What is the role of value judgments in economic analysis?
Economists employ value judgments in making policy statements, because of differences in goals or political persuasion. Liberal and conservative economists will look at the economy differently, and see different problems with different solutions. It is important to note that value judgments do not generally interfere with most economic analysis, as there are many areas of agreement among economists.
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Distinguish the short run from the long run. Generally, what causes costs of production to vary with output in the short run? What generally causes costs of production to vary in the long run?
In the Keynesian model, a $1 billion increase in autonomous consumption leads to ________ in short-run equilibrium output.
A. a $1 billion increase B. no change C. a $1 billion decrease D. a greater than $1 billion increase
Under a fixed exchange rate system, if the inflation rate in the United States is 5 percent a year and the inflation rate in Australia is 0 percent a year, then the U.S. real exchange rate will
A) increase 5 percent a year. B) decrease 5 percent a year. C) remain constant. D) possibly increase or decrease.
Suppose the only characteristic of beer that a consumer cares about is alcohol content. Currently, Bud Light and Miller Lite have the same alcohol content.
a. Using 
to denote ounces of Miller Lite and 
to denote ounces of Bud Light, what's the simplest possible utility function that can describe this consumer's tastes over the two products.
b. Suppose Bud Light
lowers its alcohol content by 50%. How would you change the utility function to account for this? c. Derive the MRS for the functions in (a) and (b) --- and interpret your answer. What will be an ideal response?