Download Ch. 9 PERFECT COMPETITION

EWU – ECON 200 - Introduction to Microeconomics - Briand
Review Topics for Final Exam: Chapters 1-10 + Selected Topics (Chapters 13-14, 16)
Ch. 1 WHAT IS MICROECONOMICS ?
In-class worksheet: Production Possibilities Curve.
HMK1 packet: Ch 1
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Economics: Definition
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1. Scarcity
Definition
What would be a free good? Is there any such thing as a free good?
What resources do individuals face a scarcity of?
What resources does society face a scarcity of?
What factors of production are ultimately used in the production of any good or service?
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2. Opportunity Costs
Definition
Different people have different opportunity costs attached to same alternative choices
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3. Production Possibilities Curve (PPC)
What does a PPC show?
How do you read the opportunity cost of producing an additional amount of good X from a
production possibilities table or a PPC?
Shape of a PPC: downward sloping curve, straight line versus bowed outward PPC: meaning
Points on/inside/outside the PPC; shifts of the PPC: meaning
Ch. 2&3 DEMAND AND SUPPLY MODEL
In-class worksheets: Supply and Demand Model: (1) Apples/Oranges & Oil/Natural Gas, (2) Coffee
HMK2 packet: Chapters 2-3
1. Demand Side of The Market
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a. Demand and Quantity Demanded
Definitions, difference between the two
graphing a demand curve from a demand schedule
individual demand curve versus market demand curve
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b. The Law of Demand
definition
shape of the demand curve
substitution and purchasing power effects
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c. Change in Quantity Demanded
movement along the demand curve
reading a change in quantity demanded due to a change in price, off the demand curve
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d. Change in Demand
shifts of the demand curve: interpretation
determinants of demand for good X other than the current price of good X: income (normal versus
inferior goods), tastes, prices of related goods and services (substitutes versus complements),
expectations of buyers, number of buyers, exchange rate effect
2. Supply Side of The Market
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a. Supply and Quantity Supplied
Definitions, difference between the two
individual supply curve versus market supply curve
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b. The Law of Supply
definition
shape of the supply curve
profit motivation of producers
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c. Change in Quantity Supplied
movement along the supply curve
reading a change in quantity supplied due to a change in price, off the supply curve
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d. Change in Supply
shifts of the supply curve: two interpretations
determinants of supply for good X other than the current price of good X: price of inputs,
technology, prices of related goods and services, expectations of producers, number of
producers/productive capacity, exchange rate effect
3. Putting Demand and Supply Together
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a. Market Equilibrium Price and Quantity
definition
how do we get from an out of equilibrium price (above/below equilibrium, i.e. surplus/shortage of
quantity) to the market equilibrium price?
b. Changes in Market Equilibrium Price and Quantity
due to a change in demand
due to a change in supply
due to a change in both demand and supply
Ch. 4 PRICE ELASTICITY OF DEMAND
In-class worksheets: Price Elasticity & Total Revenue, Elasticity & War on Drug
TEST1 packet: Chapters 1-4
1. Definition
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definition and meaning
elastic, unitary elastic and inelastic demand
price elasticity of demand and shape of the demand curve
determinants of price elasticity
examples of estimated elasticity and meaning
calculating the price elasticity of demand: change of elasticity as one moves up a demand curve
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price elasticity  slope
use of mid-value as a base in calculation of %  P and %  QD
2. Price Elasticity of Demand and Total Expenditure
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total expenditure = total revenue
relationship between changes in price, elasticity of demand and change in revenue
more examples on using elasticity of demand: in-class problems
Ch. 5 POLICY ANALYSIS WITH SUPPLY AND DEMAND MODEL
In-class worksheets: The Minimum Wage, Water Bottles vs Doctor Visits, Canadian e.g.
HMK3 packet: Chapter 5
1. Definition
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price floor
price ceiling
2. Policy Analysis Examples
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the minimum wage
the health care services market
Ch. 6 WEALTH CREATION AND DESTRUCTION
In-class worksheet: Subsidies and Incidence
HMK4 packet: Chapter 6
1.
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Supply and Demand Model and Wealth Creation
Supply curve re-interpreted as a Marginal Cost curve: S = MC
Demand curve re-interpreted as a Marginal Benefit curve: D = MB
Definition of Consumer Surplus
Definition of Producer Surplus
Consumer and Producer Surplus combined
2.
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Government Intervention and Wealth Destruction
Definition of Deadweight Loss
Deadweight Loss associated with Price Floor
Deadweight Loss associated with Price Ceiling
Deadweight Loss associated with Taxation
Deadweight Loss associated with Subsidies
Ch. 7 TRADE
In-class worksheets: Production Possibilities Curve and Gains from Trade, Video
PRACTICE packet: Chapter 7
TEST2 packet: Chapters 5-7
1. Analysis of Trade using the Production Possibility Curve
- Definition of Absolute Advantage
- Definition of Comparative Advantage
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Specialization and Trade
Gains from Trade
2.
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Analysis of Trade using the Supply and Demand Model
Consumer and Producer Surplus in a close economy
Exports and Wealth Creation (Increase in Surplus)
Imports and Wealth Creation (Increase in Surplus)
Deadweight Loss associated with Trade Restriction like Tariffs
Deadweight Loss associated with Trade Restriction like Quotas
Ch. 8 PRODUCTION AND COST
In-class worksheets: (1) Production Function in the Short-Run; (2) Production and Costs in the
Short-Run; (3) Production and Costs in the Long-Run.
HMK5 packet: Chapter 8
1. Thinking about production
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inputs and outputs
short-run versus long-run
2. Production in the short-run
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fixed and variable inputs
in short-run production is first characterized by increasing returns to labor and then diminishing
return to labor
TP, MPL: meaning, computation, interrelation, curves shape
3. Costs in the short-run
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how production and costs are related to one another
TFC, TVC, TC, AFC, AVC, ATC, MC: meaning, computation, interrelation, curves shape
4. Costs in the long-run
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difference between long-run and short-run
LTRC  TC
Shape of the LRATC
Economies of scale/diseconomies of scale
Ch. 9 PERFECT COMPETITION
In-class worksheet: Profit Maximizing Decision: Perfectly Competitive Firm in the Short-Run
HMK6 packet: Chapter 9
1. Definition of Profit
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accounting versus economic profit
relevance of all opportunity costs (implicit + explicit)
2. Characteristics of The Perfectly Competitive Market structure
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buyers and sellers are price takers
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easy entry and easy exit in the long-run
others: see textbook
3. The perfectly competitive firm in the short-run
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demand constraint. D=AR=MR=P* (horizontal line at the prevailing market price)
cost constraint. Usual TC, ATC, AVC and MC (see previous chapter)
profit maximizing output level. TR & TC and MR & MC approaches.
profit or loss level: graphs
dealing with losses: shutting down or continuing operating rules
firm short-run supply curve is the firm MC curve above its minimum AVC
4. Competitive markets in the long-run
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firms entry/exit adjustments due to expectation of positive/negative economic profit occur until firms
earn zero economic profit
goods are produced at the lowest possible costs/consumers get the goods at the lowest possible price
Ch. 10 MONOPOLY
In-class Worksheets: Profit Maximizing Decision: Non-Perfectly Competitive Firm, videos.
PRACTICE packet: Ch 10
TEST3 packet: Chapters 8-10
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1. market structure characteristics
one firm dominating the market
sources of monopoly power
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2. monopoly profit maximization goal and constraints
demand constraint = market demand (cost constraint: usual)
determining profit maximizing level of output and level of profit/loss
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3. more on monopoly
monopolization of market and deadweight loss
price discrimination
Ch. 13-14, 16 SELECTED TOPICS
In-class Worksheets: Firm Labor Hiring Decision/College and High School Graduate labor markets,
Wage-Gap video, Externalities and Property Rights, Consumer Choice Theory
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1. Labor Market (Chapter 16)
Profit maximizing labor hiring decision, individual firm and market demand for labor
Determinant of demand in the labor market; reservation wage and the supply of labor
Wage differential (i.e.wage gap), and determinants of wage gap
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2. Externalities & Public Goods (Chapters 13 & 14)
Externalities and property rights, externalities and the S/D model, ways to correct for externalities
Characteristics of a pure public good
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3. Consumer Choice Theory
The concept of utility and the utility maximizing consumption choice