What is the mechanism by which the "invisible hand" pushes markets to equilibrium?
Explain the two main causes of market failure and give an example of each.
Use a production possibilities frontier to describe efficiency. (This question can be answered either with or without the use of a graph, depending on whether you have a graphing program on your computer. It is possible to describe the various points on the PPF without a graph.)
What is the difference between a positive and a normative statement? Give an example of each.
Explain how absolute advantage differs from comparative advantage.
What are the factors that determine the quantity of a good that buyers demand?
Define the equilibrium of a market. Describe the forces that move a market toward its equilibrium.
List and explain the four determinants of price elasticity of demand,
If demand is elastic how will an increase in price change total revenue? Explain.
A recent study found that the demand and supply schedules for Frisbees are as shown in the chart at the following link:
What are the equilibrium price and quantity of Frisbees?
Frisbee manufacturers persuade the government that Frisbee production improves scientists' understanding of aerodynamics and thus is important for national security. A concerned Congress votes to impose a price floor $2 above the equilibrium price. What is the new market price? How many Frisbees are sold?
Irate college students march on Washington and demand a reduction in the price of Frisbees. An even more concerned Congress votes to repeal the price floor and impose a price ceiling of $1 below the former price floor. What is the new market price? How many Frisbees are sold?