APEC 1101 Spring 2014 Review Questions for Exam 1 - APEC 1101 Principles of Microeconomics Review Questions for Exam I Analytical\"Essay\"Questions 1 How

APEC 1101 Spring 2014 Review Questions for Exam 1 - APEC...

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APEC 1101: Principles of Microeconomics Review Questions for Exam I Analytical " Essay " Questions 1. How often do you rent DVD’s? Would you do so more often if a rental costs half as much? Distinguish between your demand curve for DVD’s and your " quantity demanded " at the current price? 2. Economists usually say that prices are a "rationing mechanism". Suppose the supply of a good declines, how do prices "ration" the goods that are now considered as scarce in a competitive market? 3. Explain the difference between a change in quantity demanded and a change in demand. Give examples of each and graphically illustrate the two concepts. 4. " The prices of condominiums in downtown Minneapolis has been increasing sharply. The demand for condominiums in downtown Minneapolis has been rising sharply as well. This is hard to explain because the law of demand states that higher prices should lead to lower demand. " Do you agree or disagree? Explain your answer. 5. Consider an economy that produces automobiles and butter under increasing marginal opportunity costs. Technological innovation makes it possible to produce cars significantly cheaper relative to butter. Illustrate this using a production possibility curve. Explain how the economy will benefit from this technological innovation.
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