Part -1:

1. What is a public good? Why does the government tend to produce public goods?

2. How are opportunity cost and scarcity related?

3. What does money have to do with specialization and comparative advantage?

4. Explain how scarcity and choice are related. Economic theory says that a rise in the price of a good will cause people to buy less of it. If the price of meat increases and John Doe buys more meat, has the theory been refuted? Explain.

5. Explain why there is an inverse relationship between quantity demanded and price. Explain why there is usually a direct relationship between quantity supplied and price.

Part -2:

1. Explain what causes economies of scale. Can economies of scale and diminishing marginal returns apply to the same firm? Explain.

2. In a meeting about whether to store inventory in a company-owned warehouse or rent a warehouse, a colleague says, "We should use our own warehouse and save the cost of renting one." Do you agree or disagree? Explain.

3. Explain how a demand curve can be derived using utility theory.

4. Explain why demand is more elastic in the long run than in the short run.

5. Explain why supply is more elastic in the long run.