1.Suppose that a city is considering building a bridge acrossa river.The bridge will be financed by tax dollars.The city gets revenues from a sales tax imposed on things sold in the city.The bridge would provide more direct access for commuters and shoppers.It would also alleviate the huge traffic jam that occurs every morning at the bridge down the river in another city.

a.Who would gain if the bridge were built?Could these gains be measured?How?Consider both the short run and the long run

b.Who would be hurt if the bridge were built?Could these costs be measured?How?

Consider both the short and the long run.

c.How would you determine if it were efficient to build the bridge?

2.Define positive economics.Give two examples.

3.Define normative economics.Give two examples.

4.Listed below are two sets of figures:the total quantity of Mexican pesos in circulation(the total amount of Mexican money available)and the peso price of a dollar(how many pesos are needed to purchase one dollar).Values are given for the years1980through1986for each variable.

a.Plot each variable by measuring time(years)on the horizontal axis and,in the first graph,pesos in circulation on the vertical axis,and in the second graph,time on the horizontal axis and peso price of a dollar on the vertical axis.

b.In each of the graphs,is the relationship between the dependent and independent variables direct or inverse.

c.Is the relationship between the dependent and independent variables linear or nonlinear

d.Suggest a theory about the Mexican peso and inflation.

YearPesos in circulation(in billions)Peso price of a Dollar

198047723.26

198163526.23

19821,03196.48

19831,447143.93

19842,315192.56

19853,462371.70

19865,790923.50

1. Explain the concept of making choicesat the margin.
2. If you were to get a job as an economist,what,for you,what be the most interesting job?What job do you think would earn the highest salary?.

7.What are the three types of market economies?p.99 Where on the spectrum is the U.S?France?North Korea?.

8.Draw a graph with time on the horizontal axis and percentages on the vertical axis.

Plot thepercentages of increase in quantity of capital and then plot the increase in the quantity of labor for1948-1973,1973-1989,1989-95.Refer to page 92in the textbook for the data.