Semester Outline. A. Objectives: By the end of this chapter, students should understand:

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "Semester Outline. A. Objectives: By the end of this chapter, students should understand:"

Transcription

1 ECON 102 Professor Daneshvary Semester Outline The first three chapters serve as the introduction to the entire text. Chapter 1 introduces ten fundamental principles on which the study of economics is based. The rest of the text is an elaboration on these ten principles. Chapter 2 will develop how economists approach problems. Chapter 3 will explain how individuals and countries gain from trade. Chapter 1: Ten Principles of Economics: 1. that economics is about the allocation of scarce resources. 2. that individuals face tradeoffs. 3. the meaning of opportunity cost. 4. how to use marginal reasoning when making decisions. 5. how incentives affect people s behavior. 6. why trade among people or nations can be good for everyone. 7. why markets are a good, but not perfect, way to allocate resources. 8. what determines some trends in the overall economy. Scarcity: the limited nature of society s resources. Economics: the study of how society manages its scarce resources. Efficiency: the property of society getting the most it can from its scarce resources. Equity: the property of distributing economic prosperity fairly among the members of society. Opportunity cost: whatever must be given up to obtain some item. Marginal changes: small incremental adjustments to a plan of action. Market economy: an economy that allocates resources through the decentralized decisions of many firms and households as they interact in markets for goods and services. Market failure: a situation in which a market left on its own fails to allocate resources efficiently. Externality: the impact of one person s actions on the well-being of a bystander. 1

2 Market power: the ability of a single economic actor (or small group of actors) to have a substantial influence on market prices. Scarcity: Economics: The Ten Principle fall into three categories Category1: How People Make Decision Principle #1: People Face Tradeoffs (efficiency, equity) Principle #2: The Cost of Something Is What You Give Up to Get It (opportunity cost) Principle #3: Rational People Think at the Margin (marginal changes) Principle #4: People Respond to Incentives Category2: How People Interact Principle #5: Trade Can Make Everyone Better Off Principle #6: Markets Are Usually a Good Way to Organize Economic Activity (market economy) Principle #7: Governments Can Sometimes Improve Market Outcomes (market failure, externality, market power) Category3: How The Economy as a Whole Works (topics of Macroeconomics, will be very briefly mentioned) Principle #8: A Country s Standard of Living Depends on Its Ability to Produce Goods and Services Principle #9: Prices Rise When the Government Prints Too Much Money Principle #10: Society Faces a Short-Run Tradeoff between Inflation and Unemployment Chapter 2: Thinking Like Economists: Economic Models: 1. how economists apply the methods of science. 2. how assumptions and models can shed light on the world. 3. two simple models the circular flow and the production possibilities frontier. 4. the difference between microeconomics and macroeconomics. Circular-flow diagram: a visual model of the economy that shows how dollars flow through markets among households and firms. Production possibilities frontier: a graph that shows the combinations of output that the economy can possibly produce given the available factors of production and the available production technology. 2

3 Positive statements: claims that attempt to describe the world as it is. Normative statements: claims that attempt to prescribe how the world should be. Microeconomics: the study of how households and firms make decisions and how they interact in markets. Macroeconomics: the study of economy-wide phenomena, including inflation, unemployment, and economic growth. Review of Basic Graphs and Understanding Slop of a Line and Curve (Appendix to chapter 2. For your own review, will not be covered in class) The Economist as Scientist i. Economists follow the scientific method. ii. Assumptions make the world easier to understand. iii. Economists use economic models to explain the world around us. iv. Our First Model: The Circular Flow Diagram v. Our Second Model: The Production Possibilities Frontier. The model illustrates concepts of: Efficiency Tradeoffs Opportunity costs, and Economic growth vi. Microeconomics and Macroeconomics Read the rest of the chapter (The Economist as Policy Advisor and Why Economists Disagree). I suggest familiarizing yourself with terms and definitions and summarizing each section or subsection in 1-2 sentences) Chapter 3: Gain From Trade: 1. how everyone can benefit when people trade with one another. 2. the meaning of absolute advantage and comparative advantage. 3. how comparative advantage explains the gains from trade. 4. how to apply the theory of comparative advantage to everyday life and national policy. Absolute advantage: the comparison among producers of a good according to their productivity. Comparative advantage: the comparison among producers of a good according to their opportunity cost. 3

4 Imports: goods produced abroad and sold domestically. Exports: goods produced domestically and sold abroad. Basic ways that people/nations can satisfy their wants self sufficiency and/or specialization and trade i. Production and consumption under self-sufficiency ii. Production and consumption under specialization and trade iii. Concepts: Absolute Advantage, Comparative Advantage, Terms of Trade, Import, Export iv. Application Outline for Chapters 4-6 Chapter 4 is the first chapter in a three-chapter sequence that deals with supply and demand and how markets work. Chapter 4 shows how supply and demand for a good determines both the quantity produced and the price at which the good sells. Chapter 5 will add precision to the discussion of supply and demand by addressing the concept of elasticity the sensitivity of the quantity supplied and quantity demanded to changes in economic variables. Chapter 6 will address the impact of government policies on prices and quantities in markets. Chapter 4: Market Forces of Demand and Supply 1. what a competitive market is. 2. what determines the demand for a good in a competitive market. 3. what determines the supply of a good in a competitive market. 4. how supply and demand together set the price of a good and the quantity sold. 5. the key role of prices in allocating scarce resources in market economies Competitive market: a market in which there are many buyers and many sellers so that each has a negligible impact on the market price. Quantity demanded: the amount of a good that buyers are willing and able to purchase. Law of demand: the claim that, other things equal, the quantity demanded of a good falls when the price of the good rises. Demand schedule: a table that shows the relationship between the price of a good and the quantity demanded. 4

5 Demand curve: a graph of the relationship between the price of a good and the quantity demanded. Normal good: a good for which, other things equal, an increase in income leads to an increase in demand. Inferior good: a good for which, other things equal, an increase in income leads to a decrease in demand. Substitutes: two goods for which an increase in the price of one good leads to an increase in the demand for the other. Complements: two goods for which an increase in the price of one good leads to a decrease in the demand for the other. Quantity supplied: the amount of a good that sellers are willing and able to sell. Law of supply: the claim that, other things equal, the quantity supplied of a good rises when the price of the good rises. Supply schedule: a table that shows the relationship between the price of a good and the quantity supplied. Supply curve: a graph of the relationship between the price of a good and the quantity supplied. Equilibrium: a situation in which the price has reached the level where quantity supplied equals quantity demanded. Equilibrium price: the price that balances quantity supplied and quantity demanded. Equilibrium quantity: the quantity supplied and the quantity demanded at the equilibrium price. Surplus: a situation in which quantity supplied is greater than quantity demanded. Shortage: a situation in which quantity demanded is greater than quantity supplied. Law of supply and demand: the claim that the price of any good adjusts to bring the supply and demand for that good into balance. Definitions of Market and Competitive Market Demand 5

6 i. Concepts: Quantity Demanded, Law of Demand, Demand Schedule, Demand Curve, and Market Demand ii. Shift in Demand Change in Quantity Demanded versus Change in Demand Curve iii. Factors That Cause a Change in Demand Curve (Income, Price of Related Goods, Tastes, Expectation about Future Income and Prices, and Number of Buyers in the Market) Supply i. Concepts: Quantity Supplied, Law of Supply, Supply Curve, Supply Schedule, and Market Supply ii. Shift in Supply Change in Quantity Supplied versus Change in Supply Curve iii. Factors that Cause a Change in Supply Curve (Input Prices, Technology, Expectations about future prices, and Number of Sellers (produces) in the Market) Market Equilibrium i. Equilibrium Quantity and Equilibrium Price ii. Shortage and Surplus iii. Changes in Equilibrium Price and Quantity 1. Change in Demand 2. Change in Supply 3. Change in Both Demand and Supply Conclusion Chapter 5: Elasticity and Its Application 1. the meaning of the elasticity of demand. 2. what determines the elasticity of demand. 3. what are the implication of demand elasticity for revenue 4. the meaning of the elasticity of supply. 5. what determines the elasticity of supply. 6. the concept of elasticity in various markets. Price elasticity of demand: a measure of how much the quantity demanded of a good responds to a change in the price of that good, computed as the percentage change in quantity demanded divided by the percentage change in price. Income elasticity of demand: a measure of how much the quantity demanded of a good responds to a change in consumers income, computed as the percentage change in quantity demanded divided by the percentage change in income. Total revenue: the amount paid by buyers and received by sellers of a good, computed as the price of the good times the quantity sold. 6

7 Cross-price elasticity of demand: a measure of how much the quantity demanded of one good responds to a change in the price of another good, computed as the percentage change in the quantity demanded of the first good divided by the percentage change in the price of the second good. Price elasticity of supply: a measure of how much the quantity supplied of a good responds to a change in the price of that good, computed as the percentage change in quantity supplied divided by the percentage change in price. Definition of Elasticity Demand: Price Elasticity of Demand Determinants of Elasticity of Demand Computation of Elasticity of Demand, Midpoint approach Variety of Demand Curves according to elasticity Total revenue and Elasticity of Demand Income Elasticity and cross-price Elasticity of Demand Supply Price Elasticity of Supply Determinants of Elasticity of Supply Application (OPEC case will be covered in class. Read other applications) OPEC Drug Farming Chapter 6: Supply, Demand, and Government Policies 1. the effects of government policies that place a price ceiling. 2. the effects of government policies that put a price floor. 3. how a tax on a good affects the price of the good and the quantity sold. 4. that taxes levied on buyers and taxes levied on sellers are equivalent. 5. how the burden of a tax is split between buyers and sellers. Price ceiling: a legal maximum on the price at which a good can be sold. It is illegal to sell or buy at higher price than the set ceiling. (Examples include rent control laws and oil price control in 1973.) Price floor: a legal minimum on the price at which a good can be sold. It is illegal to sell at a price lower than the set floor. (Examples include minimum wage laws and agriculture price support by government.) 7

8 tax incidence: the manner in which the burden of a tax is shared among buyers and sellers in a market. (Tax laws either affect the demand curve or the supply curve.) Controls on Prices Price Ceiling and Price Floors i. How Price Ceiling Affects Market Outcomes ii. How Price Floor Affects Market Outcomes iii. Evaluating Price Controls Taxes Levied on Buyers and Sellers i. How Taxes on Buyers Affect Market Outcomes ii. How Taxes on Sellers Affect Market Outcomes iii. Elasticities and Tax Incidence Chapter 7: Consumers, Producers, and the Efficincy of Markets Where are we in the course? Chapters 4 through 6 employed supply and demand in a positive (versus normative) framework. That is, we focused on the question of What is equilibrium price and quantity? We also showed how price control creates shortage and surplus in the market. Chapter 7 now addresses the normative question. That is, Is the equilibrium price and quantity in a market the best possible solution to the resource allocation problem or is it simply the price and quantity that balance supply and demand? We will discover that under most circumstances the equilibrium price and quantity is also the one that maximizes economic welfare. The chapter employs the supply and demand model to develop consumer surplus and producer surplus as a measure of welfare and market efficiency. These concepts are then utilized in Chapters 8 to determine the winners and losers from government taxation. 1. the link between buyers willingness to pay for a good and the demand curve. 2. how to define and measure consumer surplus. 3. the link between sellers costs of producing a good and the supply curve. 4. how to define and measure producer surplus. 5. that the equilibrium of supply and demand maximizes total surplus in a market. Welfare economics: The study of how the allocation of resources affects economic well-being. That is, well-being of the society and not public assistance. 8

9 Willingness to pay: The maximum amount that a buyer is willing to pay for a good (not what he/she actually pays). Marginal Buyer: The buyer who would leave the market if price s was any higher. Consumer surplus: A buyer s willingness to pay minus the amount the buyer actually pays. Cost: The value of everything a seller must give up to produce a good, including opportunity cost of time. Marginal Seller: The seller who would leave the market if price s was any lower. Producer surplus: The amount a seller is paid for a good minus the seller s cost. Efficiency: The characteristic of a resource allocation that maximizes the total surplus received by all members of society. Equity: The fairness of the distribution of well-being among the society. members of Total Surplus = Value to Buyers Cost of Sellers. Or Total Surplus = Consumer Surplus + Produces Surplus The Concept of Consumer Surplus o Willingness to Pay Measuring Consumer Surplus o The Surplus for Individual Consumer o The Surplus for All Consumers in the Market o Effect of Price Change on the size of Consumer Surplus The Concept of Producer Surplus o Cost of Producing/Selling Measuring Producer Surplus o The Surplus for Individual Seller o The Surplus for All Sellers in the Market o Effect of Price Change on the size of Producer Surplus Market Surplus as a Measure of Market Efficiency 9

10 Evaluating the Efficiency of Market Equilibrium Chapters 8: The Cost of Taxation Chapter 7 employed the supply and demand model to develop consumer surplus and producer surplus as a measure of welfare and market efficiency. These concepts are then utilized in Chapters 8 to determine the winners and losers from government taxation. 1. Objectives: By the end of this chapter, students should understand: 1. how taxes reduce consumer and producer surplus. 2. the meaning and causes of the deadweight loss from a tax. 3. why some taxes have larger deadweight losses than others. 4. how tax revenue and deadweight loss vary with the size of a tax. deadweight loss: the fall in total surplus that results from a market distortion, such as a tax. The Deadweight Loss of Taxation o Economic Welfare Before Tax o Economic Welfare After Tax o Change in Economic Welfare Due to Tax Determinants of the Size of Deadweight Losses o Price Elasticities of Supply and Demand o Relative Size of Consumer and Producer Surplus Losses and Elasticities o The Effect of Tax Size on the Size of Deadweight Losses and the Size of Tax Revenue Chapters 10: Externalities and Market Inefficiencies Chapter 7 employed the supply and demand model to develop consumer surplus and producer surplus as a measure of economic welfare and market efficiency. Then in chapter 8 we showed that at market equilibrium quantity the total surplus was maximized and deadweight loss was zero. We also showed who to determine the winners and losers (deadweight losses) from government taxation. Chapter 10 is the first chapter in public sector and deals with market externalities and offers some private and public solutions 2. what an externality is. 3. why externalities can make market outcomes inefficient. 4. how people can sometimes solve the problem of externalities on their own. 5. why private solutions to externalities sometimes do not work. 6. the various government policies aimed at solving the problem of externalities. 10

11 Externality: the uncompensated impact of one person s actions on the well-being of a bystander. It can be negative or positive. Internalizing an externality: altering incentives so that people take account of the external effects of their actions. Coase theorem: the proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own without government intervention. Transaction costs: the costs that parties incur in the process of agreeing and following through on a bargain. Pigouvian tax: a tax enacted to correct the effects of a negative externality. The Concept Externalities o Negative Externality o Positive Externality Social versus Private Costs; Social versus Private Values; Socially Optimal quantity Externalities and market Inefficiencies o Negative Externality o Positive Externality Solutions to Externalities o Private Solutions Coase Theorem o Public Solutions Regulations Pigovian Tax Tradable Pollution Permits Chapters 11: Public Goods and Common Resources Chapter 11 addresses public goods and common resources goods for which it is difficult to charge prices to users. 1. The defining characteristics of public goods and common resources. 2. Why private markets fail to provide public goods. 3. Why the cost benefit analysis of public goods is both necessary and difficult. 11

12 4. Why people tend to use common resources too much. Excludability: the property of a good whereby a person can be prevented from using it. Rivalry: the property of a good whereby one person s use diminishes other people s use. Private goods: goods that are both excludable and rival. Public goods: goods that are neither excludable nor rival. Common resources: goods that are rival but not excludable. Characteristics of Goods Excludability and Rivalry Kinds of Goods: o Private Goods o Some goods that are produced by natural monopoly are excludable but not rival o Public Goods The Free-Rider Problem Cost-Benefit Analysis of Public Goods o Common Resources Conclusion Chapters 13: The Economic Costs of Production Chapter 13 develops the cost curves on which firm behavior is based. Chapters utilize these cost curves to develop the behavior of firms in a variety of different market structures competitive and monopolistic. B. Objectives: By the end of this chapter, students should understand: 1. what items are included in a firm s costs of production. 2. the link between a firm s production process and its total costs. 3. the meaning of average costs and marginal cost and how they are related. 4. the shape of a typical firm s cost curves. 5. the relationship between short-run and long-run costs. Explicit costs: input costs that require an outlay of money by the firm. Implicit costs: 12

13 input costs that do not require an outlay of money by the firm. Economic profit: total revenue minus total cost, including both explicit and implicit costs. Accounting profit: total revenue minus total explicit cost. Production function: the relationship between quantity of inputs used to make a good and the quantity of output of that good. Average Product: of an input is total product divided by the amount of the input employed. Marginal product: of an input is the increase in output that arises from an additional unit of input. Diminishing marginal product: the property whereby the marginal product of an input declines as the quantity of the input increases. Total Fixed costs: costs that do not vary with the quantity of output produced. Total Variable costs: costs that do vary with the quantity of output produced. Average total cost: total cost divided by the quantity of output. Average fixed cost: fixed costs divided by the quantity of output. Average variable cost: variable costs divided by the quantity of output. Marginal cost: the increase in total cost that arises from an extra unit of production. Efficient scale: the quantity of output that minimizes average total cost. Economies of scale: the property whereby long-run average total cost falls as the quantity of output increases. diseconomies of scale: the property whereby long-run average total cost rises as the quantity of output increases. constant returns to scale: the property whereby long-run average total cost stays the same as the quantity of output changes. Concepts: Total Revenue, Total Cost, Economic Profit, Explicit Costs, Implicit Costs, Accounting Costs 13

14 Production and Costs 1. The Production Function Average Product (AP) and Marginal Product (MP) of factors of Production 2. Diminishing Marginal Product 3. Production Curves 4. From Production Curves to Cost Curves The Various Measures of Cost 1. Total Fixed Cost (TFC), Total Variable Cost (TVC), Total Cost (TC) 2. Average Fixed Cost (AFC), Average Variable Cost (AVC), Marginal Costs (MC) 3. Cost Curves and Their Shape Costs in the Short Run and Long Run (LR-ATC) Chapters 14: Firms in a Competitive Market Chapter 14 examines the behavior of competitive firms firms that do not have market power and are price takers. The cost curves developed in the previous chapter shed light on the decisions that lie behind the supply curve in a competitive market. C. Objectives: By the end of this chapter, students should understand: 1. What characteristics make a market competitive. 2. How competitive firms decide how much output to produce. 3. How competitive firms decide when to shut down production temporarily. 4. How competitive firms decide whether to exit or enter a market. 5. How firm behavior determines a market s short-run and long-run supply curves. Competitive market: A market with many buyers and sellers trading identical products so that each buyer and seller is a price taker. Average revenue: Total revenue divided by the quantity sold. Marginal revenue: The change in total revenue from an additional unit sold. Sunk cost: A cost that has been committed and cannot be recovered. D. Outline Introduction to Market Structure What Is a Competitive Market The Revenue of a Competitive Market Profit Maximization/Loss Minimization 14

15 o Total Approach o Marginal Approach o Measuring Profits/Losses Using Marginal Approach o The Marginal-Cost and the Competitive Firm s Supply Curves o The Firm s Short-Run Decision to Shut Down o The Firm s Long-Run Decision to Exit or Enter a Market The Supply Curve in a Competitive Market (the Industry) o The Short-Run Supply o The Long-Run Supply For a Constant-Cost Industry For an Increasing-Cost Industry Chapters 15: Monopoly Firms In Chapter 14 examines the behavior of competitive firms-firms that do not have market power and are price takers. In this chapter we examine monopoly markets. A monopolist firm is the sole seller of a product without close substitutes. As such, it has market power because it can influence the price of its output. That is, a monopolist is a price maker as opposed to a price taker. 1. Why some markets have only one seller. 2. How a monopoly determines the quantity to produce and the price to charge. 3. How the monopoly's decisions affect economic well-being. 4. The various public policies aimed at solving the problem of monopoly. Monopoly: A firm that is the sole seller of a product without close substitutes. Natural monopoly: A monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms. price discrimination: The business practice of selling the same good at different prices to different customers, when the difference in price is not justified by a difference in cost. 15

16 B. Outline Introduction to Monopoly as a "Price Maker" Why Monopoly Arise - Types of Monopoly o Monopoly Resources o Government- Created Monopolies o Natural Monopolies o Other Forms of Monopolies How a Monopoly Determines Price and Output o Demand and Marginal Revenue (MR) Curves o Profit Maximization o Why Monopoly Does Not Have a Supply Curve The Welfare Cost of Monopoly o Deadweight Loss of Monopoly Public Policy Towards Monopolies o Regulations Marginal Cost Pricing Average Cost Pricing Chapters 16: Monopolistic Competition Firms Chapters 14 and 15 developed the two extreme forms of market structure competition and monopoly. The market structure that lies between competition and monopoly is known as imperfect competition. There are two types of imperfect competition oligopoly and monopolistic competition. Monopolistic competition is the topic of the current chapter. The analysis in this chapter is again based on the cost curves developed in Chapter Competition among firms that sell differentiated products. 2. How the outcomes under monopolistic competition and under perfect competition compare. 3. the debate over the effects of advertising. 4. the debate over the role of brand names. Monopolistic competition: a market structure in which many firms sell products that are similar but not identical. Characteristics of Monopolistic Competition 16

17 The Monopolistically Competitive Firm in the Short Run The Long-Run Equilibrium Monopolistic Versus Perfect Competition Excess Capacity Markup over Marginal Cost Monopolistic Competition and the Welfare of Society The Debate over Advertising Chapters 18: Markets for the Factors of Production The purpose of Chapter 18 is to provide the basic theory for the analysis of factor markets the markets for labor, land, and capital. As you might expect, we find that the wages earned by the factors of production depend on the supply and demand for the factor. What is new in the analysis is that the demand for a factor is a derived demand. That is, a firm s demand for a factor is determined by its decision to supply a good in another market. 1. The labor demand of competitive, profit-maximizing firms. 2. The household decisions that lie behind labor supply. 3. Why equilibrium wages equal the value of the marginal product of labor. 4. How the other factors of production land and capital are compensated. 5. How a change in the supply of one factor alters the earnings of all of the factors. Factors of production: the inputs used to produce goods and services. Production function: the relationship between the quantity of inputs used to make a good and the quantity of output of that good. Marginal product of labor: the increase in the amount of output from an additional unit of labor. Diminishing marginal product: the property whereby the marginal product of an input declines as the quantity of the input increases. Value of the marginal product: the marginal product of an input times the price of the output (the dollar value of marginal productivity of input). Capital: the equipment and structures used to produce goods and services. D. Outline The Nature of Demand for Inputs (Derived Demand) Demand for Labor 17

18 o The Competitive Profit-Maximizing Firm o The Production Function and the Marginal Product of Labor o Diminishing Marginal Product o The Value of Marginal Product and the Demand for Labor o Input Demand and Output Supply o Shifts in Demand for Labor Causes The Supply of Labor o Work and Leisure tradeoffs Shifts in Supply of Labor Causes Equilibrium in the Labor Market o Marginal Product in Equilibrium o Shifts in Supply o Shifts in Demand Case Study: Productivity and Wage in the U.S. The Other Factors of Production: Land and Capital 18

Econ 201 Final Exam. Douglas, Fall 2007 Version A Special Codes 00000. PLEDGE: I have neither given nor received unauthorized help on this exam.

Econ 201 Final Exam. Douglas, Fall 2007 Version A Special Codes 00000. PLEDGE: I have neither given nor received unauthorized help on this exam. , Fall 2007 Version A Special Codes 00000 PLEDGE: I have neither given nor received unauthorized help on this exam. SIGNED: PRINT NAME: Econ 201 Final Exam 1. For a profit-maximizing monopolist, a. MR

More information

SUPPLY AND DEMAND : HOW MARKETS WORK

SUPPLY AND DEMAND : HOW MARKETS WORK SUPPLY AND DEMAND : HOW MARKETS WORK Chapter 4 : The Market Forces of and and demand are the two words that economists use most often. and demand are the forces that make market economies work. Modern

More information

Student Name: Date: Teacher Name: Heather Creamer. Score:

Student Name: Date: Teacher Name: Heather Creamer. Score: Economics EOC Quiz Answer Key Microeconomic Concepts - (SSEMI1) Flow Of Goods, (SSEMI2) Law Of Demand, (SSEMI3) Economic Behavior, (SSEMI4) Organization And Role Of Business Student Name: Teacher Name:

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. MBA 640 Survey of Microeconomics Fall 2006, Quiz 6 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A monopoly is best defined as a firm that

More information

Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 1 of 9

Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 1 of 9 Principles of Economics: Micro: Exam #2: Chapters 1-10 Page 1 of 9 print name on the line above as your signature INSTRUCTIONS: 1. This Exam #2 must be completed within the allocated time (i.e., between

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Chapter 11 Perfect Competition - Sample Questions MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Perfect competition is an industry with A) a

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Chapter 11 Monopoly practice Davidson spring2007 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) A monopoly industry is characterized by 1) A)

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron. Principles of Microeconomics Fall 2007, Quiz #6 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron. 1) A monopoly is

More information

1. Supply and demand are the most important concepts in economics.

1. Supply and demand are the most important concepts in economics. Page 1 1. Supply and demand are the most important concepts in economics. 2. Markets and Competition a. Market is a group of buyers and sellers of a particular good or service. P. 66. b. These individuals

More information

AS Economics Unit 1: Markets and Market Failure Syllabus, Key Terms & Charts

AS Economics Unit 1: Markets and Market Failure Syllabus, Key Terms & Charts AS Economics Unit 1: Markets and Market Failure Syllabus, Key Terms & Charts 10.1 The Economic Problem The Nature and Purpose of Economic Activity The central purpose of economic activity is the production

More information

ECON 101 MIDTERM 1 REVIEW SESSION (WINTER 2015) BY BENJI HUANG

ECON 101 MIDTERM 1 REVIEW SESSION (WINTER 2015) BY BENJI HUANG ECON 101 MIDTERM 1 REVIEW SESSION (WINTER 2015) BY BENJI HUANG TABLE OF CONTENT I. CHAPTER 1: WHAT IS ECONOMICS II. CHAPTER 2: THE ECONOMIC PROBLEM III. CHAPTER 3: DEMAND AND SUPPLY IV. CHAPTER 4: ELASTICITY

More information

Econ 202 Exam 2 Practice Problems

Econ 202 Exam 2 Practice Problems Econ 202 Exam 2 Practice Problems Principles of Microeconomics Dr. Phillip Miller Multiple Choice Identify the choice that best completes the statement or answers the question. Chapter 6 1. If a binding

More information

AP Microeconomics Review

AP Microeconomics Review AP Microeconomics Review 1. Firm in Perfect Competition (Long-Run Equilibrium) 2. Monopoly Industry with comparison of price & output of a Perfectly Competitive Industry 3. Natural Monopoly with Fair-Return

More information

AP Microeconomics Chapter 12 Outline

AP Microeconomics Chapter 12 Outline I. Learning Objectives In this chapter students will learn: A. The significance of resource pricing. B. How the marginal revenue productivity of a resource relates to a firm s demand for that resource.

More information

2007 Thomson South-Western

2007 Thomson South-Western Thinking Like an Economist Every field of study has its own terminology Mathematics integrals axioms vector spaces Psychology ego id cognitive dissonance Law promissory estoppel torts venues Economics

More information

Monopolistic Competition

Monopolistic Competition In this chapter, look for the answers to these questions: How is similar to perfect? How is it similar to monopoly? How do ally competitive firms choose price and? Do they earn economic profit? In what

More information

PART 3 Market failure THE LIMITATIONS OF MARKETS. Sources of Market Failure. Private and Social Costs 29/02/2016. 1 of 38

PART 3 Market failure THE LIMITATIONS OF MARKETS. Sources of Market Failure. Private and Social Costs 29/02/2016. 1 of 38 PART 3 Market failure THE LIMITATIONS OF MARKETS ISBN: 978-1-4080-6981-3 1 of 38 Sources of Market Failure Imperfect knowledge of and between buyers & sellers Can be distorted by advertising and poor technical

More information

A. a change in demand. B. a change in quantity demanded. C. a change in quantity supplied. D. unit elasticity. E. a change in average variable cost.

A. a change in demand. B. a change in quantity demanded. C. a change in quantity supplied. D. unit elasticity. E. a change in average variable cost. 1. The supply of gasoline changes, causing the price of gasoline to change. The resulting movement from one point to another along the demand curve for gasoline is called A. a change in demand. B. a change

More information

Monopoly WHY MONOPOLIES ARISE

Monopoly WHY MONOPOLIES ARISE In this chapter, look for the answers to these questions: Why do monopolies arise? Why is MR < P for a monopolist? How do monopolies choose their P and Q? How do monopolies affect society s well-being?

More information

Pricing and Output Decisions: i Perfect. Managerial Economics: Economic Tools for Today s Decision Makers, 4/e By Paul Keat and Philip Young

Pricing and Output Decisions: i Perfect. Managerial Economics: Economic Tools for Today s Decision Makers, 4/e By Paul Keat and Philip Young Chapter 9 Pricing and Output Decisions: i Perfect Competition and Monopoly M i l E i E i Managerial Economics: Economic Tools for Today s Decision Makers, 4/e By Paul Keat and Philip Young Pricing and

More information

ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS

ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS ECON 103, 2008-2 ANSWERS TO HOME WORK ASSIGNMENTS Due the Week of June 23 Chapter 8 WRITE [4] Use the demand schedule that follows to calculate total revenue and marginal revenue at each quantity. Plot

More information

Microeconomics Instructor Miller Practice Problems Monopolistic Competition

Microeconomics Instructor Miller Practice Problems Monopolistic Competition Microeconomics Instructor Miller Practice Problems Monopolistic Competition 1. A monopolistically competitive market is described as one in which there are A) a few firms producing an identical product.

More information

FBLA: ECONOMICS. Competency: Basic Economic Concepts and Principles

FBLA: ECONOMICS. Competency: Basic Economic Concepts and Principles Competency: Basic Economic Concepts and Principles 1. Define money (characteristics, role, and forms) and trace how money and resources flow through the American economic system. 2. Utilize decision-making

More information

EXAM TWO REVIEW: A. Explicit Cost vs. Implicit Cost and Accounting Costs vs. Economic Costs:

EXAM TWO REVIEW: A. Explicit Cost vs. Implicit Cost and Accounting Costs vs. Economic Costs: EXAM TWO REVIEW: A. Explicit Cost vs. Implicit Cost and Accounting Costs vs. Economic Costs: Economic Cost: the monetary value of all inputs used in a particular activity or enterprise over a given period.

More information

Essential Graphs for Microeconomics

Essential Graphs for Microeconomics Essential Graphs for Microeconomics Basic Economic Concepts roduction ossibilities Curve Good X A F B C W Concepts: oints on the curve-efficient oints inside the curve-inefficient oints outside the curve-unattainable

More information

The Revenue of a Competitive In perfect competition, average revenue equals the price of the good. Total revenue Average Revenue = = The Revenue of a

The Revenue of a Competitive In perfect competition, average revenue equals the price of the good. Total revenue Average Revenue = = The Revenue of a In this chapter, look for the answers to these questions: What is a perfectly competitive market? What is marginal revenue? How is it related to total and average revenue? How does a competitive firm determine

More information

Practice Test for Midterm 1 Econ 2010-200 Fall 2009 Instructor: Soojae Moon

Practice Test for Midterm 1 Econ 2010-200 Fall 2009 Instructor: Soojae Moon Practice Test for Midterm 1 Econ 2010-200 Fall 2009 Instructor: Soojae Moon Please read carefully and choose the choice that best completes the statement or answers the question. 1. The word economy comes

More information

Unit 2.3 - Theory of the Firm Unit Overview

Unit 2.3 - Theory of the Firm Unit Overview Unit 2.3.1 - Introduction to Market Structures and Cost Theory Intro to Market Structures Pure competition Monopolistic competition Oligopoly Monopoly Cost theory Types of costs: fixed costs, variable

More information

11 PERFECT COMPETITION. Chapter. Competition

11 PERFECT COMPETITION. Chapter. Competition Chapter 11 PERFECT COMPETITION Competition Topic: Perfect Competition 1) Perfect competition is an industry with A) a few firms producing identical goods B) a few firms producing goods that differ somewhat

More information

4. Which of the following are available in limited quantity and contribute to the problem of scarcity?

4. Which of the following are available in limited quantity and contribute to the problem of scarcity? 1. Given that resources are scarce: A) A "free lunch" is possible but only for a limited number of people B) Poor countries must make choices but rich countries do not have to make choices C) Opportunity

More information

Economic Efficiency, Government Price Setting, and Taxes

Economic Efficiency, Government Price Setting, and Taxes CHAPTER 4 Economic Efficiency, Government Price Setting, and Taxes Modified by: Changwoo Nam 1 Economic Efficiency, Government Price Setting, and Taxes A legally determined maximum price that sellers may

More information

ANSWERS TO END-OF-CHAPTER QUESTIONS

ANSWERS TO END-OF-CHAPTER QUESTIONS ANSWERS TO END-OF-CHAPTER QUESTIONS 23-1 Briefly indicate the basic characteristics of pure competition, pure monopoly, monopolistic competition, and oligopoly. Under which of these market classifications

More information

There are 10 Internal Credits AS 91401 V1 (3.3) 5 credits: Elasticity & micro-economic concepts Literacy

There are 10 Internal Credits AS 91401 V1 (3.3) 5 credits: Elasticity & micro-economic concepts Literacy Year 13 Economics Course Outline This course will cover the micro-economic issues of Market efficiency, Elasticity, Government intervention, Market failure and macroeconomic Influences on NZ economy. There

More information

Consumer and Producer Surplus. Consumer and Producer Surplus. Consumer Surplus. Consumer Surplus. Consumer Surplus Individual consumer surplus

Consumer and Producer Surplus. Consumer and Producer Surplus. Consumer Surplus. Consumer Surplus. Consumer Surplus Individual consumer surplus Consumer and Consumer and February 6, 2007 Reading: Chapter 6 Introduction Consumer surplus Producer surplus Efficiency and the gains from trade s 2 Introduction Connections to: Opportunity costs to consumers

More information

Final Exam (Version 1) Answers

Final Exam (Version 1) Answers Final Exam Economics 101 Fall 2003 Wallace Final Exam (Version 1) Answers 1. The marginal revenue product equals A) total revenue divided by total product (output). B) marginal revenue divided by marginal

More information

Practice Questions Week 8 Day 1

Practice Questions Week 8 Day 1 Practice Questions Week 8 Day 1 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. The characteristics of a market that influence the behavior of market participants

More information

10. In a market economy, economic activity is guided by a. the government. b. corporations. c. central planners. d. prices.

10. In a market economy, economic activity is guided by a. the government. b. corporations. c. central planners. d. prices. 1 chapter 1. Both households and societies face many decisions because a. resources are scarce. b. populations may increase or decrease over time. c. wages for households and therefore society fluctuate

More information

SAMPLE COURSE OUTLINE ECONOMICS ATAR YEAR 11

SAMPLE COURSE OUTLINE ECONOMICS ATAR YEAR 11 SAMPLE COURSE OUTLINE ECONOMICS ATAR YEAR 11 Copyright School Curriculum and Standards Authority, 2014 This document apart from any third party copyright material contained in it may be freely copied,

More information

b. Cost of Any Action is measure in foregone opportunities c.,marginal costs and benefits in decision making

b. Cost of Any Action is measure in foregone opportunities c.,marginal costs and benefits in decision making 1 Economics 130-Windward Community College Review Sheet for the Final Exam This final exam is comprehensive in nature and in scope. The test will be divided into two parts: a multiple-choice section and

More information

Econ 202 Exam 3 Practice Problems

Econ 202 Exam 3 Practice Problems Econ 202 Exam 3 Practice Problems Principles of Microeconomics Dr. Phillip Miller Multiple Choice Identify the choice that best completes the statement or answers the question. Chapter 13 Production and

More information

Chapter. Perfect Competition CHAPTER IN PERSPECTIVE

Chapter. Perfect Competition CHAPTER IN PERSPECTIVE Perfect Competition Chapter 10 CHAPTER IN PERSPECTIVE In Chapter 10 we study perfect competition, the market that arises when the demand for a product is large relative to the output of a single producer.

More information

MICROECONOMIC PRINCIPLES SPRING 2001 MIDTERM ONE -- Answers. February 16, 2001. Table One Labor Hours Needed to Make 1 Pounds Produced in 20 Hours

MICROECONOMIC PRINCIPLES SPRING 2001 MIDTERM ONE -- Answers. February 16, 2001. Table One Labor Hours Needed to Make 1 Pounds Produced in 20 Hours MICROECONOMIC PRINCIPLES SPRING 1 MIDTERM ONE -- Answers February 1, 1 Multiple Choice. ( points each) Circle the correct response and write one or two sentences to explain your choice. Use graphs as appropriate.

More information

UNIT 6 cont PRICING UNDER DIFFERENT MARKET STRUCTURES. Monopolistic Competition

UNIT 6 cont PRICING UNDER DIFFERENT MARKET STRUCTURES. Monopolistic Competition UNIT 6 cont PRICING UNDER DIFFERENT MARKET STRUCTURES Monopolistic Competition Market Structure Perfect Competition Pure Monopoly Monopolistic Competition Oligopoly Duopoly Monopoly The further right on

More information

CHAPTER 11 PRICE AND OUTPUT IN MONOPOLY, MONOPOLISTIC COMPETITION, AND PERFECT COMPETITION

CHAPTER 11 PRICE AND OUTPUT IN MONOPOLY, MONOPOLISTIC COMPETITION, AND PERFECT COMPETITION CHAPTER 11 PRICE AND OUTPUT IN MONOPOLY, MONOPOLISTIC COMPETITION, AND PERFECT COMPETITION Chapter in a Nutshell Now that we understand the characteristics of different market structures, we ask the question

More information

Learning Objectives. Chapter 6. Market Structures. Market Structures (cont.) The Two Extremes: Perfect Competition and Pure Monopoly

Learning Objectives. Chapter 6. Market Structures. Market Structures (cont.) The Two Extremes: Perfect Competition and Pure Monopoly Chapter 6 The Two Extremes: Perfect Competition and Pure Monopoly Learning Objectives List the four characteristics of a perfectly competitive market. Describe how a perfect competitor makes the decision

More information

Pure Competition urely competitive markets are used as the benchmark to evaluate market

Pure Competition urely competitive markets are used as the benchmark to evaluate market R. Larry Reynolds Pure Competition urely competitive markets are used as the benchmark to evaluate market P performance. It is generally believed that market structure influences the behavior and performance

More information

Pre-Test Chapter 20 ed17

Pre-Test Chapter 20 ed17 Pre-Test Chapter 20 ed17 Multiple Choice Questions 1. In the above diagram it is assumed that: A. some costs are fixed and other costs are variable. B. all costs are variable. C. the law of diminishing

More information

CHAPTER 9: PURE COMPETITION

CHAPTER 9: PURE COMPETITION CHAPTER 9: PURE COMPETITION Introduction In Chapters 9-11, we reach the heart of microeconomics, the concepts which comprise more than a quarter of the AP microeconomics exam. With a fuller understanding

More information

Chapter 6 Competitive Markets

Chapter 6 Competitive Markets Chapter 6 Competitive Markets After reading Chapter 6, COMPETITIVE MARKETS, you should be able to: List and explain the characteristics of Perfect Competition and Monopolistic Competition Explain why a

More information

C H A P T E R 4: The Price System, Demand and Supply, and Elas ticity. The Price System: Rationing and Allocating Resources

C H A P T E R 4: The Price System, Demand and Supply, and Elas ticity. The Price System: Rationing and Allocating Resources C H A P T E R 4 The Price System, Demand and Supply, and Elasticity Prepared by: Fernando Quijano and Yvonn Quijano Karl Case, Ray Fair The Price System: Rationing and Allocating Resources The market system,

More information

Chapter 13 Perfect Competition

Chapter 13 Perfect Competition Chapter 13 Perfect Competition 13.1 A Firm's Profit-Maximizing Choices 1) What is the difference between perfect competition and monopolistic competition? A) Perfect competition has a large number of small

More information

CHAPTER 12 MARKETS WITH MARKET POWER Microeconomics in Context (Goodwin, et al.), 2 nd Edition

CHAPTER 12 MARKETS WITH MARKET POWER Microeconomics in Context (Goodwin, et al.), 2 nd Edition CHAPTER 12 MARKETS WITH MARKET POWER Microeconomics in Context (Goodwin, et al.), 2 nd Edition Chapter Summary Now that you understand the model of a perfectly competitive market, this chapter complicates

More information

Short-Run Production and Costs

Short-Run Production and Costs Short-Run Production and Costs The purpose of this section is to discuss the underlying work of firms in the short-run the production of goods and services. Why is understanding production important to

More information

Chapter 14 Monopoly. 14.1 Monopoly and How It Arises

Chapter 14 Monopoly. 14.1 Monopoly and How It Arises Chapter 14 Monopoly 14.1 Monopoly and How It Arises 1) One of the requirements for a monopoly is that A) products are high priced. B) there are several close substitutes for the product. C) there is a

More information

Practice Multiple Choice Questions Answers are bolded. Explanations to come soon!!

Practice Multiple Choice Questions Answers are bolded. Explanations to come soon!! Practice Multiple Choice Questions Answers are bolded. Explanations to come soon!! For more, please visit: http://courses.missouristate.edu/reedolsen/courses/eco165/qeq.htm Market Equilibrium and Applications

More information

Economics 100 Exam 2

Economics 100 Exam 2 Name: 1. During the long run: Economics 100 Exam 2 A. Output is limited because of the law of diminishing returns B. The scale of operations cannot be changed C. The firm must decide how to use the current

More information

CHAPTER 18 MARKETS WITH MARKET POWER Principles of Economics in Context (Goodwin et al.)

CHAPTER 18 MARKETS WITH MARKET POWER Principles of Economics in Context (Goodwin et al.) CHAPTER 18 MARKETS WITH MARKET POWER Principles of Economics in Context (Goodwin et al.) Chapter Summary Now that you understand the model of a perfectly competitive market, this chapter complicates the

More information

Econ 101: Principles of Microeconomics

Econ 101: Principles of Microeconomics Econ 101: Principles of Microeconomics Chapter 14 - Monopoly Fall 2010 Herriges (ISU) Ch. 14 Monopoly Fall 2010 1 / 35 Outline 1 Monopolies What Monopolies Do 2 Profit Maximization for the Monopolist 3

More information

LABOR UNIONS. Appendix. Key Concepts

LABOR UNIONS. Appendix. Key Concepts Appendix LABOR UNION Key Concepts Market Power in the Labor Market A labor union is an organized group of workers that aims to increase wages and influence other job conditions. Craft union a group of

More information

ECON 202: Principles of Microeconomics. Chapter 1 Economics: Foundations and Models

ECON 202: Principles of Microeconomics. Chapter 1 Economics: Foundations and Models ECON 202: Principles of Microeconomics Chapter 1 Economics: Foundations and Models Economics: Foundations and Models 1. Introduction. 2. Three key economic ideas. 3. The economic problem that every society

More information

CHAPTER SEVEN THE THEORY AND ESTIMATION OF COST

CHAPTER SEVEN THE THEORY AND ESTIMATION OF COST CHAPTER SEVEN THE THEORY AND ESTIMATION OF COST The production decision has to be based not only on the capacity to produce (the production function) but also on the costs of production (the cost function).

More information

Economics 101 Fall 2013 Answers to Homework 5 Due Tuesday, November 19, 2013

Economics 101 Fall 2013 Answers to Homework 5 Due Tuesday, November 19, 2013 Economics 101 Fall 2013 Answers to Homework 5 Due Tuesday, November 19, 2013 Directions: The homework will be collected in a box before the lecture. Please place your name, TA name and section number on

More information

Problems: Table 1: Quilt Dress Quilts Dresses Helen 50 10 1.8 9 Carolyn 90 45 1 2

Problems: Table 1: Quilt Dress Quilts Dresses Helen 50 10 1.8 9 Carolyn 90 45 1 2 Problems: Table 1: Labor Hours needed to make one Amount produced in 90 hours: Quilt Dress Quilts Dresses Helen 50 10 1.8 9 Carolyn 90 45 1 2 1. Refer to Table 1. For Carolyn, the opportunity cost of 1

More information

Monopoly. Chapter 13. Monopoly and How It Arises. Single-price Monopoly. Monopoly and Competition Compared. Price Discrimination

Monopoly. Chapter 13. Monopoly and How It Arises. Single-price Monopoly. Monopoly and Competition Compared. Price Discrimination CHAPTER CHECKLIST Monopoly Chapter 13 1. Explain how monopoly arises and distinguish between single-price monopoly and price-discriminating monopoly. 2. Explain how a single-price monopoly determines its

More information

The Circular Flow of Income and Expenditure

The Circular Flow of Income and Expenditure The Circular Flow of Income and Expenditure Imports HOUSEHOLDS Savings Taxation Govt Exp OTHER ECONOMIES GOVERNMENT FINANCIAL INSTITUTIONS Factor Incomes Taxation Govt Exp Consumer Exp Exports FIRMS Capital

More information

Paper 1 (SL and HL) markschemes

Paper 1 (SL and HL) markschemes Paper 1 (SL and HL) markschemes Examples of markschemes for Exam practice: paper 1 in the Economics for the IB Diploma CD-ROM are provided below. Paper 1 section A: Microeconomics Chapter 2 Competitive

More information

PROBLEM SET#3 PART I: MULTIPLE CHOICE

PROBLEM SET#3 PART I: MULTIPLE CHOICE 1 PROBLEM SET#3 PART I: MULTIPLE CHOICE 1. In general, elasticity is a measure of a. the extent to which advances in technology are adopted by producers. b. the extent to which a market is competitive.

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Chap 13 Monopolistic Competition and Oligopoly These questions may include topics that were not covered in class and may not be on the exam. MULTIPLE CHOICE. Choose the one alternative that best completes

More information

Chapter 6 Supply, Demand, and Government Policies

Chapter 6 Supply, Demand, and Government Policies Chapter 6 Supply, Demand, and Government Policies Review Questions Using supply-demand diagrams, show the difference between a non-binding price ceiling and a binding price ceiling in the wheat market.

More information

PAGE 1. Econ 2113 - Test 2 Fall 2003 Dr. Rupp. Multiple Choice. 1. The price elasticity of demand measures

PAGE 1. Econ 2113 - Test 2 Fall 2003 Dr. Rupp. Multiple Choice. 1. The price elasticity of demand measures PAGE 1 Econ 2113 - Test 2 Fall 2003 Dr. Rupp Multiple Choice 1. The price elasticity of demand measures a. how responsive buyers are to a change in income. b. how responsive sellers are to a change in

More information

Learning Objectives. After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to:

Learning Objectives. After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to: Learning Objectives After reading Chapter 11 and working the problems for Chapter 11 in the textbook and in this Workbook, you should be able to: Discuss three characteristics of perfectly competitive

More information

THE ECONOMIC & BUSINESS ENVIRONMENT SETTING THE SCENE. Scarcity + + Making Decisions 29/02/2016. 1 of 38. Session 1

THE ECONOMIC & BUSINESS ENVIRONMENT SETTING THE SCENE. Scarcity + + Making Decisions 29/02/2016. 1 of 38. Session 1 Session 1 THE ECONOMIC & BUSINESS ENVIRONMENT SETTING THE SCENE 1 of 38 Scarcity + Scarcity = limited nature of society s resources Businesses allocate scarce resources among competing uses, taking into

More information

Monopolistic Competition

Monopolistic Competition Monopolistic Chapter 17 Copyright 2001 by Harcourt, Inc. All rights reserved. Requests for permission to make copies of any part of the work should be mailed to: Permissions Department, Harcourt College

More information

Chapter 22 The Cost of Production Extra Multiple Choice Questions for Review

Chapter 22 The Cost of Production Extra Multiple Choice Questions for Review Chapter 22 The Cost of Production Extra Multiple Choice Questions for Review 1. Implicit costs are: A) equal to total fixed costs. B) comprised entirely of variable costs. C) "payments" for self-employed

More information

Perfect Competition. Perfect competition a pure market

Perfect Competition. Perfect competition a pure market We now move on to study the economics of different market structures. The spectrum of competition ranges from perfectly competitive markets where there are many sellers who are price takers to a pure monopoly

More information

4 THE MARKET FORCES OF SUPPLY AND DEMAND

4 THE MARKET FORCES OF SUPPLY AND DEMAND 4 THE MARKET FORCES OF SUPPLY AND DEMAND IN THIS CHAPTER YOU WILL Learn what a competitive market is Examine what determines the demand for a good in a competitive market Chapter Overview Examine what

More information

CEVAPLAR. Solution: a. Given the competitive nature of the industry, Conigan should equate P to MC.

CEVAPLAR. Solution: a. Given the competitive nature of the industry, Conigan should equate P to MC. 1 I S L 8 0 5 U Y G U L A M A L I İ K T İ S A T _ U Y G U L A M A ( 4 ) _ 9 K a s ı m 2 0 1 2 CEVAPLAR 1. Conigan Box Company produces cardboard boxes that are sold in bundles of 1000 boxes. The market

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Practice for Perfect Competition Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which of the following is a defining characteristic of a

More information

Managerial Economics & Business Strategy Chapter 8. Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets

Managerial Economics & Business Strategy Chapter 8. Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets Managerial Economics & Business Strategy Chapter 8 Managing in Competitive, Monopolistic, and Monopolistically Competitive Markets I. Perfect Competition Overview Characteristics and profit outlook. Effect

More information

Chapter 8 Application: The Costs of Taxation

Chapter 8 Application: The Costs of Taxation Chapter 8 Application: The Costs of Taxation Review Questions What three factors must be taken into account in order to fully understand the effect of taxes on economic well-being? ANSWER: In order to

More information

LIST OF MEMBERS WHO PREPARED QUESTION BANK FOR ECONOMICS FOR CLASS XII TEAM MEMBERS. Sl. No. Name Designation

LIST OF MEMBERS WHO PREPARED QUESTION BANK FOR ECONOMICS FOR CLASS XII TEAM MEMBERS. Sl. No. Name Designation LIST OF MEMBERS WHO PREPARED QUESTION BANK FOR ECONOMICS FOR CLASS XII TEAM MEMBERS Sl. No. Name Designation 1. Mrs. Neelam Vinayak V. Principal (Team Leader) G.G.S.S. Deputy Ganj, Sadar Bazar Delhi-110006

More information

Supply and Demand, and Market Failure. Economics looks at the world from a perspective of choices we make given our limited resources.

Supply and Demand, and Market Failure. Economics looks at the world from a perspective of choices we make given our limited resources. and Demand, and Market Failure Economics looks at the world from a perspective of choices we make given our limited resources. Economics - the study of how society manages its scarce resources Or the study

More information

ECON 600 Lecture 3: Profit Maximization Π = TR TC

ECON 600 Lecture 3: Profit Maximization Π = TR TC ECON 600 Lecture 3: Profit Maximization I. The Concept of Profit Maximization Profit is defined as total revenue minus total cost. Π = TR TC (We use Π to stand for profit because we use P for something

More information

Chapter 3:Externalities and Government Policy

Chapter 3:Externalities and Government Policy Reading: page 98~130 (Public Finance in Canada, David N. Hyman 10th edition) :Externalities and Government Policy Objectives: Define an externality and understand how such externality can prevent efficiency

More information

5. The supply curve of a monopolist is A) upward sloping. B) nonexistent. C) perfectly inelastic. D) horizontal.

5. The supply curve of a monopolist is A) upward sloping. B) nonexistent. C) perfectly inelastic. D) horizontal. Chapter 12 monopoly 1. A monopoly firm is different from a competitive firm in that A) there are many substitutes for a monopolist's product but there are no substitutes for a competitive firm's product.

More information

Principle of Microeconomics Econ 202-506 chapter 13

Principle of Microeconomics Econ 202-506 chapter 13 Principle of Microeconomics Econ 202-506 chapter 13 MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The WaveHouse on Mission Beach in San Diego

More information

B.A. PROGRAMME DISCIPLINE COURSE ECONOMICS. COURSE CONTENTS (Effective from the Academic Year 2011-2012 onwards)

B.A. PROGRAMME DISCIPLINE COURSE ECONOMICS. COURSE CONTENTS (Effective from the Academic Year 2011-2012 onwards) B.A. PROGRAMME DISCIPLINE COURSE ECONOMICS COURSE CONTENTS (Effective from the Academic Year 2011-2012 onwards) DEPARTMENT OF ECONOMICS UNIVERSITY OF DELHI DELHI 1 Syllabus for B.A. Programme - Economics

More information

Ch. 6 Lecture Notes I. Price Elasticity of Demand 4. CONSIDER THIS A Bit of a Stretch

Ch. 6 Lecture Notes I. Price Elasticity of Demand 4. CONSIDER THIS A Bit of a Stretch Ch. 6 Lecture Notes I. Price Elasticity of Demand A. Law of demand tells us that consumers will respond to a price decrease by buying more of a product (other things remaining constant), but it does not

More information

Integrating the Input Market and the Output Market when Teaching Introductory Economics

Integrating the Input Market and the Output Market when Teaching Introductory Economics 1 Integrating the Input Market and the Output Market when Teaching Introductory Economics May 2015 Clark G. Ross Frontis Johnston Professor of Economics Davidson College Box 7022 Davidson, NC 28035-7022

More information

Econ 201, Microeconomics Principles, Final Exam Version 1

Econ 201, Microeconomics Principles, Final Exam Version 1 Econ 201, Microeconomics Principles, Final Exam Version 1 Instructions: Please complete your answer sheet by filling in your name, student ID number, and identifying the version of your test (1 or 2).

More information

PART A: For each worker, determine that worker's marginal product of labor.

PART A: For each worker, determine that worker's marginal product of labor. ECON 3310 Homework #4 - Solutions 1: Suppose the following indicates how many units of output y you can produce per hour with different levels of labor input (given your current factory capacity): PART

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron. Principles of Microeconomics, Quiz #5 Fall 2007 Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question on the accompanying scantron. 1) Perfect competition

More information

Equilibrium of a firm under perfect competition in the short-run. A firm is under equilibrium at that point where it maximizes its profits.

Equilibrium of a firm under perfect competition in the short-run. A firm is under equilibrium at that point where it maximizes its profits. Equilibrium of a firm under perfect competition in the short-run. A firm is under equilibrium at that point where it maximizes its profits. Profit depends upon two factors Revenue Structure Cost Structure

More information

Unit 7. Firm behaviour and market structure: monopoly

Unit 7. Firm behaviour and market structure: monopoly Unit 7. Firm behaviour and market structure: monopoly Learning objectives: to identify and examine the sources of monopoly power; to understand the relationship between a monopolist s demand curve and

More information

Name Eco200: Practice Test 2 Covering Chapters 10 through 15

Name Eco200: Practice Test 2 Covering Chapters 10 through 15 Name Eco200: Practice Test 2 Covering Chapters 10 through 15 1. Four roommates are planning to spend the weekend in their dorm room watching old movies, and they are debating how many to watch. Here is

More information

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. Exam Name MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) If a producing firm does not have enough time to expand its plant capacity, it is: A)

More information

AP Microeconomics Chapter 5 Outline

AP Microeconomics Chapter 5 Outline I. Learning Objectives In this chapter students should learn: A. How to differentiate demand side market failures and supply side market failures. B. The origin of consumer surplus and producer surplus,

More information

Econ 111 (04) 2nd Midterm A

Econ 111 (04) 2nd Midterm A Econ 111 (04) 2nd Midterm A MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) Which one of the following does not occur in perfect competition? A)

More information

Chapter 7 Monopoly, Oligopoly and Strategy

Chapter 7 Monopoly, Oligopoly and Strategy Chapter 7 Monopoly, Oligopoly and Strategy After reading Chapter 7, MONOPOLY, OLIGOPOLY AND STRATEGY, you should be able to: Define the characteristics of Monopoly and Oligopoly, and explain why the are

More information

AP Microeconomics. Practice Exam. Advanced Placement Program

AP Microeconomics. Practice Exam. Advanced Placement Program Advanced Placement Program AP Microeconomics Practice Exam The questions contained in this AP Microeconomics Practice Exam are written to the content specifications of AP Exams for this subject. Taking

More information