Eco 498
Opening Questions
Spring 2013
Every economics student should be able to answer the following questions. Since the
prerequisites for this course are ECO 285 and ECO 384, reasonably complete answers
should be available given the previous coursework.
Each student has been randomly assigned a number corresponding to the questions
below. On January 16, you are to turn in a one page hand written answer. Your answer
may include graphs and or equations as appropriate. In addition, on January 16, each
student will provide the class with a 2-3 minute oral answer to the question. You may use
the boards to draw graphs as necessary.
Some questions have very short answers. Some questions have had numerous books
written about the topic, but focus your answer down to a single page - handwritten.
You should read the entire list of questions before working on your answer.
You are to complete this assignment with the knowledge you already have in your head
from your previous coursework and thought. It is an act of academic dishonesty to use
any type of resource (books, notes or web)- including discussing the question with your
classmates. See the syllabus regarding academic dishonesty.
50 points maximum.
1. At the most fundamental level, economics is the study of what? Toward what end
do we study economics? Why is social decision making an important area of
study?
2. What type of social organization do we have in the United States? What is the
primary role of the market system within our social organization?
3. What is the interaction between markets and government?
4. From an economics perspective, what are the roles of a democratic system
(Government) within our social organization? What are public goods?
5. What is the supply curve for an individual competitive firm? What is the supply
curve for a monopolist?
6. How does an oligopoly differ from a competitive market? When do firms have socalled market power?
7. Adam Smith wrote what important book? Why is it an important book? Describe
the idea of the "invisible hand?"
8. What is the main focus of study in macroeconomics?
9. What does the Phillips Curve purport to show? Why are measures of inflation and
unemployment important? How does the natural rate of unemployment fit into the
discussion?
10. When a market (competitive) is in disequilibrium, what does this tell us about
society’s interest in resource allocation? Is the allocation optimal?
11. What was Keynes' main focus for stimulating economic activity? Give us some
details.
12. What was Friedman's main focus for stimulating economic activity? Give us some
details.
13. What is the role of the banking system within our social organization? What is the
fractional reserve banking system? Why is the reserve requirement rate an
important measure?
14. What is the main focus of study in microeconomics?
15. What is the goal of individual firm within our social organization? What is the
assumed goal of the individual consumer in our social organization?
16. What is the “ability condition” for the consumer? What is it for the producer?
17. What is role of an individual in a society? How does an individual fit into society
as an economic agent (consumer and input)? How does an individual fit into
society in terms of a Democracy? How do individuals interact with society?
18. What is the FED? What are the roles of the Federal Open Market Committee?
19. What is the SEC? (Security and Exchange Commission.) Why is such a social
organization essential?
20. How would a firm protect market power? What does the competitive market say
about market power?
21. Why is the elasticity of demand an important economic measure? What does this
measure tell us about consumer behavior?
22. Why is information important for markets to function correctly? Why is
information important from a consumer's perspective? Why is information
important for investors - either labor or capital funding?
23. Distinguish between the federal deficit and the federal debt. Why are these
important measures for understanding social decision making?
24. What is the role of markets within a social organization? What do markets have to
do with the questions concerning resource allocation?
25. When price increases, how do total revenues change? What is the determining
variable?
26. What is the market equilibrium (Supply and Demand) condition? What does
quantity demanded measure? Quantity supplied? What does this tell us about the
conditions in the market when they are equal?
27. How does a market self correct? What if there is a shortage? A surplus? What
does this tell us about the movement of resources?
28. What is the role of profits within a market economy? What does this tell us about
the movement of resources? What is the equilibrium condition for a competitive
market?
29. What is the normal rate of return? Why do people invest capital funding in firms?
30. What is the profit maximizing output decision condition for a firm? When profits
are maximized, in a competitive market, and the market is in equilibrium, zero
profits, what does this tell us about the efficiency of resource allocation within
that market?
31. Focusing on a zero profits equilibrium with profit maximizing firms, inputs are all
paid according to the value of their attributable output. How much is left over
after all inputs are paid? What does this say, from a social perspective, about the
efficiency of resource allocation?
32. Are markets good for society? What is the argument for allowing markets to be
free?
33. Would it be beneficial for firms to earn positive economic profits? How can firms
accomplish maintaining positive economic profits?
34. What services does money serve within society? What are the roles of money?
35. Which agency of government manages the monetary system in the United States?
36. The current national discussion has focused on the size of the deficit and the debt.
Are there inherent probles with either of these?
37. What does the Laffer Curve purport to show?
38. Are you glad I am out of questions?