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What is a positive economic statement? What is a normative economic statement? Provide an example of each.
Draw production possibilities frontier curve. Illustrate set of points that is feasible, set of points that is efficient, and set of points that is infeasible.
Why does the production possibilities frontier bow out? Give an example of two goods for which this would be the case.
What criteria would you use to determine which of two workers has a comparative advantage in performing a task?
Should your professor, who has highly specialized training in economics, take time out of his teaching schedule to mow his lawn? Defend your answer.
How does your decision to invest in a college degree add to your capital stock? Show this on your projected production possibilities frontier for 10 years.
What range of ratios of bread and apple pie would allow both parties to benefit from trade? Who has the absolute advantage in making bread?
Now suppose that in a time of crisis everyone pitches in and works much harder than usual. What happens to the production possibilities frontier?
Does a price change cause a movement along a demand curve or a shift of the entire curve? What factors cause the entire demand curve to shift?
Describe the difference between inferior and normal goods. Why does the supply curve slope upward?
Does a price change cause a movement along a supply curve or a shift of the entire curve? Describe the process that leads the market toward equilibrium.
What happens in a competitive market when the price is above or below the equilibrium price? What roles do shortages and surpluses play in the market?
If she is successful, how would this marriage change the artist's demand for goods? How would it change her supply of labor?
Are laser pointers and cats complements or substitutes? (Not sure? Search for videos of cats and laser pointers online.) Discuss.
Calculate what is the equilibrium price and quantity. Given your answer in part c, will the price rise or fall in order to find the equilibrium point?
What is the value of the price elasticity if demand is elastic? Give an example of a good that has inelastic demand.
What is the connection between total revenue and the price elasticity of demand? Explain why slope is different from elasticity.
Define the price elasticity of supply. What are the two determinants of the price elasticity of supply?
What is the value of the price elasticity if supply is elastic? What is the value of the price elasticity if supply is inelastic?
What is the income elasticity of a luxury good? Give an example of a necessity. What is the income elasticity of a necessity?
Define the cross-price elasticity of demand. Give an example with negative cross-price elasticity, another with zero cross-price elasticity.
If the government decided to impose a 50% tax on gray T-shirts, would this policy generate a large or small increase in revenues?
Over that range of prices, does the business face elastic, unitary, or inelastic demand?
At a price of $200, a cellphone company manufactures 300,000 units. At a price of $150, company produces 200,000 phones. What is the price elasticity of supply?
Determine the income elasticity of demand for eating out and for having frozen lasagna dinners.