THIS EXAM WILL COVER THE MATERIAL COVERED IN CLASS FROM CHAPTERS 1 THROUGH 4: Any material covered in class may be represented in the exam, whether or not it is explicitly covered in the text. The text is a supplement to the lectures. The exam will consist of 20 multiple choice questions and 3 short answer questions that the student will pick from 4 different questions.

CONCEPTS:
Unlimited wants and finite resources as the source for scarcity
Trade-offs as the nature of this world
Models: simplified versions of the world
Rationality: economic rationality regular rationality
Marginal cost, benefit, and revenue
Opportunity Cost
Equity versus Efficiency
Centrally planned economies versus market economies
Normative versus Positive
The Cartesian plane and the slopes of lines
The Production Possibilities Frontier for one and two people
Growths and shrinks in the PPF
Absolute advantage versus comparative advantage and the direction of trade The perfectly competitive market
Demand schedules and curves and what can cause shifts
Income and substitution effects
Inferior and normal goods
Substitutes and complements
Supply schedules and curves and what can cause shifts
The uses of money
GDP and what is included
Peaks and troughs in the business cycle
Definition of unemployment

KNOW HOW TO:
Construct a PPF for one person
Illustrate a supply and demand graph, and be able to predict changes in price and

quantity due to shifts.
Calculate who has the comparative advantage in a market of two people Describe the difference between potential and actual production