1. List and describe the characteristics of a perfectly competitive market.

2. Explain how a firm in a competitive market identifies the profit maximizing level of production. When should the firm raise production, and when should the firm lower production?  Be able to illustrate your answer with a graph.

3. Briefly contrast the difference between a monopoly, oligopoly, monopolistic competitor and perfect competition.

4. You must decide whether or not to attend another year of college next semester. How might you use economic analysis to make your decision?  Be sure to use economic jargon in your answer and define the terms.

5. Why is it that two individuals or nations can both gain from trade when they trade things of equal value?

6. Why is productivity so important in an economy and what steps can the government take to increase productivity?

7.  Draw a production possibilities frontier representing the economy's possible production of milk and eggs. Now, show what will happen to the frontier or the production point under each of the following circumstances. Use a separate graph to illustrate each situation.

a. The outcome for the economy is efficient, with society choosing approximately equal amounts of milk and eggs.
b. A recession causes a significant percentage of the labor force to become unemployed.
c. Some cows are found to be infected with Mad Cow Disease, and many of the cows must be destroyed.
d. Chickens are infected with a rare disease and egg-laying is reduced.
e. Improvements in animal nutrition raise the general productivity of cows and chickens.
f. The cow and chicken populations increase.
g. The Surgeon General announces that drinking milk prolongs life.

8. What characteristics or requirements must be met for a market to be considered as each of the following?

a. perfectly competitive
b. a monopoly
c. an oligopoly
d. monopolistic competition

9. For each of the following industries, determine whether the market structure is perfect competition, monopolistic competition, oligopoly, or monopoly.

a. the broadcast television networks
b. local telephone service
c. fast food in a city
d. soft drinks
e. municipal water
f. existing (previously issued) U.S. Treasury bonds
g. the automobile industry
h. the textbook industry

10. Other things being equal, explain the effect each of the following will have on either the demand or supply of corn. Explain also what the effect will be on equilibrium price and quantity.

a. Corn is now considered by doctors to be the most healthy vegetable.
b. There is a decline in the amount of land used to grow corn.
c. Producers expect the price of corn to fall in the future.
d. The price of peas, a substitute for corn, goes up.
e. Corn is a normal good and incomes fall.
f. The price of fertilizer rises.

11. Suppose you know that U.S. nominal GDP in 2000 was $9,000 billion, and U.S. nominal  GDP in 1933 was $90 billion. What judgment about the change in the economic well-being of average Americans could you make? Explain.

12. People in northern states spend more on house heating than do people in southern states. If prices of heating oil and natural gas increase, and Social Security payments are indexed by the CPI, what happens to the relative economic well-being of Social Security recipients in northern and southern states?  (Index means that social changes are based on the CPI.  i.e.  If the CPI increases 5%, the government will increase Social Security by 5%.)

13. Are all people who are not working counted as unemployed? Are all people who are working counted as employed? Explain.

14. Are credit cards and debit cards money? What's the difference between credit and debit cards?

15. What are the three ways the Fed can increase the money supply?

16. What is the difference between monetary policy and fiscal policy?