midterm1_review_sheet

midterm1_review_sheet - ECON 1 Summer 2007 Midterm 1 Review...

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ECON 1, Summer 2007: Midterm 1 Review Sheet Instructions: Keep in mind that a correct but unexplained answer will not receive full credit. Topics: Production Possibilities Frontier (PPF) o Graphing PPFs (Why bowed outward? Why downward sloping?) o Growth- be able to show it on a graph o Trade Opportunity costs Absolute v. Comparative Advantage Gains from Trade (What is necessary for gains to trade?) Supply and Demand o Graphing supply and demand o Determinants of changes in demand and supply o Movements along the curves v. shifts of the curves o Equilibrium (supply = demand) o Adjustment: price mechanism o Price rationing v. non-price rationing o Distortions (price ceilings, price floors, taxes) o Consumer and producer surplus, DWL o Elasticities, esp. price elasticity of demand Relationship of elasticity to change in total revenue after a price change o What makes demand downward sloping, what makes supply upward sloping? Household (consumer) behavior o Utility maximization rule: MU x /P x = MU y /P y o budget constraint: income = expenditure Firm (producer) behavior o Graphing firm’s revenue and different cost curves o Identifying a firm’s total revenues and costs on a graph o
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