Survey
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
* Your assessment is very important for improving the workof artificial intelligence, which forms the content of this project
Econ 106 – SI review questions for exam 2 Hint: These questions are all based on class notes. Try to answer them on your own but refer to your notes if you get stuck or if my question is not clear. This is a good way to study on your own – turn everything you have been taught into a question, and then see if you can write a good answer. If you can, no need to study that concept anymore. If you can’t, re-read your notes on that concept or look it up in the book. 1. For any type of elasticity, there is a change, and a response to that change. Draw this as a fraction. 2. The answer to question 1 is what you will use to construct the three types of elasticity that we discuss – what are these three types and how are they represented as fractions? 3. When is elasticity positive? Negative? Greater than one? Between 1 and 0? Hint: draw the response/change fraction, and then compare how the numerator and denominator are increasing/decreasing. 4. Why would a firm care about elasticity? Draw a graph to show your answer visually. Hint: Think about total revenue. 5. Draw a price/quantity graph showing supply, demand, and equilibrium. Now indicate the areas of producer as well as consumer surplus. 6. Now shift the supply curve to the left – show the area of lost trades, or a loss in efficiency. 7. What is the definition of a luxury good? A normal good? An inferior good? 8. What do economists mean when they use the word ‘utility?’ 9. What is the difference between total utility and marginal utility? What does diminishing marginal utility mean? 10. Write the formula for the rational spending rule. Write what this means in your own words. Why is diminishing marginal utility important for this rule to be true? 11. Draw a graph with utility on the y-axis and quantity on the x-axis. Now draw two curves: one for total utility and another for marginal utility. 12. What is a reservation price, and how does it relate to supply and demand curves? 13. Draw a bowed-out production possibilities curve (PPC) (we always draw them this way in class) with two goods (such as peanuts and cotton, but hopefully something more interesting…). Now, draw the supply curve for one of the goods. How does the shape of the PPC determine the shape of the supply curve? Hint: think about how the opportunity cost of a good changes as you make more or less of it. 14. Does a firm exist to minimize cost? To maximize revenue? To maximize profit? 15. What are the conditions which make a market perfectly competitive? 16. Draw a supply and demand graph for an entire perfectly competitive market, and then draw the supply and demand graph for an individual firm. 17. Why should a firm facing a perfectly competitive market follow the rule of producing a good up until the point that marginal cost equals marginal benefit (MC=MB)?