4. Suppose you are the manager of a restaurant that serves an average of 400 meals per day at an average price per meal of
$20. On the basis of a survey, you have determined that reducing the price of an average meal to $18 would increase the
1. Economists use basic psychological insights in the field of study called 9. A negative income tax system is designed to
a. psychological economics. b. transitional economics
a. provide in-kind benefits to the poor.
c. behavioral economics. d. social ec
and equality both refer to how much a society can produce with its resources.
and equality both refer to how fairly the benefits from using resources are distributed between
members of a society.
refers to how much a society can pro
1. DEFINING ECONOMICS
1. Define economics.
2. Explain the concepts of scarcity and opportunity cost and how they
relate to the definition of economics.
3. Understand the three fundamental economic questions: What
should be produced? Ho
1. THE GAINS FROM TRADE
1. Differentiate between an absolute advantage in
producing some good and a comparative advantage.
2. Explain and illustrate the conditions under which two
countries can mutually b
1. ANTITRUST LAWS AND THEIR
1. Define antitrust policies and tell when and why they were
introduced in the United States.
2. Discuss highlights in the history of antitrust policies in the United
States, focusing on major
1. TIME AND INTEREST RATES
1. Define interest and the interest rate.
2. Describe and show algebraically how to compute present
3. List and explain the factors that affect what the present
value of some future payment will be.
1. THE ROLE OF GOVERNMENT IN A
1. Discuss and illustrate government responses to the market failures of
public goods, external costs and benefits, and imperfect competition and
how these responses have the potential to r
1. THE THEORY AND PRACTICE OF
1. Discuss and assess Karl Marxs theory of capitalism,
including mention of the labor theory of value, the
concept of surplus value, periodic capitalist crises, and
1.1 The Eco
1. MAXIMIZING THE NET BENEFITS
1. Explain why pollution can be said to have benefits as well as costs and
describe the nature of these benefits and costs.
2. Using marginal benefit and marginal cost curves, apply the margi
1. INCOME INEQUALITY
1. Explain how the Lorenz curve and the Gini coefficient
provide information on a countrys distribution of income.
2. Discuss and evaluate the factors that have been looked at
to explain changes in the distribution
1. A key theme fundamental to all of economics is:
A) there are limited wants.
B) we are a rich country but are simply not aware of it.
C) people have unlimited wants facing limited means to satisfy them.
D) there are unlimited resources.
1. The price elasticity of demand is measured by:
A) dividing the percentage change in price by the percentage change in quantity
B) dividing the percentage change in quantity demanded by the percentage change in
C) subtracting the percen
1. THE DEMAND FOR LABOR
Apply the marginal decision rule to determine the quantity of labor
that a firm in a perfectly competitive market will demand and illustrate
this quantity graphically using the marginal revenue product and
1. PRODUCTION CHOICES AND
COSTS: THE SHORT RUN
Understand the terms associated with the short-run production functiontotal product, average
product, and marginal productand explain and illustrate how they are related to each other.
Markets for Factors of
1. PRICE-SETTING BUYERS: THE
CASE OF MONOPSONY
1. Define monopsony and differentiate it from
2. Apply the marginal decision rule to the profitmaximizing sol
1. THE PRICE ELASTICITY OF
1. Explain the concept of price elasticity of demand and its calculation.
2. Explain what it means for demand to be price inelastic, unit price elastic, price
elastic, perfectly price inelastic, and pe
1. PUTTING DEMAND AND
SUPPLY TO WORK
1. Learn how to apply the model of demand and supply to the
behavior of equilibrium prices and output in a variety of markets.
2. Learn basic vocabulary on the organization of firms and explain
1. THE LOGIC OF MAXIMIZING
1. Explain the maximization assumption that economists
make in explaining the behavior of consumers and firms.
2. Explain and illustrate the concepts of marginal benefit
and marginal cost and supply
Choices in Production
The production possibilities model shows
the goods and services that an economy is
capable of producing its opportunities given
the factors of production and the technology it
An economic system i
Demand and Supply
Markets are the institutions that bring together
buyers and sellers.
Examples include: farmers markets, eBay,
Amazon.com, and retail outlets.
1. Define the quantity demanded of a good or service and illustra
1. THE CONCEPT OF UTILITY
1. Define what economists mean by utility.
2. Distinguish between the concepts of total utility and marginal utility.
3. State the law of diminishing marginal utility and illustrate it
4. State, e
1. PERFECT COMPETITION: A
1. Explain what economists mean by perfect competition.
2. Identify the basic assumptions of the model of perfect
competition and explain why they imply price-taking
1. PERFECT COMPETITION: A
1. THE NATURE OF MONOPOLY
1. Define monopoly and the relationship between price
setting and monopoly power.
2. List and explain the sources of monopoly power and how
they can change over time.
3. Define what is meant by a natural monop
A natural monopoly arises when
a. there are constant returns to scale over the relevant
range of output.
b. there are economies of scale over the relevant range
c. one firm owns a key natural resource.
d. the government gives a single firm t
Imperfect competition refers to a market structure
with more than one firm in an industry in which at least
one firm is a price setter.
1. MONOPOLISTIC COMPETITION:
COMPETITION AMONG MANY
Explain the main chara