Final Review - Microeconomics

Note: The following topics may be included on the Final Exam. It is highly recommended that
you look over the topics and study them since they may end up on the Exam.
1. What is economics?
a.
The difference between macro and microeconomics
b.
The concept of scarcity
c.
Opportunity cost
2. the three economic ideas
a.
People are rational
b.
People respond to economic incentives
c.
Optimal decisions are made at the margin
i. i.
Marginal analysis
3. The economic What, How, and Who.
a.
Trade-offs
4. The different types of economies
a.
Centrally planned
b.
Market
c.
Mixed
5. Allocative efficiency and productive efficiency
a.
What are they?
6. Positive analysis and normative analysis
7. Production Possibilities Frontier
a.
Be able to graph this curve
b.
Absolute advantage
c.
Comparative advantage
i.
Be able to show who has absolute/comparative advantage in
producing each product on the production possibilities frontier.
d.
Be able to show technological progress/inefficiency on the production
possibilities frontier
9. Market Demand
a.
The Law of Demand
b.
Be able to draw the demand curve
c.
What are the factors that can shift the demand curve?
d.
Substitution Effect/Income Effect
i.
Why is the demand curve downward sloping?
e.
Normal goods/inferior goods
10. Market Supply
a.
The Law of Supply
b.
Be able to draw the supply curve
c.
What are the factors that shift the supply curve?
d.
Market equilibrium/Competitive Market Equilibrium
e.
Surplus/Shortage
11. Consumer/Producer Surplus
a.
Price Ceilings/Price Floors
i.
Be able to show and draw these on a graph
b.
Marginal Benefit/Marginal Cost Curves
12. Elasticity of Demand/Supply

a.
Be able to do calculation with elasticity
b.
Midpoint formula
c.
Know what elastic/inelastic and unit-elastic means
13. Costs of Production
1.
Total Revenue/Total Cost
a.
Know the formulas for calculating both
2.
Be able to graph the Cost curves
a.
MC, ATC, AVC, AFC
3.
Calculations of costs (AVC, AFC, MC)
4.
Profit Calculations
5.
Costs in the long-run vs. costs in the short-run
a.
Be able to show long-run costs on a graph
b.
Economies of scale, constant returns to scale, diseconomies of
scale
14.
Firms in Competitive Markets
1.
What is a competitive market?
a.
The three main characteristics of competitive markets
b.
The revenue of a competitive firm
c.
Marginal Revenue and Average revenue
i.
Know why the marginal revenue and price are equal for an
individual firm in a perfectly competitive market.
d.
The profit-maximizing point for perfectly competitive firms
(i.e. MC=MR)
e.
Profits in the short-run vs. profits in the long-run
i.
Be able to illustrate profits for competitive firms
f.
Graphs for perfectly competitive markets
2.
A firms shutdown point in the short-run and in the long-run
a.
The entry/exit decision of a firm
15.
Monopoly
1.
What is a monopoly?
a.
The key characteristics of a monopoly
b.
Natural Monopolies
c.
The profit-maximizing point for a monopoly
d.
Be able to show profits for a monopoly
e.
Monopoly cost, MR and demand curve graphs
2.
16.

Oligopoly
3.
4.

Price Discrimination
a.
What is price discrimination?

What is the difference between an oligopoly and a monopoly?

What are the characteristics of an oligopoly?
a.
Duopoly
b.
Be able to provide examples for an oligopoly
5.
How does an oligopoly maximize profits?
6.
Game theory
a.
Prisoners dilemma
17. Information assymetries
1. lemons and plums know this in detail