ECN 112 Final Exam Study Outline – Fall 2004
Based on Chapter Checkpoints in Foundations of Microeconomics 2nd Edition – Bade & Parkin
The final exam will be 50 multiple choice questions based on the following sections in the text. An alternative exam will be available which will consist of 20 short answer questions from the following sections of the book.
1.3. Explain five core ideas that define the economic way of thinking.
A. Rational Choice
B. Cost: What You Must Give Up
C. Benefit: Gain
Measured By What You Are Willing to Give
Up
D. On the Margin
1. Marginal Cost
2. Marginal Benefit
3. Making a Rational Choice
E. Responding to Incentives
3.3. Define efficiency and describe an efficient use of resources.
A. Two Conditions for Efficiency
1. Production Efficiency
2. Allocative Efficiency
B. Marginal Benefit
C. Marginal Benefit Schedule and Curve
D. Marginal Cost
E. Efficient Use of Resources
F. Efficiency in the
4.1. Distinguish between quantity demanded and demand and explain what determines demand.
A. Competitive Markets
B. The Law of Demand
C. Demand Schedule and Demand Curve
D. Individual Demand and Market Demand
E. Changes in Demand
1. Prices of Related Goods
2. Income
3. Expectations
4. Number of Buyers
5. Preferences
F. Demand: A Summary
4.2. Distinguish between quantity supplied and supply and explain what determines supply.
A. The Law of Supply
B. Supply Schedule and Supply Curve
C. Individual Supply and Market Supply
D. Changes in Supply
1. Prices of Related Goods
2. Prices of Resources and Other Inputs
3. Expectations
4. Number of Sellers
5. Productivity
E. Supply: A Summary
5.1. Define, explain the factors that influence, and calculate the price elasticity of demand.
A. Percentage Change in Price
1. The Midpoint Method
B. Percentage Change in Quantity Demanded
1. Minus Sign
C. Elastic and Inelastic Demand
D. Influences on the Price Elasticity of Demand
1. Substitution Effects
a. Luxury Versus Necessity
b. Narrowness of Definition
c. Time Elapsed Since Price Change
2. Income Effects
E. Computing the Price Elasticity of Demand
1. Slope and Elasticity
2. A Units-Free Measure
F. Elasticity Along a Linear Demand Curve
G. Total Revenue and the Price Elasticity of Demand
H. Your Expenditure and Your Elasticity of Demand
I. Applications of the Price Elasticity of Demand
1. Farm Prices and Total Revenue
2. Addiction and Elasticity
6.1. Distinguish between value and price and define consumer surplus.
A. Demand and Marginal Benefit
B. Consumer Surplus
6.2. Distinguish between cost and price and define producer surplus.
A. Supply and Marginal Cost
B. Producer Surplus
7.2. Explain how the minimum wage creates unemployment, inefficiency, and unfairness.
A. The Minimum Wage
1. Increased Job Search Activity
2. Illegal Hiring
B. Is the Minimum Wage Efficient?
C. Is the Minimum Wage Fair?
D. If the Minimum Wage Is So Bad, Why Do We Have It?
8.1. Describe the effects of sales taxes and excise taxes, determine who pays these taxes, and explain why taxes create inefficiencies.
A. Tax Incidence
B. Tax Incidence and Elasticities of Demand and Supply
C. Tax Incidence and Elasticity of Demand
1. Perfectly Inelastic Demand: Buyer Pays Entire Tax
2. Perfectly Elastic Demand: Seller Pays Entire Tax
D. Tax Incidence and Elasticity of Supply
1. Perfectly Inelastic Supply: Seller Pays Entire Tax
2. Perfectly Elastic Supply: Buyer Pays Entire Tax
E. Taxes and Efficiency
8.2. Describe the effects of income taxes and social security taxes, determine who pays these taxes, and explain which taxes create the greatest inefficiency.
A. The Personal Income Tax
B. The Effects of the Income Tax
1. Tax on Labor Income
2. Taxes on Capital Income
3. Taxes on the Income from Land and Other Unique Resources
C. The Social Security Tax
1. A Tax on Workers
2. A Social Security Payroll Tax
10.2. Explain the free-rider problem and how public provision can help to overcome that problem.
A. The Free-Rider Problem
B. The Marginal Benefit of a Public Good
C. The Marginal Cost of a Public Good
D. The Efficient Quantity of a Public Good
E. Private Provision
F. Public Provision
1. The Principle of Minimum Differentiation
G. The Role of Bureaucrats
H. Rational Ignorance
I. Why Government is Large and Grows
1. Voter Preferences
2. Inefficient Overprovision
J. Voter Backlash
11.2. Explain marginal utility theory and use it to derive a consumer’s demand curve.
A. Utility
1. Temperature: An Analogy
B. Total Utility
C. Marginal Utility
D. Maximizing Total Utility
1. Allocate the Available Budget
2. Equalize the Marginal Utility Per Dollar Spent
3. Units of Utility
E. Finding the Demand Curve
F. Marginal Utility and the Elasticity of Demand
G. The Power of Marginal Analysis
12.3. Explain the relationship between a firm’s output and costs in the short run.
A. Total Cost
B. Marginal Cost
C. Average Cost
D. Why the Average Total Cost Curve is U-Shaped
E. Cost Curves and Product Curves
F. Shifts in the Cost Curves
1. Technology
2. Prices of Factors of Production
13.1. Explain a perfectly competitive firm’s profit-maximizing choices and derive its supply curve.
A. Perfect Competition
B. Other Market Types
C. Price Taker
D. Revenue Concepts
E. Profit-Maximizing Output
F. Marginal Analysis and the Supply Decision
G. Exit and Temporary Shutdown Decisions
H. The Firm’s Short-Run Supply Curve
14.2. Explain how a single-price monopoly determines its output and price.
A. Price and Marginal Revenue
B. Marginal Revenue and Elasticity
C. Output and Price Decision
14.3. Compare the performance of single-price monopoly with that of perfect competition.
A. Output and Price
B. Is Monopoly Efficient?
C. Is Monopoly Fair?
D. Rent Seeking
1. Buy a Monopoly
2. Create a Monopoly by Rent Seeking
3. Rent Seeking Equilibrium
15.2. Explain how a firm in monopolistic competition determines its output and price in the short run and the long run.
A. The Firm’s Profit-Maximizing Decision
B. Profit Maximizing Might Be Loss Minimizing
C. Long Run: Zero Economic Profit
D. Monopolistic Competition and Perfect Competition
1. Excess Capacity
2. Markup
E. Is Monopolistic Competition Efficient
1. Making the Relevant Comparison
2. The Bottom line
16.
A. Small Number of Firms
1. Interdependence
2. Temptation to Collude
B. Barriers to Entry
E. Identifying Oligopoly
18.2. Explain how the value of marginal product determines the demand for a factor of production.
A. Value of Marginal Product
1. The Value of Marginal Product Curve
B. A Firm’s Demand for Labor
1. A Firm’s Demand for Labor Curve
C. Changes in the Demand for Labor
1. The Price of the Firm’s Output
2. The Prices of Other Factors of Production
3. Technology
19.
A. Income and Wealth Distributions
B. Lorenz Curves
C. Inequality over Time
1. Change in Income Distribution
2. Change in Wealth Distribution
D. Who Are the Rich and the Poor?
E. Poverty
F. Comparing Like with Like
1. Wealth Versus Income
2. Annual or Lifetime Income and Wealth?