Economics1200StudyOutlineofconcepts2016 - ECONOMICS 1200...

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ECONOMICS 1200 Study Outline of Concepts MICROECONOMICS I. Markets: Role/Meaning of Price and Market in Economy Rationing by Price and Non-Price: Price Controls, Government Imposed Min./Max Prices (e.g., min. wages) Factors that cause prices/quantities to change Changes in demand v. changes in quantity demanded and Changes in supply v. changes in quantity supplied Burden of taxation, deadweight loss and relationship with elasticity of demand and supply Role of private property rights and government. Producer and consumer surplus Tax Incidence (statutory vs. economic) Producer and Consumer surplus II. Free Trade; Gains from Trade (Expansion of world output (global) and producer and consumer surplus considerations); Law of Comparative Advantage III. Law of diminishing returns, economies of scale, and economies of scope. Understand long run and short run concepts. Impact of these production relationships on a firm’s cost structure. Minimum Efficient Scale. IV. Understand the “different” costs: Average cost, marginal cost, fixed costs, average variable costs and sunk costs; role of short run vs. long run and significance for business decisions. Meaning and significance of the Minimum Efficient Scale V. Price taking model (Perfect Competition): Firm, market distinction and assumptions of model; understand the mechanics—short run and long run adjustments. VI. Price searching markets: Monopoly, Oligopoly and Monopolistic Competition. Understand the models and unique characteristics and reasons they exist – why do they exist, why are there different market structures, etc; how do they price compared to price taker; “good” vs. “bad” monopoly. Different types of Oligopoly Models: Kinked Demand Curve, Contestable Market and Cartels. Social Cost of Price Searchers and Benefit of Price Searchers VII. Price discrimination and pricing issues (e.g., two tying arrangements) and game theory (e.g., prisoners’ dilemma, repeated games etc.) VIII. Antitrust Policy and Government Regulation, Mergers and the Herfindahl-Hirschman Index; what is the meaning of competition and the Process of Creative Destruction, how are natural monopolies regulated?
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