Friday Exam Reveiw

1. What are resources? 
2. What is scarcity? 
3. Normative vs. Positive statements 
4. Define Opportunity Cost. 
5. Macroeconomics vs. Microeconomics? Examples 
6. Parts of a Production Possibilities Graph. 
7. Absolute advantage vs. Comparative advantage. 
8. Supply and Demand. Movement along a curve vs. shifting of the curve. 
9. What causes movement, What causes shifting? 
10.Compliments, Substitutes, Normal Goods, Inferior Goods. 
11.Price Ceilings vs. Price Floors

Currency Solutions from Powepoint 1-7

Currency Solutions 1-9

Currency Excange Problems

Currency Exchange Problems.

Graph the following problems using Panel 3 from your Big Graphs and Explain how each affects Imports and GDP of each partner.

1. The prices of U.S. goods rise relative to the prices of German goods.

2. Interest rates in the United States rise faster than interest rates in Canada.

3. French tourists flock to Mexico’s beaches.

4. Japanese video games become popular with U.S. children.

5. The U.S. government initiates a personal income tax reduction plan, leaving every tax-paying American with more disposable income.    
                  
6 . Japan’s fiscal policies lead to an increase in Japan’s real GDP.

7.  The U.S. federal budget deficit increases, which causes the interest rate to rise. (Assume trade with Great Britain.)

8.  Europe’s interest rates are increasing, while the U.S. interest rate remains relatively constant.

9. There is a rapid increase in the Canadian price level while the U.S. price level remains relatively constant.

Ceilings and Floors Assignment

Ceilings and Floors:  Assignment

Wheat Market:

Assume that US wheat farmers have gotten so successful in growing wheat that they have flooded the market with wheat and therefore the EP has collapsed.

Farmers discover that selling wheat at the EP price will cause them to go bankrupt.

On a supply and demand graph, show how the government steps in with a price that allows wheat farmers to create profit.

What will the immediate result be in this market with the new price?

What can you predict about the market in the next few years when farmers are now

guaranteed a profit for growing wheat?

Bottled and Drinkable Water Market:

Assume that a hurricane has ripped through a major coastal city.  The EP price of potable water is now sky-high and profiteers are taking cruel advantage of pricing this essential item.

On a supply and demand graph, show how the government steps in with a price

that allows normal people to able to afford water.

What will the immediate result be in this market with the new, enforced price?

What can you predict about the market in the immediate future as suppliers react to this legal limit to their profits?

Human Rights Survey

Human Rights Violation Survey

Market Changes in Supply and Demand (1-15)

Basic Market Changes in Supply and Demand or Quantity Supplied and Demanded

(Assume Ceteris Paribus.) (Indicate the First Change.) (Assume a market exists.)

(Watch out for Complementary/Substitute Goods and Inferior/Normal Goods)

1. Increase in Demand
2. Decrease in Demand
3. Increase in Supply
4. Decrease in Supply
5. No Shift

Problem 1 (1- 4):

After several years of decline, the market for handmade acoustic guitars is making a comeback. These guitars are usually made in small workshops employing relatively few highly skilled luthiers. Assess the impact on the equilibrium price and quantity of handmade acoustic guitars as a result of each of the following events. In your answers indicate if there is a shift (Increase/Decrease in Demand or Increase/Decrease in Supply or No Change)

1. Environmentalists succeed in having the use of Brazilian rosewood banned in the United States, forcing luthiers to seek out alternative, more costly woods.

2. A foreign producer reengineers the guitar-making process and floods the market with identical guitars.

3. Music featuring handmade acoustic guitars makes a comeback as audiences tire of heavy metal and grunge music.

4. The country goes into a deep recession and the income of the average American falls sharply.

1. Increase in Demand
2. Decrease in Demand
3. Increase in Supply
4. Decrease in Supply
5. No Shift

Problem 2 (5- 10):

How do each of the following events affects the equilibrium price

and quantity of Pizza Hut Pizza. In your answers indicate if there is a shift (Increase/Decrease in Demand or Increase/Decrease in Supply or No Change)

5.   The price of mozzarella cheese is reduce by 14%.

6.   The health hazards of hamburgers are widely publicized.

7.   The price Pizza is increased from $10.99 to $18.99.

8.   The incomes of consumers rise and pizza is an inferior good.

9.   Consumers expect the price of pizza to increase next week.

10.  Action 4 News gives Pizza Hut negative reviews after rat dropping are discovered in the containers that hold the topping.

1. Increase in Demand
2. Decrease in Demand
3. Increase in Supply
4. Decrease in Supply
5. No Shift

Problem 3 (11- 15) :

Will Shakespeare is a struggling playwright in sixteenth-century London.  As the price he receives for writing a play increases, he is willing to write more plays. In your answers indicate if there is a shift (Increase/Decrease in Demand or Increase/Decrease in Supply or No Change)

11. The playwright Christopher Marlowe, Shakespeare’s chief rival, is killed in a bar brawl after defending the honor of a lady friend.

12. The bubonic plague, a deadly infectious disease, breaks out in London.

13. To celebrate the defeat of the Spanish Armada, Queen Elizabeth declares several weeks of festivities, which involves commissioning new plays.

14.  Shakespeare is heartbroken when his love leaves him for a composer and then goes into a deep depression and a coma-like state for months.

15.  After months of inactivity, Shakespeare’s agent hires 4 ghost writers to write plays on the behalf of William Shakespeare.