G_Micro Study Guide 2_10

# G_Micro Study Guide 2_10 - ECON 6912 Microeconomic Theory...

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ECON 6912: Microeconomic Theory Study Guide for Midterm 2 Major Topics: 1. Choice Under Uncertainty a. Expected Value vs. Expected Utility i. Determining Risk Behavior 1. Risk averse, loving, neutral b. Insurance i. Reservation price Kahneman and Tversky a. Differences with classical model b. Interesting insights c. What the model says about risk behavior 2. Production a. Marginal and average productivity b. Isoquants i. Marginal rate of technical substitution c. Returns to scale d. Elasticity of substitution e. The 4 Production Functions (perfect subs, fixed proportions, cobb-douglas, and CES) 3. Costs a. Marginal and Average Costs (formulas and graphs) i. Relationship with productivity. b. Fixed and variable costs c. Solving for cost as a function of output. d. Relationship between marginal costs and marginal productivity e. How to find cost minimizing allocation of inputs i. How it depends on input prices and differences between nations f. Relationship between costs and returns to scale g. Long-run and short-run costs relationship i. How to derive long run total cost functions (function of Q, w, r) ii. Solving for contingent demand functions for L and K 4. Profit Maximization a. Profit maximizing condition b. Relationship between TR/TC curves, and MR/MC curves and profit curve c. Marginal Revenue i. Relationship with demand and with elasticity d. Ability to charge price above MC e. How to find profit maximizing price and quantity f. Profit Function i. How profits change when prices of product or inputs change ii. First derivatives of profit function f. Short run supply and producer surplus g. Input Demand 1

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Practice Problems Note: The test will consist of approximately 10 short answer questions. The practice problems below are just a sample of some of the types of questions you’ll be asked on the exam. Enjoy the questions! 1. You are a contestant on the famous game show "Let's Make a Deal" and Monty Hall has selected you as a final contestant. You have a choice: you can take \$64 in cash or you can gamble. If you decide to gamble, there are three possible outcomes: door number one, door number two, and door number three. Behind one of the doors is a prize valued at \$100, another
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G_Micro Study Guide 2_10 - ECON 6912 Microeconomic Theory...

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