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Unformatted text preview: ECO 211: Introductory Microeconomics Review Sheet—Exam 2 Fall 2007 The exam will cover chapters 7-11 (material since the first exam) and all the required non-text readings (“Three Cords and the Truth”, “Emissions Trading—Lessons from Experience”, “Earth in the Balance Sheet”, “Is Gasoline Undertaxed?”, “Paper Victories”). Economic Efficiency (Chapter 7) 1.Consumer Surplus • Know the definition of Consumer Surplus (CS) • Know how to find CS on a graph of demand • Be able to explain (and show) how CS changes as the price of a good changes 2. Producer Surplus • Know the definition of Producer Surplus (PS) • Know how to find PS on a graph of supply • Be able to explain (and show) how PS changes as the price of a good changes 3. Efficiency • Know what “efficiency” means in economics: An resource allocation is efficient if it maximizes the Total Surplus (TS = CS + PS) received by society. • We conclude that the market outcome is efficient — with some exceptions (e.g., externalities) for the following reasons: ❑ Free markets allocate the supply of goods to buyers who value them most highly, as...
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This note was uploaded on 04/07/2008 for the course ECO 210 taught by Professor Sun during the Fall '08 term at Grand Valley State.
- Fall '08