1. What is the difference between the study of microeconomics and the study of macroeconomics? Provide two examples of each form of economic analysis.

2. Evaluate the following statement…”In order for a model to be useful, all assumptions used to create the model must be completely realistic”.

3. Can rational behavior be applied to gambling? What is the difference between gambling and the selling or buying life insurance?

4. Identify which of the statements below use positive economic analysis and which use normative economic analysis.

a. The government should not regulate the education system because recent problems have demonstrated that it does not know what it is doing?

b. The elimination of barriers to the free movement of individuals across European boarders has caused wages to become more equal in many industries.

c. Paying members of Congress more provides them with less incentive to commit wrongful acts.

d. We need more restrictions on companies that pollute because air pollution is destroying our way of life.

5. Distinguish between scarcity and shortage. Provide an example for scarcity and shortage.

6. It is not uncommon for someone to say something like “if we can put a man on the moon we should be able to… ”, followed by the person’s favorite project. What response can an economist make to this person?

7. What can a nation do to increase its economic growth? Why is economic growth among the major economic goals of all countries?

8. Discuss the fundamental questions that all nations’ economies must address?