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Final Exam

Final Exam. Monday, 12/15, 8-10 a.m. 80 multiple choice bring pencil, Oswego ID cumulative study guide is posted if taking MAT 102, 120, 210, 220 makeup is Tues., 12/16, 2- 4 makeup ONLY if you have a conflict with MAT. Final exam review. some stuff NOT on the exam supply and demand

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Final Exam

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  1. Final Exam • Monday, 12/15, 8-10 a.m. • 80 multiple choice • bring pencil, Oswego ID • cumulative • study guide is posted • if taking MAT 102, 120, 210, 220 • makeup is Tues., 12/16, 2- 4 • makeup ONLY if you have a conflict with MAT

  2. Final exam review • some stuff NOT on the exam • supply and demand • elasticity • production & costs • market structures • labor demand

  3. this review • selected topics • NOT exhaustive! • see the study guide

  4. requested for today, butNOT on the exam: • game theory (10) • indifference curves (6) • CALCULATING elasticity (5) • income & substitution effects (12) • accounting vs. economic profit (7) • graphs of perfect competition (8) • price discrimination (9)

  5. Supply and Demand • how events shift demand or supply? • how shifts in demand and/or supply will change P & Q? • DRAW THE PICTURE!

  6. market for oranges • orange juice discovered to prevent cancer • what shifts? • demand (change in tastes) • what direction? • increase

  7. D’ P S P rises Q rises D Q

  8. both demand and supply increase • what happens to price and quantity?

  9. D’ increase in demand P S P rises Q rises D Q

  10. S’ increase in supply P S P falls Q rises D Q

  11. so if both S and D increase • Q rises • change in P is uncertain

  12. Elasticity • questions about INTERPRETING elasticity • elastic • Q very responsive to price changes • inelastic • Q not responsive to price changes

  13. example • elasticity of supply = 2 • supply is ELASTIC • supply curve is relatively steep • a 1% increase in P cause a 2% increase in Qs

  14. elasticity of demand and TR • inelastic • TR will rise when P rises • elastic • TR will fall when P rises • what makes the demand for something elastic?

  15. cross elasticity • change in Qd when P of RELATED good changes • < 0 for compliments • > 0 for substitutes • income elasticity • change in Qd when income changes? • > 0 for normal goods • < 0 for inferior goods

  16. Production & costs • total costs • total fixed costs • incur even if output = 0 • total variable costs • = 0, if output = 0

  17. given total product • calculate marginal product • calculate average product • given total cost • calculate marginal cost

  18. economic profit • if = 0, normal profit • profit above opportunity cost • > 0, if P > ATC • < 0, if P < ATC

  19. Market structures • perfect competition • monopolistic competition • oligopoly • monopoly

  20. product • identical • perfect comp. • differentiated • mon. comp. • oligopoly • unique • monopoly

  21. entry/exit • free entry exit • perfect comp. • mon. comp. • barriers to entry • monopoly • oligopoly

  22. economic profit • zero, in the LR • perfect comp. • mon. comp. • may be > 0 in the LR • monopoly • oligopoly

  23. demand curve • perfectly elastic (horizontal) • perfect comp. • downward sloping • all others

  24. MR and P • P = MR • perfect comp. • P > MR • all others

  25. collusion/interdependence • ONLY in oligopoly

  26. choosing Q • MR = MC • except oligopoly, which is uncertain

  27. choosing P • perfect comp • price determined by market supply and demand • monopoly & mon. comp. • use firm demand curve • oligopoly • uncertain

  28. monopoly vs. perfect competition • monopoly has • higher price • lower output • less efficient (loss of output)

  29. cartel • oligopoly firms • collude to act like a monopoly • split up monopoly output • charge monopoly price • split monopoly profits

  30. labor demand • what is MRP? • what happens to MRP as Q of labor rises? • given # workers, total output • calculate MRP • # workers hired, given wage

  31. example: smoothies wage = $6 wage = $10 • price of smoothie = $2 • smoothies per hour Q labor TP MP MRP= MP x P 0 0 1 6 6 12 2 11 3 15 5 10 hire 2 workers 4 8 4 18 5 20 3 6 hire 4 workers 2 4

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