First Microeconomics Exam
Instructor: James Sondgeroth
The questions below and succeeding ones will function as learning objectives for the essay and multiple-choice exams and will also constitute a lecture outline for the course.Depending on how quickly we move this semester, the class will cover between 45 to 54 of these questions.
For the essay exam, students will be allowed to use two sheets of paper (8.5 X 11) with handwritten notes on both sides of each. These notes must be turned in with the exam and will constitute 10% of the exam grade.
Answers to the essay questions must be written in a Blue Book
Two of the following questions will be randomly drawn on the day of the exam; you will have to answer those two questions for the exam. The notes mentioned above must be on your cleared desk with your Blue Book before the questions are drawn.
Students will have 50 minutes to answer the two questions that have been drawn as fully and with the greatest detail as they are able to.
The multiple-choice exam will be administered on the course's ACC Blackboard site. Pools of multiple-choice questions have been constructed around each question below. There are from 10 to 40 questions in each pool. The exam on Blackboard will randomly select 2 or 3 questions from each pool for each question covered on an exam. The multiple-choice exam is an open book, open note exam which will be taken on-line outside of class time.
This exam covers chapters 1, 2, part of 20, 3, and 4 plus various handouts.
- Definition of Microeconomics (Chapter 1)
- List and discuss the various definitions of economics given in the textbook?
- What is the definition of microeconomics given in the class lecture?
- Discuss in detail the major terms used in the definition given in class.
- Scarcity (Chapter 1 and lecture)
- What is scarcity and why does it exist?
- classical (capitalist-in the textbook),
- graphical illustration of (i),
- Explain the link between scarcity and each of the following:
- opportunity cost,
- the need for a rationing device,
- Free Goods and Economics Goods (Chapter 1 plus lecture)
- What is a free good? Give an example.
- What is an economic good? Give an example.
- Explain both using supply and demand graphs and examples.
- What is a bad?
- The Scientific Method (handout from Arnold's 7th edition)
- Explain how the scientific method works.
- Are scientific theories ever proven? Explain why or why not.
- How is the scientific method similar to democracy, evolution, and the market system? Explain each.
- Opportunity Costs and the Law of Increasing Costs (Chapter 1 and Chapter 2)
- Explain what is meant by opportunity cost and the law of increasing costs?
- Illustrate these concepts with the use of a production possibilities curve.
- Draw a production possibilities frontier. (Chapter 2)
- Discuss why it bows out from the origin.
- Show how seven major economic concepts can be illustrated with a Production Possibilties Frontier. Explain how the PPF illustrates each concept.
- The Production Possibilities Frontier, Economic Growth, and Technological Improvements (Chapter 2)
- Economic Growth
- Illustrate how economic growth can be illustrated with a production possibilities frontier.
- List and discuss the different sources of economic growth.
- Discuss (and illustrate with another production possibilities frontier) how a technological advancement in one line of production (say in growing cotton) might result in greater output in production of an unrelated good (say maize) which did not experience any technological advancement in our ability to produce it.
- Given the level of technology, resource availability, and labor productivity for each country, the United States and Germany can produce the following amounts of steel and coal in thousands of tons per week with one unit of their respective resources (land, labor, and capital).
(From Chapter 2, Chapter 20, and class handout)
Coal Steel Germany 72 18 United States 108 36
Explain your answers in detail. Also give numbers and calculations if needed.
- Which country has an absolute advantage in the production of coal?
- Which country has an absolute advantage in the production of steel?
- Which country has a comparative advantage in the production of coal?
- What is the opportunity cost of producing one ton of steel in the United States?
- What country will specialize in the production of coal if international trade takes place?
- What mutually beneficial settle price (exchange rate) might result with international trade and specialization?
- Socialism vs. Capitalism (class handout)
- Socialism: What does the socialist thinker say about
- private property,
- income distribution
- and power?
- Capitalism: What does the capitalist thinker say about
- private property,
- income distribution
- and power?
- The Circular Flow of Economic Activity (class handout)
- Draw the circular flow of economic activity, labeling all actors, markets, and flows.
- Point out where capitalism answers the questions of 'what,' 'how,' and 'to whom,' and explain how it does so at the places indicated on your drawing.
- Money (lecture and PPT)
- Define what money is.
- Explain what the price of money is.
- Outline the evolution of money from earliest times to the present commenting on the reasons that led from one level development to the next.
- Define the law of demand and draw a Demand Curve labeling all the axes correctly.
- List the "Ceteris Paribus" variables that affect demand and illustrate a shift in a Demand Curve. Now discuss how a change in each of these varialbes would lead to the shift you have illustrated in your drawing.
- Define the law of supply and draw a Supply Curve labeling all the axes correctly.
- List the "Ceteris Paribus" variables that affect supply and illustrate a shift in a Supply Curve. Now discuss how a change in each of these varialbes would lead to the shift you have illustrated in your drawing.
- Equilibrium (Chapter 3)
- Draw a supply and demand curve. Label all axes and curves appropriately. Label the equilibrium point, the equilibrium quantity, and the equilibrium price.
- Explain what equilibrium in the market is and why there is a tendency toward it. (In other words, if the price of something is higher or lower than the equilibrium price, what forces (i.e., human behavior) push the price and quantity to equilibrium.)
- Disequilibrium (Chapter 3)
- With the use of a graph illustrate what a shortage (excess demand) is.
- With the use of a graph illustrate what a surplus (excess supply) is.
- Explain how surpluses/shortages might become permanent. (In other words, explain what forces might keep the market from establishing an equilibrium.)
- Elasticity (Chapter 5)
- Define the price elasticity of demand in words and with the use of a formula.
- Illustrate the five different types of demand elasticity with the use of graphs and the formula.
- Give an example of a good or service that might have a demand elasticity like each one you illustrated.
- The Determinants of Elasticity, and Elasticity and Total Revenue (Chapter 5)
- List and discuss the determinants of the elasticity of demand.
- Illustrate with the use of graphs and then explain the relationship between Total Revenue and
- elastic demand curves;
- inelastic demand curves.
- Cross Price and Income Elasticity of Demand (Chapter 5)
- Cross Price Elasticity
- Define cross price elasticity of demand.
- Using the formula for it, explain how it differs when a complement changes price versus a substitute changing price.
- Income Elasticity
- Define income elasticity of demand.
- Discuss, using the formula for the income elasticity of demand, the different income elasticities of inferior goods, necessities, and luxuries.