Exam 1: The Scope and Method of Economics

Describe what took place during the Industrial Revolution.

Explain the difference between positive economics and normative economics.

Define the concept used in economics known as Ockham's Razor.

Explain why it is more likely that the opportunity cost of attending a 7:00 a.m. class is forgone sleep but that this is not reasonably likely to be the case for a class that meets at 12:00 noon.

When is it more expensive for a country to go to war - during a recession or during an economic boom? Explain.

Explain the difference between economic growth and stability. Can a country experience both at the same time? Why or why not?

List and describe the two areas of positive economics.

Explain the difference between microeconomics and macroeconomics.

Review the following statement. "He who has choice has pain." What is meant by this?

An engineer has informed the city manager that the marginal cost of an additional car crossing the city bridge is zero? If you were required to draw this cost function on a graph what would it look like? What is the slope of this graph?

Situation #1 Assume that you have hired three executives to run your company each with a different job. All are equally productive and each can do the other person’s job if necessary. Assume that the first executive’s contribution to the company is worth $1,000,000 and is assigned to this task; the second one is worth $800,000 and the third one is worth $500,000. -Referring to Situation #1 suppose that you decide that you have to fire the first and the third executive without hiring any replacements. What would be the opportunity cost of the second executive's work? Explain why your answer is not the same as in the question above.

Explain how to calculate the slope of a line. What does the slope measure?

List and describe four fields of economics.

Explain what post hoc fallacy means and give an example.

Define a variable and give two examples that would apply to economics.

Some politicians have recently suggested changing the income tax system in the U.S. to a flat tax system where all taxpayers would pay the same percentage of their income in tax to the federal government. Explain how such a change can be analyzed in terms of efficiency. Do you believe that this tax will have equity effects as well?

For each of the following, list whether the topic is microeconomic or macroeconomic in nature: (a.) The price of gasoline. (b.) The national unemployment rate. (c.) The quantity of new cars sold each year. (d.) The wage rate paid to steel workers. (e.) The amount of national output in an economy.

Explain how a model can be useful even if it is not realistic.

Explain the concept of marginalism as it is used in economics.

Explain what is meant by the term opportunity cost.