Economics 101 Honors, Section 001, Professor Salemi
Principles of Economics
Spring Semester, 2012
  Cost Benefit Principle
Page Version: May 4, 2012, Final Version


Class Meetings: Tuesday and Thursday, 9:30-10:45, Gardner

Michael K. Salemi
:   108 Gardner Hall, 966-5391 (office), 929-9504 (home),
Office Hours: Tu, 10:45--noon and by appointment.

The course Fact Sheet and Syllabus explains the goals and rules of the course, organizes its by topics, and provides an expanded reading list..
course Calendar provides a list day-by-day class activities and assignments.


Midterm One    February 16, 2012
Midterm Two    March 29, 2012
Final                 8:00-11:00 am, Thursday, May 3.  

    First Midterm  
Extra Office Hours:    February 14 and 15 1:30-2:30
    Responses to Unanswered Questions
Midterm One Exam Guide
Midterm One Practice Multiple Choice Questions
Midterm One Key
Second Midterm
    Extra Office Hours:    March 27 and 28 1:30-2:30
     Responses to Unanswered Questions
Midterm Two Exam Guide
    Midterm Two Practice Multiple Choice Questions
Midterm Two Key
   Final Exam

    Revised Extra Office Hours:  
  April 26 10:00-11:00 and May 2 11:00-12:00, 1:00-3:00
Responses to Unanswered Questions  
   Final Exam Exam Guide
   Final Exam Practice Multiple Choice Questions
   Final Exam Key

Grade Memo is posted here.

Required Supplemental Readings

    "The Opportunity Cost of Economic Education," by Robert Frank, New York Times, September 1, 2005

    The Wealth of Nations, Chapters 1-4, by Adam Smith    Discussion Questions for Smith, Chapters 1-4

    "As Price of Oil Soars, Users Shiver and Cross Their Fingers," New York Times, January 21, 2012

    "The Use of Knowledge in Society," by F. A. Hayek    Discussion Questions for Hayek
    "U.S. Monetary Policy: An Introduction," Federal Reserve Bank of San Francisco

    "Getting Back on Track: Macroeconomic Policy Lessons from the Financial Crisis," by John B. Taylor

    "Monetary Policy and the Housing Bubble," Ben S. Bernanke     Discussion Questions for Taylor and Bernanke Readings

   Readings for the End of the Euro Discussion on March 12
"Is This Really the End?"  The Economist
"Why the Euro Isn't Finished," The New Yorker
"Optimal Currency Areas," Martin Feldstein Speech at a European Central Bank Conference
    "An Avoidable Crisis," The New Yorker

Recommended Supplemental Readings

    "Use It or Lose It: Teaching Literacy in the Economics Principles Course," Lee W. Hansen, Michael K. Salemi and John J. Siegfried

    The Wealth of Nations, Chapters 5-7, Adam Smith    Discussion Questions for Smith, Chapters 5-7

    "Emissions Trading versus COTaxes," Parry and Pizer, Resources for the Future, May 2007

    "The Trouble with Markets for Carbon," NYT, June 20, 2008

     "The Economic Organization of a P.O.W. Camp," R. A. Radford    Discussion Questions for Radford

    "Is Free Trade Passe?" by Paul Krugman   Discussion Questions for Krugman

    "Why does the Economy Fall to Pieces after a Financial Crisis," Robert E. Hall

Class Handouts Will Be Posted Here After Each Class

Class 1  Health Assistance Handout
Class 2
Class 3
Class 4
Class 5
Class 6
Class 7
Class 8
Class 9
Class 10
Class 11
Class 12: First Midterm Exam
Class 13
Class 14
Class 15
Class 16 Student Teams submitted their work on these exercises for course credit.
Class 17
Class 18
Class 19
Class 20
Class 21
Class 22 Second Midterm Exam
Class 23
Class 24
Class 25
Class 26
Class 27
Class 28
Class 29

Exercises and Problem Sets
Problems sets and other graded assignments will be posted here as they are made.
Assignment 1 Assigned on January 26, 2012 PDF of Simulation Data Excel Spreadsheet of Simulation Data  Assignment Key

Assignment 2 Assigned on March 1, 2012  Preparation for a Class Discussion the "The End of the Euro?"

Assignment 3 Assigned on March 29, 2012.  Macro data assignment.  The companion data spreadsheet is here.

Journal Assignments
Students are required to keep a class journal which will be collected and reviewed.

Journal Assignment One:    Find a news or opinion article that you believe is fundamentally about scarcity
of an important resource. Write a one-page (200 word) essay in your course journal in which you explain why and how
the concepts of opportunity cost and the benefit-cost principle can be used to better understand the article.

Journal Assignment Two:

a.    Read the New York Times article, “As Price of Oil Soars, Users Shivers and Cross Their Fingers.” 

b.    Write a 200 word essay in your course journal in which you use demand and supply analysis to interpret the article. 

c.    According to the article, how does the decline in the price of natural gas affect the demand schedule for
home heating oil in the short run (one year)?  In the longer run (say five years)? Why is there a difference
in the short and long run effects on the demand for heating oil of a fall in the price of natural gas? 
Please make a separate entry in your journal in which you answer the questions posed in this part of the assignment.

Journal Assignment Three
: Find a news article that describes a situation in which a firm has market power and uses it to raise profits.
Write a 200-300 word essay in which you use the concepts covered in this lecture to interpret the article. 

Journal Assignment Four:
Find an additional article in the media on the European Financial Crisis.  The article can be on
European banks, debt problems in Greece or other Euro Zone nations, or any related matter.  Write an essay for your journal
of 200-300 words in which you use the ideas from the four background readings to interpret your article and explain
its implications for the question of whether or not the Euro will survive.

Journal Assignment Five: Find an article in the media that discusses the impact of changes in interest rates on consumer or producer decisions
to purchase durable goods (for example, houses, commercial buildings, equipment, and vehicles). Write an essay for your journal of 200-300
words in which you use your understanding of the real rate of interest to explain how the article illustrates the economic idea that higher
real rates of interest raise the marginal cost of durable goods purchases and that lower real rates of interest lower those marginal costs. In your essay,
also explain the practical significance of the connection between real rates of interest and durable goods purchases on the current economic

Journal Assignment Six: Find an article in the media that takes a stand on whether Federal Reserve policy since the onset of the Great Contraction
has been appropriate.  Write an essay in which you accomplish two objectives. First, interpret what the article has to say using the macro model
presented in our course. Second, explain whether you agree with the article or not and your reasons.

Note that Journals were collected on February 28 and will be collected again on April 24.