1.	Briefly explain the first two principles ("People face tradeoffs" and "The cost of something is what you give up to get it") of how people make decisions. Support your ideas with examples for each principle.
2.	Briefly explain the last two principles (“Rational people think at the margin” and “People react to incentives”) of how people make decisions. Support your ideas with examples for each principle.
3.	Shortly explain the three principles regarding the way people interact with one another. Support your ideas with examples for each principle.
4.	Shortly explain the three principles of how economy as a whole works. Support your ideas with examples for each principle.
5.	Explain the two primary causes of market failure and give an example of each.
6.	What does the “invisible hand” of the marketplace do?
7.	Explain the term "inflation". How are unemployment and inflation related in the short run?
8.	Explain 'The production possibilities frontier" model. Interpret the graphic given below.

9.	Explain the circular-flow diagram and its importance in economics.
10.	Identify the positive and normative statements and the way they are related to each other.
11.	Explain what observation, theory, model and assumptions are. Why do economists make assumptions?
12.	 What are the two big subfields of economics? Clarify what each subfield studies.
13.	Identify how comparative advantage and absolute advantage differ and how they are important for trade.
14.	Leyla can read 20 pages of microeconomics in an hour. She can also read 50 pages of macroeconomics in an hour. She spends 5 hours per day studying. 
a)	Draw Leyla’s production possibilities frontier for reading economics and accounting.
b)	What is Leyla’s opportunity cost of reading 100 pages of macroeconomics?
15.	The following table depicts the production possibilities of two cities in Australia:
Name of the city	Pairs of yellow socks per worker per hour	Pairs of black socks per worker per hour	
Perth	3	3	
Canberra	2	1	

a)	Which city has an absolute advantage in the production of each color sock? 
b)	Which city has a comparative advantage in the production of each color sock? 
16.	Explain the terms “opportunity cost” and “comparative advantage”. Give examples.
17.	Assume that there are 10 million workers in Germany and each of these workers can produce either 4 cars or 2 machines in a year. 
a)	What is the opportunity cost of producing a car in Germany?
b)	What is the opportunity cost of producing a machine in Germany?
18.	Draw a consumer’s indifference curves for bananas and apples. Describe and explain four properties of these indifference curves.
19.	Draw a consumer’s indifference curves for milk and cheese. Describe and explain four properties of these indifference curves.
20.	Can an increase in the price of apples possibly induce a consumer to buy more apples? Explain why inferior goods are not always Giffen.
21.	A person who consumes tea and coffee enjoys $1000 rise in his income (his income increased from $2000 to $3000). Demonstrate what happens if tea and coffee are normal goods.
22.	A person who consumes Coke and Pepsi enjoys $1000 rise in his income (his income increased from $2000 to $3000. Show what happens if Coke is an inferior good.
23.	Explain what income effect and substitution effect are.
24.	What is a competitive market? Explain shortly the types of markets other than perfectly competitive markets.
25.	What are the supply curve and the supply schedule and how are they related? Why does the supply curve slope upward?
26.	Leyla’s income reduces and as a result she buys more potatoes. Is potato a normal or an inferior good for Leyla? Describe how her demand curve would change with this?
27.	Explain the following statements using supply and demand diagrams.
a)	When the weather turns to be warmer in Brighton, the prices of hotel rooms in Caribbean resorts decrease.
b)	When a wild hurricane hits Florida, the price of orange juice goes up in supermarkets all over 
the country.
28.	Ketchup is a complement for hot dogs. If the price of hot dogs rises, what happens to the market for ketchup? For tomatoes? For tomato juice? For orange juice?
29.	Explain how a firm’s production function is related to its marginal product of labor.

30.	Explain “diminishing marginal product” and “value of the marginal product”.

31.	Identify what can cause the labor demand curve and labor supply curve to shift?
32.	Miralam opens a Chicken Kebab restaurant in Baku which employs 8 people. The employees are paid $8 per hour, and a chicken kebab there sells for $2. If Miralam is maximizing his profit, what is the value of the marginal product of the last worker he hired? What is that worker’s marginal product?
33.	A freeze in Florida destroys part of the Florida orange crop.  Assume that the price of apples doubles and the marginal product falls by 35%. What happens to the equilibrium wage of orange buyers? 
34.	Explain positive and negative externalities. Give examples for each.
35.	How can the private market be effective in handling externalities? Explain the Coase theorem.
36.	Define the term “externality”. How are the externalities associated with the production of goods or consumption?
37.	What are the private solutions to externalities and why do not they always work?
38.	Identify the policies towards externalities. 
39.	 Briefly explain general equilibrium model.
40. Explain the importance of general equilibrium model and “Edgeworth Box”.
41. Explain the general equilibrium and Pareto efficiency.
42. Identify the theorems of Welfare Economics.
43. Explain the theorems of Welfare Economics. What do they suggest?
44. Define compensating differential and give an example.
45. Define the term “discrimination” in economics and problems with gauging it.
46. What are the determinants of equilibrium wages?
47. College students sometimes find internships in private firms or government. Lots of these positions do not pay anything. What is the opportunity cost of taking such a job and why students are likely to take such jobs then?
48. Explain why a worker’s wage might be above the level that balances supply and demand.
49. Discuss the measurement of inequality and its problems. Refer to the four questions which are helpful in measuring inequality.
50. Discuss poverty rate as a gauge used for the distribution of income.
51. Identify the policies to decrease poverty.
52. Discuss the types of unemployment and how to deal with them.
53. List the policies aimed at helping the poor and state their benefits and drawbacks.
54. How do economists generally measure the cost of living? How CPI is calculated?
55. What are the stages of calculating the consumer price index?
56. What are problems in measuring the cost of living?
57. Explain GDP deflator and Consumer Price Index (CPI).
58. Explain the meaning of real interest rate and nominal interest rate. How are they related?
59. Discuss the measurement of Gross Domestic Product.
60. Decompose GDP and explain each composition.
61. Differentiate between real and nominal GDP. Which one is the better measure of economic well-being and why?
62. Discuss why policymakers should care about GDP. 
63. Answer the questions based on the table given below:
Year	Nominal GDP (in billions)	GDP deflator (base year: 2010)	
2015	8,662	110	
2016	8,111	112	

a)	Calculate the growth rate of nominal GDP between 2015 and 2016.
b)	Calculate the real GDP in 2015 and 2016 measured in 2010 prices.
64. Answer the questions based on the table given below:
Year	Nominal GDP (in billions)	GDP deflator (base year: 2011)	
2014	7,662	120	
2015	8,211	122	

a)	Calculate the growth rate of nominal GDP between 2014 and 2015.
b)	Calculate the real GDP in 2014 and 2015 measured in 2011 prices.
65. Discuss productivity and its role. What are the determinants of productivity?
66. Discuss why productivity and economic growth are important (bring examples).
67. Discuss how productivity is determined.
68. Explain what diminishing returns and catch-up effect mean.
69. Discuss how government policies can influence the economy’s growth rate.
70. Discuss how unemployment is measured. What are the types of unemployment?
71. Briefly discuss unemployment. How unemployment rate and labor-force participation rate are calculated, respectively?
72. Why is frictional unemployment inevitable? How might the government reduce the amount of frictional unemployment?
73. Explain the term “natural rate of unemployment”. What does the term “discouraged workers” mean?
74. Explain how unemployment rate is calculated and why are there always some people unemployed?
75. Briefly discuss the theory of efficiency wages and the way it explains why there is always some unemployment in economies.