are

More information

Chapter 1: Ten Principles of Economics Principles of Economics, 8 th Edition N. Gregory Mankiw Page 1

Chapter 1: Ten Principles of Economics Principles of Economics, 8 th Edition N. Gregory Mankiw Page 1 Page 1 I. Introduction A. Use the margins in your book for note keeping. B. My comments in these chapter summaries are in italics. C. For testing purposes, you are responsible for material covered in the

More information

Unit One, Day One (pages 6-20, 28) ECONOMICS: The study of how limited productive resources are efficiently allocated in a world of unlimited wants.

Unit One, Day One (pages 6-20, 28) ECONOMICS: The study of how limited productive resources are efficiently allocated in a world of unlimited wants. Unit One, Day One (pages 6-20, 28) ECONOMICS: The study of how limited productive resources are efficiently allocated in a world of unlimited wants. SCARCITY: WANTS EXCEED RESOURCES We want more than we

More information

Field 048: Social Studies Economics Assessment Blueprint

Field 048: Social Studies Economics Assessment Blueprint Field 048: Social Studies Economics Assessment Blueprint Domain I Economic Concepts and Research Skills 0001 Economic Concepts and Systems (Standard 1) 0002 Economic Research Skills (Standard 7) Domain

More information

Common Sense Economics: What Everyone Should Know About Wealth and Prosperity (Gwartney, Stroup, Lee, and Ferrarini - St. Martin s Press, 2010)

Common Sense Economics: What Everyone Should Know About Wealth and Prosperity (Gwartney, Stroup, Lee, and Ferrarini - St. Martin s Press, 2010) 1 Common Sense Economics: What Everyone Should Know About Wealth and Prosperity (Gwartney, Stroup, Lee, and Ferrarini - St. Martin s Press, 2010) Reading Guide Part I. Twelve Key Elements of Economics

More information

Economics : Principles of Microeconomics Spring 2014 Instructor: Robert Munk April 24, Final Exam

Economics : Principles of Microeconomics Spring 2014 Instructor: Robert Munk April 24, Final Exam Economics 001.01: Principles of Microeconomics Spring 01 Instructor: Robert Munk April, 01 Final Exam Exam Guidelines: The exam consists of 5 multiple choice questions. The exam is closed book and closed

More information

Chapter 6 Lecture - Elasticity: The Responsiveness of Demand and Supply

Chapter 6 Lecture - Elasticity: The Responsiveness of Demand and Supply Chapter 6 Lecture - Elasticity: The Responsiveness of Demand and Supply 1 The Price Elasticity of Demand and Its Measurement We define price elasticity of demand and understand how to measure it. Although

More information

Changes in Equilibrium Price and Quantity: The Four-Step Process

Changes in Equilibrium Price and Quantity: The Four-Step Process OpenStax-CNX module: m48631 1 Changes in Equilibrium Price and Quantity: The Four-Step Process OpenStax College This work is produced by OpenStax-CNX and licensed under the Creative Commons Attribution

More information

Supply and Demand: CHAPTER Theory

Supply and Demand: CHAPTER Theory 3 Supply and Demand: CHAPTER Theory Markets and Prices A market is any arrangement that enables buyers and sellers to get information and do business with each other. A competitive market is a market that

More information

Department of Urban Studies and Planning Microeconomics Fall, Answers to the First Midterm

Department of Urban Studies and Planning Microeconomics Fall, Answers to the First Midterm Department of Urban Studies and Planning Frank Levy 11.203 Microeconomics Fall, 2006 Answers to the First Midterm 1) (25 points). At different times, federal, state and local governments have intervened

More information

Principles of Economics, Fourth Edition N. Gregory Mankiw

Principles of Economics, Fourth Edition N. Gregory Mankiw PowerPoint Lecture Presentation to accompany Principles of Economics, Fourth Edition N. Gregory Mankiw Prepared by Kathryn Nantz and Laurence Miners, Fairfield University. Economy...... The word economy

More information

Multiple choice questions 1-60 ( 1.5 points each)

Multiple choice questions 1-60 ( 1.5 points each) NAME: STUDENT ID: Final Exam ECON 101, Section 2 summer 2004 Ying Gao Instructions Please read carefully! 1. Print your name and student ID number at the top of this cover sheet. 2. Check that your exam

More information

Chapter 2 Production Possibilities, Opportunity Cost, and Economic Growth

Chapter 2 Production Possibilities, Opportunity Cost, and Economic Growth Chapter 2 Production Possibilities, Opportunity Cost, and Economic Growth MULTIPLE CHOICE 1. Which of the following correctly lists the three fundamental economic questions? a. If to produce? Why to produce?

More information

Forward-Looking Statements. Strong Business Model and Strategy. Earnings per Share. Sales ($ Millions) Sustainable and Dependable Performance

Forward-Looking Statements. Strong Business Model and Strategy. Earnings per Share. Sales ($ Millions) Sustainable and Dependable Performance 2 Forward-Looking Statements This presentation contains, or incorporates by reference, forward-looking statements with projections concerning, among other things, the Company s strategy, and the Company

More information

Answers to Text Questions and Problems

Answers to Text Questions and Problems Answers to Text Questions and Problems Answers to Review Questions 1. An individual has a comparative advantage in the production of a particular good if she can produce it at a lower opportunity cost

More information

The Basics of Supply and Demand

The Basics of Supply and Demand C H A P T E R 2 The Basics of Supply and Demand Prepared by: Fernando & Yvonn Quijano CHAPTER 2 OUTLINE 2.1 Supply and Demand 2.2 The Market Mechanism 2.3 Changes in Market Equilibrium 2.4 Elasticities

More information

The Economic Problem: Scarcity and Choice

The Economic Problem: Scarcity and Choice Chapter 2 The Economic Problem: Prepared by: Fernando & Yvonn Quijano 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair The Economic Problem: 2 Chapter Outline Scarcity,

More information

Agricultural Outlook Forum 2004 Presented Friday, February 20, 2004

Agricultural Outlook Forum 2004 Presented Friday, February 20, 2004 Agricultural Outlook Forum 2004 Presented Friday, February 20, 2004 FOOD PROCESSING CONTRACTS Path To Maintain United States Competitiveness Douglas R. Circle President/CEO Circle Farms, Inc. & Frozsun

More information

The Key Principles of Economics

The Key Principles of Economics 2 The Key Principles of Economics Your student film society is looking for an auditorium to use for an all-day Hitchcock film program and is willing to pay up to $200. Your college has a new auditorium

More information

Market Structures. Perfect competition Monopolistic Competition Oligopoly Monopoly

Market Structures. Perfect competition Monopolistic Competition Oligopoly Monopoly Market Structures The classification of market structures can be arranged along a continuum, ranging from perfect competition, the most competitive market, to monopoly, the lease competitive: Perfect competition

More information

Economic Development Unit Case Studies

Economic Development Unit Case Studies Economic Development Unit Case Studies For this unit you will need to know 5 case studies. In the examination you will 1 case study to answer. Economic Development 1. An Aid project in an LEDC Farm Africa

More information

Demand and Supply CHAPTER 2. Teach a parrot to say demand and supply, and you ve created an economist. LEARNING OBJECTIVES

Demand and Supply CHAPTER 2. Teach a parrot to say demand and supply, and you ve created an economist. LEARNING OBJECTIVES CHAPTER 2 Demand and Supply Teach a parrot to say demand and supply, and you ve created an economist. An old joke Each day, we buy an assortment of goods and services a meal, a snack, maybe a magazine.

More information

Sample Paper-05 ( ) Economics Class XII. Time allowed: 3 hours Maximum Marks: 100

Sample Paper-05 ( ) Economics Class XII. Time allowed: 3 hours Maximum Marks: 100 Sample Paper-05 (2016-17) Economics Class XII Time allowed: 3 hours Maximum Marks: 100 Answers 1. (b) How to produce. 2. (c) tea and coffee 3. (c) Contraction of demand. 4. PPC shift when (i) resources

More information

The Basics of Supply and Demand

The Basics of Supply and Demand C H A P T E R 2 The Basics of Supply and Demand Prepared by: Fernando & Yvonn Quijano CHAPTER 2 OUTLINE 2.1 Supply and Demand 2.2 The Market Mechanism 2.3 Changes in Market Equilibrium 2.4 Elasticities

More information

The exam has a total of 50 questions (100 points). You will have 75 minutes to complete the exam. Good Luck!

The exam has a total of 50 questions (100 points). You will have 75 minutes to complete the exam. Good Luck! Econ 111 Practice Midterm 1 The exam has a total of 50 questions (100 points). You will have 75 minutes to complete the exam. Good Luck! Print your Name Sign the honor Pledge affirming that you have neither

More information

Do You Really Need It?

Do You Really Need It? Grade Four Do You Really Need It? Overview Students share several chapters of the book The Boxcar Children, by Gertrude Chandler Warner, to learn about needs and wants and earning money. Students complete

More information

Economics-Unit 1 Summer Assignment. 2. Why is the idea of scarcity a starting point for thinking economically?

Economics-Unit 1 Summer Assignment. 2. Why is the idea of scarcity a starting point for thinking economically? Name Period Economics-Unit 1 Summer Assignment Answer the following questions from Unit 1 in at least 1-2 complete sentences. Print this document and handwrite your answers in the space provided. There

More information

Chapter 5: Variable pay or straight salary

Chapter 5: Variable pay or straight salary Chapter 5: Variable pay or straight salary University Professors get a straight salary which is not even based on age (may be considered high or low, depending on your point of view). Should we introduce

More information

Gross Domestic Product

Gross Domestic Product Question 1: What is GDP? Answer 1: From a macroperspective, the broadest measure of economic activity is gross domestic product (GDP). GDP represents all the goods and services that are produced within

More information

GLOBAL. Microeconomics ELEVENTH EDITION. Michael Parkin EDITION

GLOBAL. Microeconomics ELEVENTH EDITION. Michael Parkin EDITION GLOBAL EDITION Microeconomics ELEVENTH EDITION Michael Parkin Microeconomics, Global Edition - PDF - PDF - PDF Table of Contents Cover Microeconomics About the Author Brief Contents Alternative Pathways

More information

Professor Christina Romer SUGGESTED ANSWERS TO PROBLEM SET 1

Professor Christina Romer SUGGESTED ANSWERS TO PROBLEM SET 1 Economics 2 Spring 2017 rofessor Christina Romer rofessor David Romer SUGGESTED ANSWERS TO ROBLEM SET 1 1.a. The opportunity cost of a point on your economics exam is 2 points on your chemistry exam. It

More information

Contemporary s Economics McGraw Hill Wright Group 2006 Alignment to Arizona Social Studies Standards Strand 5: Economics

Contemporary s Economics McGraw Hill Wright Group 2006 Alignment to Arizona Social Studies Standards Strand 5: Economics Concept 1: Foundations of Economics The foundations of economics are the application of basic economic concepts and decision-making skills. This includes scarcity and the different methods of allocation

More information

ECON 260 (2,3) Practice Exam #4 Spring 2007 Dan Mallela

ECON 260 (2,3) Practice Exam #4 Spring 2007 Dan Mallela ECON 260 (2,3) Practice Exam #4 Spring 2007 Dan Mallela Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. 1. Profit is defined as a. net revenue

More information

Goal 8 The United States Economic System

Goal 8 The United States Economic System Practice Test of Goal 8 The United States Economic System Note to teachers: These unofficial sample questions were created to help students review state Goal 8 content, as well as practice for the Civics

More information

Boğaziçi University, Department of Economics Spring 2016 EC 102 PRINCIPLES of MACROECONOMICS MIDTERM I , Tuesday 11:00 Section 06 TYPE A

Boğaziçi University, Department of Economics Spring 2016 EC 102 PRINCIPLES of MACROECONOMICS MIDTERM I , Tuesday 11:00 Section 06 TYPE A NAME: NO: SECTION: Boğaziçi University, Department of Economics Spring 2016 EC 102 PRINCIPLES of MACROECONOMICS MIDTERM I 15.03.2016, Tuesday 11:00 Section 06 TYPE A Do not forget to write your full name,

More information

CHAPTER 8: SECTION 1 A Perfectly Competitive Market

CHAPTER 8: SECTION 1 A Perfectly Competitive Market CHAPTER 8: SECTION 1 A Perfectly Competitive Market Four Types of Markets A market structure is the setting in which a seller finds itself. Market structures are defined by their characteristics. Those

More information

Mark Scheme (Results) January GCE Business Studies (6BS01) Paper 01

Mark Scheme (Results) January GCE Business Studies (6BS01) Paper 01 Mark Scheme (Results) January 2012 GCE Business Studies (6BS01) Paper 01 Edexcel and BTEC Qualifications Edexcel and BTEC qualifications come from Pearson, the world s leading learning company. We provide

More information

Chapter 1 What Is Economics?

Chapter 1 What Is Economics? Chapter 1 What Is Economics? CHAPTER INTRODUCTION SECTION 1 Scarcity and the Science Scarcity and the Science of Economics SECTION 2 Concepts Basic Economic SECTION 3 Economic Choices and Economic Choices

More information

Competitive Markets. Jeffrey Ely. January 13, This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 3.0 License.

Competitive Markets. Jeffrey Ely. January 13, This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 3.0 License. January 13, 2010 This work is licensed under the Creative Commons Attribution-NonCommercial-ShareAlike 3.0 License. Profit Maximizing Auctions Last time we saw that a profit maximizing seller will choose

More information

Framingham State College. Principles Of Microeconomics. Problem Set Number 1. Ten Principles of Economics Quiz

Framingham State College. Principles Of Microeconomics. Problem Set Number 1. Ten Principles of Economics Quiz Framingham State College Principles Of Microeconomics Problem Set Number 1 Ten Principles of Economics Quiz You My Name is? Introduction Q1. We live in a world of? A1. Scarcity Q2. What did Alfred Marshall

More information

LESSON FIVE MAINTAINING COMPETITION

LESSON FIVE MAINTAINING COMPETITION LESSON FIVE MAINTAINING COMPETITION LESSON DESCRIPTION This lesson introduces the rationale for maintaining and strengthening competition, and illustrates the U.S. experience with antitrust laws and other

More information