1. Explain how and why an all-volunteer army may actually be cheaper than an army staffed with drafted soldiers.
2. Critically evaluate the following statement. "If a country has an absolute advantage in the production of everything it necessarily follows that it will have a comparative advantage in the production of everything."
3. If a comparative advantage implies that a country can produce a product at a lower opportunity cost than another country then why do we see two countries often trading the same goods? For instance, for most agricultural products the U.S. has a comparative advantage. Japan, one of America's largest trading partners has a comparative advantage in the production of most economy cars. Explain what is going on here when we still see the U.S. exporting cars to Japan and the U.S. importing some foods from Japan.
4. Most goods and service that we enjoy are bought and sold in the market. However, leisure is something that we value but we do not buy it explicitly. What is the price of leisure? Explain what would happen to the amount of leisure that we would enjoy if the wage rate went up. Make sure to use the substitution and income effect to explain your answer and postulate whether leisure is a normal or inferior good. Why is the ultimate net effect not determinable by appealing to logic alone?
5. Most modern countries have prohibitions on the trading of human organs in the marketplace. What impact do you believe such laws have had on the availability of organs for patients that need them? Furthermore, which people are most likely to be able to obtain the organs that they require and why? Explain the ethical dilemma that is at work that makes the strict application of basic economic principles difficult to put into practice in cases like this.
6. In the past dating was a fairly simple activity in the United States. If there was someone you wanted to go out with you would call them or ask them to go out for dinner and a movie. Nowadays it appears that many people are willing to pay large amounts of money to professional dating services to find a compatible mate. This idea is not a new one but it has increased quite dramatically in popularity. What does this suggest about what kind of good dating services might be and why? Are we likely to find this type of service be more or less prevalent in poorer countries?
7. Observe the difference in vending machines between canned soda and newspapers. Typically, if you insert coins into a newspaper vending machine and open it you will see available all of the copies of the newspaper within one's reach. However, soda machines are very different. They work such that only one can is dispensed at a time. The rest of the canned soda is well out of reach. Explain in terms of marginal utility why the newspaper distributor is relatively unconcerned about the rest of the newspapers being taken without payment while the soda distributor uses a machine that goes to great lengths to insure that only one can of soda is dispensed at a time.
8. A lawyer quits his job at a top legal firm where he was making $100,000 per year. He was just informed that his late aunt has bequeathed to him $1 million in cash. He decides to use all of the money to open and run his own hardware store. Assume at the end of the first year of business that his accountant has informed him that he earned a $90,000 accounting profit. Why would an economist not be quite as impressed? Explain.

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