STUDY GUIDE

STUDY GUIDE - STUDY GUIDE For each chapter I identify...

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STUDY GUIDE For each chapter I identify material that you are not responsible for, key words or concepts that you should be familiar with, and a summary of the key points to take away from each chapter. Following this are practice multiple choice questions. I have not included short-answer practice questions. Use your worksheets, homework and quizzes from recitation, as well as any problems I solved in lecture. The format of the exam will be 20 multiple choice questions worth 60 points, and 3 short answer questions worth 40 points. I will also have an extra credit question or two worth between 5 and 10 points. Possible types of short answer problems are: - Drawing PPFs, Shifts in PPFs - Graphing Supply and Demand, Calculating Equilibrium, Calculating Surpluses - Application of Price Controls or Taxes to the Supply and Demand Framework (including calculating changes in welfare, identifying shortage/surplus, identifying price of buyers and sellers, etc) - Drawing the Consumer Choice Framework (Budget Constraint and Indifference Curves) - Drawing a Perfectly Competitive Firms Cost and Revenue Curves, Identifying Profit or Loss - Drawing a Monopoly’s Cost and Revenue Curves, Identifying Profit or Loss, Calculating Deadweight Loss The material we have covered so far can be grouped into a number of categories and sub-categories. A. PPFs and Trade (parts of Chapter 2, Chapter 3) B. The Basics of Supply and Demand (Chapter 4) 1. Elasticity (Chapter 5) 2. Welfare Economics (Chapter 7) 3. Government Intervention i. Price Controls and Taxes (Chapter 6, parts of Chapter 8) ii. Public Goods, Common Resources (Chapter 11) iii. Externalities (Chapter 10) C. Consumer Choice (Chapter 21) D. Market Structures 1. Costs of Production (most of Chapter 13) 2. Perfectly Competitive Firms (Chapter 14) 3. Monopolies (Chapter 15)
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CHAPTER 1 (Introduction to Economics – Ten Principles) You will not be tested on this material. (PPFs and TRADE) CHAPTER 2 You are responsible for the section entitled “Our Second Model: The Production Possibilities Frontier”, pages 24-26. Key Words: Production Possibilities Frontier CHAPTER 3 You will not be tested on trade prices. Key Words: Opportunity Cost Comparative Advantage Absolute Advantage Specialization Summary of Key Points: 1. Each person consumes goods and services produced by many other people both in our country and around the world. Interdependence and trade are desirable because they allow everyone to enjoy a greater quantity and variety of goods and services. 2. There are two ways to compare the ability of two people in producing a good. The person who can produce the good with a smaller quantity of inputs is said to have an absolute advantage in producing the good. The person who has the smaller opportunity cost of producing the good is said to have a comparative advantage. The gains from trade are based on comparative advantage, not absolute advantage. 3. Trade makes everyone better off because it allows people to specialize in those activities in which they
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STUDY GUIDE - STUDY GUIDE For each chapter I identify...

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