ECONOMIC QUESTIONS FOR THE MASTER'S EXAM

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1 ECONOMIC QUESTIONS FOR THE MASTER'S EXAM Introduction 1. What is economics? Discuss the purpose and method of work of economists. Consider observation, induction, deduction and scientific criticism. 2. What is economics and how does it differ from other empirical sciences (e.g. physics, chemistry, biology)? 3. What is the economic law (give examples)? How do economic laws differ from the laws of physics, chemistry, and biology? 4. What is the economic model? How does the correlation of variables differ from casual connection (give examples)? 5. Discuss sets (types) of statistical data used by economists. How do absolute changes differ from relative changes? 6. On the example of the inflation index discuss the differences between simple and complex indices. 7. What is the difference between the real and nominal value of an amount of money? Give an example in figures. 8. What is the difference between the present and future value of money? Give a numerical example. Microeconomics 9. Using the competitive market model describe the impact of concurrent supply and demand shocks on the price and quantity of goods. 10. Using the market model, present the impact of a change in the market demand on the situation of a perfectly competitive industry in the short and long term. 11. Discuss the concept of the consumer surplus, the producer surplus and the total surplus. 12. Give examples of using the concept of surpluses (the total surplus, the consumer surplus and the producer surplus) in economics. 1

2 13. Show how the competitive market guarantees maximization of the sum of the consumer surplus and the producer surplus. 14. A sales tax has been introduced in a competitive market. In a graph present the distribution of the tax burden on the transaction participants. 15. What are the factors of the price and income elasticity of supply and demand? Show their applications. 16. Using a preference map and a budget constraint line illustrate the consumer's decision to choose the best products basket. 17. Using a preference map and a budget constraint line illustrate the substitution and income effect of a change in the price of goods. 18. What is the production function of a company? Discuss the differences between the production techniques: technically and economically efficient techniques, and labour and capital efficient techniques. 19. What are the fixed and variable production costs? Where does the cost difference in the short and long term come from? 20. What is the difference in the cost of production in accounting and economic terms (give an example)? 21. Discuss the decision making criteria in a company concerning the size of output in the short and long term. 22. What are the benefits of the economies of scale and the economies of scope? Discuss several reasons for the economies of scale? 23. List the main market forms and discuss their most important features. Give two indicators of production concentration in the market. 24. Make a comparative analysis of the perfect competition and monopoly. Use the concept of the total surplus. 25. What is a natural monopoly? Present your answer in the form of a graph. Explain the concept and discuss several methods of regulating natural monopolies. 26. In the form of a graph present profit maximizing of: a) a perfectly competitive company, b) a monopoly. 2

3 27. Discuss profit maximizing of a company operating on the monopolistic competition market in the short and long term. 28. Referring to the game "prisoner's dilemma", discuss the Nash equilibrium. Give an example of the use of the game in economics. 29. Discuss the model of the Cournot duopoly. 30. Discuss the model of the Stackelberg duopoly. 31. What is price discrimination by a company? Discuss the reasons and give examples. 32. What determines the demand of a company for factors of production? Show the equilibrium on the labour market in the perfect competition, monopoly and monopsony. 33. How do trade unions influence the labour market, level of wages and volume of employment? 34. Discuss the impact of interest rates on a household's decisions about the volume of savings and the impact of wages on labour supply decisions. 35. Discuss the poverty line, the Lorenz curve and the Gini coefficient. 36. In what way does a fair game differ from a favourable and unfavourable game? How do risk games differ from no risk games? 37. Discuss risk pooling and sharing as methods of reducing risk in the insurance markets. 38. Discuss several methods of risk reduction (consider the insurance market, the capital market and the derivatives market). 39. Show that the perfect competition market guarantees achieving the Pareto efficiency. 40. Discuss the main forms of market failure. 41. Discuss the causes and forms of the competition protection policy. 42. Discuss externalities. What is the content of the Coase theorem? 43. Discuss the public good and the tragedy of commons. What is free-riding? 44. Discuss the information asymmetry as well as merit goods and merit bads. 45. Explain the following concepts: the negative selection, the moral hazard and the principal-agent problem. 3

4 46. What is the meaning of "the objective of management is efficiency and equity?" Provide a detailed answer. 47. Discuss the theory of general equilibrium. 48. What is the Pareto efficiency? Discuss the advantages and disadvantages of the Pareto efficiency as a tool of management description. 49. What is the government failure? Discuss its main forms. Macroeconomics 50. Discuss Gross Domestic Product (GDP). Describe the components and methods of calculating GDP. 51. Discuss the advantages and disadvantages of GDP as an indicator of social welfare. Suggest another indicator of welfare. 52. What determines the volume of consumption in the economy? Discuss the Keynesian theory and the permanent income theory and the life cycle theory. 53. What determines the level of investment? Discuss the relationship between the size of investment, economic fluctuations and economic growth. 54. List the key assumptions and provide a description of the demand (Keynesian) model of economy. 55. What is the autonomous spending multiplier? Give an example of its use for the analysis of the economy. 56. List the key assumptions and provide description of the classical model of the economy. 57. What is money? Discuss the functions of money and the benefits from its existence. 58. Discuss the reasons for the existence of the money demand. How can central banks control the money supply? 59. Discuss operations of the money market with the curves of the money demand and supply. 60. How can central banks directly set interest rates? Give an example. 61. Discuss the causes of unemployment. Consider natural and involuntary unemployment. 4

5 62. Discuss the classical and Keynesians' views on the causes and ways of combating unemployment. Describe the sources of rigidity ("stickiness") of prices and wages. 63. Describe the damage caused by unemployment. Consider efficiency and equity. 64. Discuss the structure of the IS-LM model. 65. Using the IS-LM model, present the effects of the budget (fiscal) policy in a closed economy. 66. Using the IS-LM model, present the effects of the monetary policy in a closed economy. 67. Discuss the structure of the AD-AS model. 68. Using the AD-AS model present the reactions of the economy to demand shocks. 69. Using the AD-AS model present the reactions of the economy to supply shocks. 70. What is stagflation? Explain causes and ways of combating stagflation. 71. What is inflation? What is the difference between the consumer price index (CPI) and the GDP deflator? 72. Using the Fisher equation of exchange explain the position of supporters of the quantity theory of money on the causes of inflation. 73. Present the two Phillips curves. Discuss the relationships illustrated by them. 74. Describe the damage caused by inflation. Consider efficiency and equity. 75. Discuss the impact of inflation expectations on the behaviour of economic entities (consider the hypothesis of adaptive and rational expectations). 76. Present the main benefits for society from foreign trade. Consider the theory of comparative costs. 77. Should the state protect the domestic market against foreign products? Present arguments for and against protectionism. 78. What determines the level of exchange rates in the economy? Consider the nominal and real exchange rate. 79. Discuss the influence of exchange rate changes on the economy. 80. What is the exchange rate corresponding to the purchasing power parity? What is its relevance in the economy? 5

6 81. Why, in practice, does the exchange rate deviate from the level corresponding to the purchasing power parity? Discuss the Balassa-Samuelson effect. 82. Using the Mundell-Fleming model describe the effects of expansionary and restrictive budget (fiscal) policy in an open economy. 83. Using the Mundell-Fleming model describe the effects of expansionary and restrictive monetary policy in an open economy. 84. Describe the effects of expansionary monetary policy in an open economy in the long term. What is the neutrality of money? 85. What is the currency crisis? What are its causes and effects? 86. What is economic growth? List the main sources of economic growth. 87. What is the macroeconomic production function? Give an example of the Cobb-Douglas function and discuss its main features. 88. Discuss Robert Solow's model of economic growth and the phenomenon of real convergence. 89. Discuss the differences between exogenous and endogenous theories of economic growth. 90. Give the meaning of " by shaping institutions in a proper way, the state can promote economic growth." Give examples. 91. Describe various methods of state support for economic growth. 92. What is the business cycle? Describe the cycle by using the AD-AS model and other possible way. 93. What is the budget deficit and public debt? Discuss ways of financing the deficit. Is it worth pursuing the policy of a balanced budget? 94. What is the stabilization policy of the state in the economy? Give arguments for and against such a policy. 95. Discuss the differences between discretion in macroeconomic policy and fixed rules. Use the Taylor rule. 96. Using the criterion of efficiency, list the main arguments for government intervention in the economy (consider micro-and macroeconomics) 6

7 Reading reference: D. Begg, R. Dornbusch, S. Fischer, Ekonomia, vol. 1 and 2, PWE, Warsaw, numerous editions. G. N. Mankiw, M. P. Taylor, Ekonomia, vol. 1 and 2, PWE, Warsaw P. Samuelson, W. Nordhaus, Ekonomia, vol. 1 and 2, PWN, numerous editions. B. Czarny, Podstawy ekonomii, PWE, Warsaw H. Varian, Mikroekonomia: kurs średni - ujęcie nowoczesne, PWN, Warsaw, numerous editions. E. Czarny, Mikroekonomia, PWE, Warsaw W. Samuelson, S. Marks, Ekonomia menedżerska, PWE, Warsaw, M. Burda, C. Wyplosz, Makroekonomia. Podręcznik europejski, PWE, Warsaw R. Hall, J. Taylor, Makroekonomia, PWN, Warsaw, numerous editions. O. Blanchard, Makroekonomia, Oficyna Ekonomiczna Wolters Kluwer, Warsaw

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