Macro & Micro economics:
Principles of Economics:
The Price System:
1. Give one example from the article, “The Economic Organization of a P.O.W. Camp,” of a market process. Do not use the example of cigarettes emerged as currency; we discuss that in the next question. (1 paragraph maximum answer)
2. In the article, “The Economic Organization of a P.O.W. Camp,” Radford describes how cigarettes emerged as currency within the camp. What properties of cigarettes made them a good currency? What properties of cigarettes made them bad currency? How did currency evolve within the POW camp over time? (1 paragraph maximum answer)
3. A barrel of oil can be used to produce both gasoline and asphalt. If the price of gasoline falls, the supply of asphalt _______ and asphalt prices ________.
a. increases; decrease
b. increases; increase
c. decreases; decrease
d. decreases; increase
4. Suppose that a war in the Middle East makes oil increasingly scarce. Oil usage should:
a. increase in low-value uses.
b. fall the most in high-value uses.
c. fall the most in low-value uses.
d. fall equally across low- and high-value uses.
5. Why do so few British neighbours devise arrangements to share their washing machines? Do British households enjoy spending money on expensive durable goods that they use only a few hours each week? (5 sentences maximum, no graphs necessary).
6. The difference between the entrepreneur and all other participants in a project is that the entrepreneur
a. Accepts responsibility for the outcome.
b. Offers credible guarantees to all the others.
c. Persuades others to give him or her control of the project.
d. Receives the residual, or what is left over after all prior agreements have been honoured.
e. All of the above.
7. From 1920 to 1933, there was a nationwide ban on the sale, production, importation, and transportation of alcoholic beverages in the United States. During this period of Prohibition, beer and wine were difficult to find but whisky and gin were plentiful. Why? (5 sentences maximum, no graphs necessary).
8. One way to appreciate the interrelatedness of costs, demand, and prices is to trace the sequence of effects that might follow from an event such as a drought in Ukraine. In each blank, indicate whether we expect an increase or a decrease. Please write your answers in the numbered list below to make it easier to mark.
A severe drought in the Ukraine will (1) _____ the quantity of wheat available to the people of Ukraine. If the government of Ukraine then buys wheat from U.S. grain dealers, the price of U.S. wheat will (2) ______. This will (3) ______ the cost of flour to U.S. millers and (4) ______ the cost of bread in the U.S. grocery stores. It will also (5) _____ the cost to Pakistan of purchasing wheat from the United States, which will (6) ______ the demand in Pakistan for domestically produced wheat and (7) ______ its price. This will (8) ______ the demand for land on the part of Pakistani wheat growers and thus (9) _____ the cost of growing cotton on land that is also suitable for wheat production. This will (10) _____ the quantity of cotton produced, (11) _____ the price of cotton, and (12) _____ the cost of purchasing cotton clothing. This will (13) _____ the demand for wool.
Meanwhile, back in the United States, the demand for land suitable for wheat production will (14) _____, which will (15) ____ the cost of growing feed grain for cattle. This will (16) _____ the quantity of cattle grown and cause beef prices to (17) _____. This will (18) ____ the demand for chickens.
1. 7. 13.
2. 8. 14.
3. 9. 15.
4. 10. 16.
5. 11. 17.
6. 12. 18.
9. Graph an example of a price control (floors or ceiling). Make sure you label everything in your graph carefully. Write one paragraph explaining what kind of price control it is and all of the effects of the price control in your graph.
10. The property rights of people
a. must be carefully distinguished from human rights or civil rights.
b. determine people’s incomes but do not affect their decisions.
c. are rights to control the way in which particular resources will be used.
d. are only the legal rights people have with respect to resources other than their labour.