# revt1 - Dr Duffy Microeconomics Exam 1 review CHAPTERS 1-3...

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Dr. Duffy Microeconomics Exam 1 review CHAPTERS 1-3 Frank and Bernanke

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Exam Format & Rules 35 multiple choice, 2 points each 30 points for short problems, similar to  homework problems  You do not need a Scantron You may use a calculator but Andrew or I must  check it first.  It can't have a memory function.  It  must be a simple calculator, not a scientific or  business calculator.   No cell phones on desks. We must be able to see your ears at all times.
Major Concepts Opportunity Costs Sunk Costs Marginal and Average Benefit Marginal and Average Cost Cost-Benefit Principle Scarcity Principle "Low Hanging Fruit" (e.g. increased opportunity costs to produce  more of a product) Comparative versus Absolute Advantage PPF Exchange  Supply and Demand Equilibrium, Surplus, Shortage

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Sunk Cost Problem Sunk Cost Problem: I purchased a computer in 2006 for \$2,000 and it now has a retail value of \$500. How much is the sunk cost? (Cost I can't recover.) Sunk cost = \$2000-\$500 = \$1500.
Jane has a voucher, good for one domestic airfare, that must be used by January 10, 2008. She could use the voucher to attend a friend's wedding in October, or save it to use to go home in December (a trip she must make.) She values attending the wedding at \$800. Airfare to the wedding, if she buys it, is \$400 and all other costs would equal \$600. Her airfare home in December would cost \$300. Should she attend the wedding? No.

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## This note was uploaded on 11/15/2011 for the course AGEC 7100 taught by Professor Duffy,p during the Fall '08 term at Auburn University.

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revt1 - Dr Duffy Microeconomics Exam 1 review CHAPTERS 1-3...

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