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Intermediate Microeconomics Final Study Guide – June 2014 Basic Points: - Test will cover Ch 7-9, 14-16 - About 40% of the test will be MC questions, the rest will consist of short answers, graphing or equation-related questions. - Will try to make all graphing or equations straightforward; will use linear base where possible Topics You Should Know/Understand…. Ch 7: Technology and Production - Efficient Production methods – production possibilities set, efficient production frontier – what - Productivity – average product/marginal product, reasons for diff. prod. - Law of Dimin. Marg. Returns - Assignment of work between plants – (if a question relates to this, will only relate to basic concept – no graphing or equations) - Isoquant properties - Input substitution in production with 1 or 2 variable inputs - Returns to scale – def., what causes, - Productivity in SR/LR – fixed and variable, - MRTS, declining MRTS - Prod. Technologies – substitutes, complements, Cobb Douglas – define, equation and meanining/implications Ch8: Cost - Types of cost – variable, fixed (Sunk vs. avoidable), economic vs. acct., opportunity cost – def., compare/contrast, examples - Costs – SR/LR, 1 variable input, multiple - Isocost lines – def., help identifying least-cost production, interior vs. boundary solutions - Use cost function – equation, output expansion path, lumpy/avoidable costs, - Ave/Marginal cost and efficient scale of production and relationship with slope - Econ/disecon of scale - 2 product firms (if a question relates to this, will only relate to basic concept – no graphing or equations) Ch 9: Profit Maximization - Profit max quantities and prices – how, view between lumpy and finely divisible output, - Marginal revenue - Output expansion vs. price reduction effects - Why price taker vs. price maker - Shut down with/out sunk costs – how know, written and graphically - Supply functions – def., use of - SR/LR Supply - Producer surplus-identification - Basics for 2 product firms – implications only Ch 14: Equil. And Efficiency - Competitive Markets – requirements, - Market demand/supply – indiv. Vs. mkt, - SR vs. LR – differences, equil., responses to changes in demand and cost, - Aggregate surplus and maximization of that surplus, measuring, deadweight loss, - Changes in terms of who produces, number of goods produced, Ch 15: Market Interventions - - Understand basics for: Taxes / Subsidies: who pays, who is affected, how Floors / supports / quotas Tariffs / quotas How do the above affect the various parties Which are better / worse Ch 16: General Equilibrium - Understand the basic concept for both partial and general equilibriums and how they both work - Understand the graphing, etc. needed to illustrate that basic concept of it What is Not directly on: - Questions specifically from the application sections. Might be used for example context but will not use to any greater depth. - No Ch 14 Appendix - More emphasis on theory and basic graphing. Less emphasis on math related questions (but still present).