Economics Dr.

Sauer

ECO 1040 Exam 1 Information

Time and Place Exam 1 will be given during our regular class on Monday February 20th. You have until the end of our regular class period to finish. If you arrive late to class, you will not be given additional time to complete the exam. If you receive exam accommodations through the Access Center, youll need to bring your exam information form to class or office hours for me to sign. Please do this in a timely manner so I can make sure the Access Center receives a copy of your exam in a timely manner. If you miss this exam, Exam 3 will be weighted to compensate.

What to Bring Please bring the following to the exam: - #2 pencil and eraser - Scantron bubble sheet (available for purchase at the bookstore) - your completed essay

What to Expect This exam is closed book, closed notes, and closed neighbor. You may not use any resources other than your brain. You may ask Professor Kate clarification questions during the exam depending on the nature of your question, she may reserve the right not to answer.

Exam Format y The in-class portion of the exam will consist of 45 multiple choice problems. (90 % of exam grade) y You will be given an essay question in advance. Youll bring your essay to class and hand it in with your exam. (10 % of exam grade)

Exam Content y The midterm covers material from chapters 1 through 6 as well as the introductory lecture from the first day of class. The number of questions coming from each will be approximately equal. Exam Purpose: Assess your ability to meet the following course learning objectives

Identify/define the fundamental concepts of economics including incentives, opportunity costs, marginal analysis, and prices. (intro lecture, ch 1, ch 2) Apply supply and demand analysis to evaluate market changes, economic problems and their impact on the human experience. (ch 1) Identify/define the role of the government in a market economy and the effects of various government regulations on market outcomes and on the human experience. (ch 2, ch 3, ch 4)

How to Study for the Exam A note on studying economics in general: Most brains process economics best in small doses. Studying frequently for short periods of time is usually more much more effective than an all-night cram session the night before the exam. For example, when you have 10 extra minutes, use that time to review the notes for one chapter. Feel like procrastinating? Set a timer for 30 minutes and re-work as many of the in-class worksheets or homework problems as you can then stop and do something else. This strategy is for *reviewing* your work and assumes youve been keeping up with the reading and homework and worksheets as theyve been assigned. Youll have to put in additional time if you are catching up on material. ____________________________________________________________________________________ Primary Concepts This is a list of concepts from the reading and from lectures. These are the concepts that you are expected to have learned and you will be tested on. Familiarity with these concepts would be commensurate with a C grade. If you are targeting a higher grade, then youll also want to review all of your course materials in greater detail. Introduction Lecture - explain what economics is - describe how economists are sometimes scientists and sometimes policy advisors - identify and define the key aspects of thinking like an economist

Chapter 1: The Power of Markets - explain Adam Smiths major insight - describe how a market economy works and contrast it with a centrally planned economy - analyze the behavior of individuals and firms - explain the role of prices in a market system - illustrate market equilibrium graphically, including changes in equilibrium - identify some benefits of a market system

Chapter 2: Incentives Matter - describe how incentives influence the behavior of individuals and firms - explain the role of incentives in good policy making - identify some examples of perverse incentives - describe the role of incentives in exploiting and preserving communal resources - describe the process of creative destruction and its role in a market economy - explain how incentives factor into the principal-agent problem, the Prisoners Dilemma, and the tax system

Chapter 3: The Government & The Economy I - identify the 3 roles of a good government in a market economy - explain how governments can help make markets possible - explain how governments and the private sector can deal with externalities - explain why governments might provide public goods and the issue of cost-benefit analysis - identify examples of externalities and public goods

- describe why the government must redistribute some of the individuals wealth - identify types of philosophical questions that economics will not answer definitively

Chapter 4: The Government & The Economy II - explain under what circumstances the government should be involved in providing goods and services in a market economy - compare and contrast the way the market directs resources with the way governments direct resources - identify ways in which regulations can be beneficial and harmful - describe the costs associated with taxes - explain the Laffer Curve and the tax-cuts-increase-revenue fallacy - describe the economic framework for thinking about the optimal size of government - given government revenue and spending, calculate the deficit or surplus

Chapter 5: Information Economics - explain the major concepts related to information asymmetry (hidden actions, hidden characteristics, moral hazard, adverse selection. - identify examples of information asymmetry - describe the health care market in the context of information economics - describe how branding can be beneficial to consumers and firms - explain how signaling and screening help overcome information asymmetry

Chapter 6: Productivity & Human Capital - identify examples of how the standard of living varies around the world - describe the 4 main determinants of productivity - explain the catch-up theory - explain the link between human capital, productivity and the standard of living - analyze poverty from a human capital standpoint - describe the viewpoints in the debate on the significance of the USs gap in income - explain the Lump of Labor Fallacy - describe some factors that contribute to income inequality - demonstrate the Rule of 72