Potential questions for exam 1

1. Planet Earth is our only home for the time being. As global

populations grow and our resources dwindle, we should

worry more about the issues of SCARCITY AND CHOICE. All

parts of this question are part of the topic called Intro to

some key concepts of Economics.

i. There are 17 Rare Earth Elements. Pick any 5 of

them, and for EACH of the 5, explain in detail why

they are so critical to us. Use Google to look the

up.

 Include in your answer:

a. what it used for,

b. why are those things so critical?

c. Where in the world the resource is

located.

d. And approximately how much is left.

e. For EACH of the 5, please explain 3

things we need to start doing today

to avoid running out of that

resource. It is very important that

you provide thorough and complete

explanations here.

b. The theory of rational behavior says that we humans

act in our own self-interest. Given our actual behavior

and the decisions we have made and are continuing

to make relative to the planet, please:

i. What does over-pumping of aquifers really

mean? Use Google to gather info.

ii. Is continued over-pumping of aquifers around the

world is in our best interest. If yes, explain why. If

no, explain why not.

iii. Explain how the continued over-pumping of

aquifers in America, China, and India, could

impact our ability to survive on the planet. This

will require that you find out what things these 3

nations have in common that are related to

aquifers. Connect the dots and explain how our

ability to survive on the planet could be

impacted by continued over pumping of

aquifers. Please provide plenty of detail here.

Google can help!

iv. Explain in detail 3 things we can do to stop the

over-pumping problem. Hint: Focus on the top

uses of water in the world.

c. Utility Concepts:

i. Explain the 3 concepts: Utility, Marginal Utility,

and Diminishing Marginal Utility.

ii. Explain 3 examples of EACH of those 3 concepts

as they might be applied to the Keystone XL

Pipeline project.

d. The Theory of Consumer Behavior: this material is

provided in the slides and audio lecture.

i. Explain EACH of the key assumptions of the

Theory of Consumer Behavior and what the

theory tells us. Read the slide and listen to the

audio lecture.

ii. Does the theory of consumer behavior reflect

reality? If yes, then why. If no, the why not.

e. Marginal analysis is a decision-making tool. 

i. Please define Marginal Cost

ii. Please define Marginal Benefit,

iii. Explain the following 3 cases in terms of what you

should do regarding the activity involved. Should

we do more of the activity, less of the activity, or

keep doing the same? Explain why in each case.

1. MB>MC

2. MC>MB

3. MC=MB

iv. Explain 3 examples of MC related to the Keystone

XL Pipeline question.

v. Explain 3 examples of MB related to the Keystone

XL Pipeline question.

2. The Production Possibilities Model is one of the first Economic

Models students learn about. Please refer to the material

covered in the topic called The Economizing Problem.

a. Please explain what the model teaches us.

b. Please explain each of the 4 assumptions of the

model.

c. Please explain Productive Efficiency and how it relates

to the ppc.

d. Please explain Allocative Efficiency and provide a

thorough explanation of the 2-step process for finding

the point of allocative efficiency on the PPC.

e. On the topic of Economic growth: need to see some

detail here.

i. What does it mean?

ii. How can it be graphically represented?

iii. What are the prerequisites to Economic growth?

iv. Why is Economic growth good for you and your

country?

v. Why is Economic growth bad for you and your

country?

vi. Please provide thorough explanation of 3 factors

that would tend to limit economic growth. Be

sure you explain how those factors would

actually cause economic growth to be limited.

f. The Presentville – Futureville case:

1. Explain what motivated each group to

make the decisions they made.

2. Explain the impact of those decisions on the

future of each group.

3. Which group is most like America, and why?

4. What does this story teach you?

g. Law of increasing opportunity cost:

1. Explain it.

2. What does it teach us?

3. How could it be explained graphically?

h. Explain how you could use the Production Possibility

Model to represent the US Economy during the 2020

Corona Virus pandemic.

3. Every country has its own unique type of Economic System.

Ours is called Capitalism. Please consult the material

covered in the topic called The Market System. Google

may also be of help here.

a. Please list and explain 5 “good” things Capitalism has

produced for us over the years. Make sure you provide

thorough explanations of why you believe these are

“good” things.

This is harder than it looks! Think carefully and be

objective. Nothing is 100% good or bad, so you

will need to be very thorough in your

explanations. Don’t talk about pros and cons.

Focus only on good things that capitalism has

produced.

b. Please list and explain 5 “bad” things Capitalism has

produced for us over the years. Make sure you provide 

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College unless otherwise noted.

thorough explanations of why you believe these are

“bad”.

c. Capitalist Economic Systems typically require a steady

flow of resources and expanding markets. Please

explain in detail what would happen to our capitalist

system when these two conditions are absent, and

explain why those things would happen.

4.Demand, Supply, Market Equilibrium. Please use the

material covered in the topic called Supply and Demand.

a. Demand:

i. Please Thoroughly and completely define

demand.

ii. Please state the law of demand.

iii. List and thoroughly explain the 3 factors that

support the law of demand. Be sure you explain

how each actually supports the law of demand.

1. Don’t just copy from the slides, explain what

they actually mean and how they support

the law of demand.

iv. List and explain the determinants of demand and

how each can cause an increase in demand and

a decrease in demand.

1. List and explain each of the 5 determinants

and how they impact demand.

v. Thoroughly and completely explain the

differences between a change in demand and a

change in quantity demanded along with the

causes of those changes, and how each change

is graphically represented.

b. Supply .

i. Define supply.

ii. State the law of supply.

iii. List and explain the determinants of supply and

how each can cause an increase in supply and

a decrease in supply.

iv. Thoroughly and completely explain the

differences between a change in supply and a

change in quantity supplied, the causes of

those changes, and how each is graphically

represented.

c. Market equilibrium.

i. Please thoroughly and completely explain what

market clearing equilibrium means.

1. Don’t just copy stuff, explain what this really

means. Please be thorough.

ii. Thoroughly and in detail, explain what happens

when a price is above the equilibrium price, and

why those things happen!!! Detail!

iii. Thoroughly and in detail, explain what happens

when a price is below the equilibrium price, and

why those things happen!!! Detail!

iv. Thoroughly and completely explain the two

government intervention cases, price floors and

price ceilings and give examples of each.

5.Market Failure. please use the material covered in the topic

called The US Economy – Private and Public Sectors

a. State the definition of a market failure,

b. List and explain the 4 causes of market failure included

in the slides, including how they actually lead to over

or under allocation of resources (market failure). Don’t

miss this part! Must be very specific.

c. State the definition of spillovers costs

d. Give two examp les of a spillover cost situation and

explain why your examples are correct.

e. Explain in detail, the economic effects of spillover

costs.

• Explain why a firm would want to offload some

of its production costs to a 3rd party.

• Explain how output decisions are affected.

• Explain how resource allocation is affected by

the output decisions.

• Explain how the new resource allocations leads

to market failure, defined as the over or under

allocation of resources.

f. Explain in detail, how spillover costs are corrected and

how those two approaches would actually work to

solve the problem. Be very detailed.

g. State the definition of spillover benefits.

h. Give two examples of a spillover benefit situation and

explain why your examples are correct. Be specific.

i. Explain in detail, the economic effects of spillover

benefits.

• Explain how the 3rd party responds to receiving

unexpected benefits.

• Explain how the behavior of the 3rd party impacts

the producers’ perception of demand.

• Explain how the producers’ perception of

demand leads to changes in the output

decisions of the firm.

• Explain how those output decisions lead to

solution of the market failure problem.

j. Thoroughly and completely explain how spillover

benefits are corrected and the economic implications

of the corrections.

Explain the two approaches used to solve the spillover

benefit problem and how they work to solve the

problem.

6. Throughout the ages countries have implemented

impediments to trade. Please use the material covered in

the topic called The US in the Global Economy as well as

Google

a. What is a tariff?

b. Why would America impose tariffs against another

nation?

c. Why would the U.S. impose steep tariffs on Chinese

solar panels prior to 2016?

i. Explain how this would work to accomplish the

U.S. objective.

d. Given the current trade war with China and other

nations, please explain

i. Which industries are being hurt by higher tariffs

against foreign nations and how are they being

hurt?

ii. Which industries are being helped by higher tariffs

against foreign nations and how are they being

helped?

iii. Explain how and why the American customers of

those industries are being impacted. Please

provide thorough explanations.

e. What is an import quota?

f. Why would America implement import quotas?

g. Identify 3 cases where the U.S. has imposed import

quotas on another country and explain why each were

implemented. Be thorough.

i. Google can help you.

h. What are non-tariff barriers?

i. List and explain 3 examples of non-tariff barriers

imposed by the U.S., why they were implemented, and

their impact on the U.S. and other countries.

i. Google can help you.

j. If America suddenly eliminated all trade barriers,

explain what would happen to employment, national

income, and GDP in America, and why those things

would happen. What role would the concept of

comparative advantage play in these events? Please

provide lots of detail.