Download Economics 101 Review for the Final

Economics 101
Brief Outline
Study Suggestions: Review the topics listed below for each assigned chapter. Check the
terms and concepts and the summary at the end of each chapter in the text. Be sure to
study the Key Graphs and read the “Last word” and “Consider this” applications in each
chapter. Use the lecture notes on my web site and try some of the practice quizzes and
power point presentations found on the textbook web page.
Unit I
August 17--September 22
Examination I
(September 23/24)
Chapter 1 Limits, Alternatives, and Choices: Limited resources, choices and opportunity cost
(4) Contrast the following: macro-economics vs. microeconomics (6-7) Positive vs. normative
economics ((7) resource categories (10) Production possibilities (11) Law of increasing costs,
Key Graph (12) Optimal output MB =MC, figure 1.3 (13) Present choices and future possibilities,
figure 1.6, Pitfalls of sound reasoning (16-18)
Chapter 1 Appendix: Direct and inverse relationships, dependent and independent variables,
“other things equal” or ceteris paribus assumption, slope of a line (23-24)
Chapter 2 The market System and the Circular Flow: Contrast the command system vs. the
market system (30) Characteristics of the market system (30-32) Five fundamental questions (3437) the “invisible hand” (38) the circular flow model, Key Graph (40) Resource markets, product
markets (40-42)
Chapter 3 Demand, Supply and Market Equilibrium: The law of demand, individual demand
and market demand, change in demand, (reaction to determinants of demand) (46-50) Change in
quantity demanded (reaction to price change) (51) The law of supply, change in supply (reaction
to determinants of supply (51-54) Change in quantity supplied (reaction to price change) (54)
Market equilibrium, Key Graph (54-55) Surplus, shortage (55-56) Productive efficiency,
allocative efficiency (56-57) Changes in supply, demand and equilibrium (57-58) Price ceilings
and price floors (59-62)
Chapter 4 The U.S. Economy: Private and Public Sectors: Vocabulary terms: Functional
income distribution, personal income distribution (73-74) Plant, firm, industry, vertical merger,
horizontal merger, conglomerate merger, sole proprietorship, partnership, corporation, stock,
bond, principal-agent problem (75-78) The role of government, the five economic functions of
government, legal framework, maintaining competition, redistributing income, reallocation,
stabilization (78-82) Vocabulary terms: transfer payments, externality (79) public good, free rider
problem (80) quasi-public good (81)
Unit II
September 28--October 27
Examination II
(October 28/29)
Chapter 6 Elasticity, Consumer and Producer Surplus: Price elasticity of demand, midpoint
formula (114) Elastic, inelastic, unitary, perfectly elastic, perfectly inelastic (115-116) The total
revenue test (116-119) Determinants of price elasticity of demand (120-122) Price elasticity of
supply, market period, short run , long run (122-124) Cross elasticity and income elasticity (124126) Consumer and producer surplus (126-128) Efficiency losses (129)
Chapter 21 The Economics of Health Care: Twin problems: cost and access, international
comparisons, (432-434) Labor market effects, personal bankruptcies, impact on government
budgets (434-435) Peculiarities of health care market, ethical considerations, asymmetric
information, positive externalities, third party payers, (436) Demand side causes for rising health
care costs, income elasticity of health care, inelastic price elasticity of demand, aging population,
unhealthy lifestyles, defensive medicine, the moral hazard problem (437-440) Supply side causes
of rising costs, labor intensive production process, cost of education for health care professionals,
changes in technology (440-442)
Chapter 7 Consumer Behavior: Law of diminishing marginal utility, Key Graph (135-137)
Utility maximizing rule, marginal utility per dollar, (138-140) Income and substitution effects
(140-141) the Diamond- water paradox (142) Cash and noncash gifts(144)
Chapter 8 Costs of Production: Explicit and implicit costs, normal profit as a cost, economic
profit (155-156) Short run vs. long run (156), Short run production relationships, total product,
marginal product, average product, law of diminishing returns (157-159) Key Graph (160) Short
run production costs, total fixed costs, total variable costs, total cost (159-162) Per unit or average
costs, marginal cost (162-165) Key Graph (164) Figure 8.6 (165) Long run costs, economies and
diseconomies of scale (166-169) Key Graph (167) Minimum efficient scale, natural monopoly
(170) Sunk costs (172)
Unit III
November 2--December 1
Examination 3
(December 2/3)
Chapter 9 Pure Competition Four market models (177) Characteristics of pure competition
(177-178) perfectly elastic demand (178) Profit maximization in the short run, MC = MR
approach (181-185) Key Graphs (184) Shutdown case (185) Marginal cost and short run supply
(186) Key Graph (187) Profit maximization in the long run (189-193) Pure competition and
efficiency, (193-197) Key Graph (194) Productive efficiency: P=Minimum ATC, Allocative
efficiency: P = MC (195)
Chapter 10 Pure Monopoly Characteristics (202) Barriers to entry (202-204) Marginal revenue
is less than price (205-206) Single price monopolist is a price maker and sets price in the elastic
price range (206-207) MC =MR rule, Key Graph (207-208) Total, not unit profit (209) Economic
effects of monopoly, price, output and efficiency, income transfer (210-211) X-inefficiency, rent
seeking (212-213) Price discrimination, necessary conditions (214-215) Regulated monopoly,
dilemma of regulation (216-219)
Chapter 11 Monopolistic Competition and Oligopoly: Characteristics of monopolistic
competition (223-224) Concentration, concentration ratio, Herfindahl index (224-225)Price and
output in monopolistic competition, Key Graph (225-226) Monopolistic competition and
efficiency, Neither productive nor allocative efficiency, figure 23.2 (227-228) Benefits of variety
(229) Characteristics of Oligopoly (229-230) Game theory, mutual interdependence, collusive
tendencies, incentive to cheat (232-233) Kinked demand model, (234) Key Graph (235) Cartel
and other collusion, joint monopoly profits (236-238) Price leadership (239) Positive and
negative effects of advertising (240-241) Oligopoly and efficiency (241)
Chapter 12 The Demand for Resources: Significance of resource pricing (254) Marginal
productivity theory, derived demand, marginal revenue product (MRP), rule for employing
resources, MRP=MRC, market demand for resources, determinants of resource demand (254259) Elasticity of resource demand (261-262) Optimal Combination of resources, The least cost
rule(263-265