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Unformatted text preview: BE-201 Principles of MicroeconomicsFall 2007 Final Exam ReviewExam will consist of 35 multiple choice questions (1 point each), three short answer /graphical questions (10 points each), and two out of four essay questions (15 points each). 95 points total. I will provide a sheet of formulas at the end of the exam.Multiple choice: •Be able to identify examples of the concept of opportunity cost-opportunity cost- the best alternative sacrificed for a chosen alternative.-ex: college and working•Be able to calculate the opportunity cost given numbers-slope (rise/run)=y2-y1/x2-x1•Know what causes the production possibilities curve to shift-economic growth-quantity or quality of our resources improves-technological improvement•Know why opportunity cost typically increases-law of increasing opportunity costs-states that the opportunity cost increases as production of one output expands•Know what a demand curve shows and what the law of demand states-the demand curve allows you to find the quantity demanded by a buyer at any possible selling price by moving along the curve-law of demand- states there is an inverse relationship between the price of a good and the quantity buyers are willing to purchase in a defined time period-demand is the amount of a good or service that buyers are willing and able to purchase at any given price. •Given that two goods are substitutes, be able to determine what happens to the demand for one good if the price of the other good changesIf the price on one increases the demand increases for the other one. If one price decreases the demand of the other will decrease also.•Know how changes in income influence the demand for normal and inferior goods-normal good- when income increases, demand shifts right-when income decreases, demand shifts left-inferior good- when income increases, demand shifts to left-when income decreases, demand shifts right•Recall that if market price is above equilibrium, a surplus will drive prices down; and if market price is below equilibrium, a shortage will drive prices up => any imbalances will be eliminated by adjustments in price•Know how changes in demand or supply (e.g., shifts) influence equilibrium price and quantity 1-the increase in demand causes both the equilibrium price and the equilibrium quantity to increase-decrease in demand causes both the decrease in equilibrium price and in quantity supplied.-increase in supply causes decrease in equilibrium price and increase in quantity demanded-decrease in supply causes increase in equilibrium price and decrease in quantity demanded•Recall that price floors set above equilibrium result in surpluses and price ceiling set below equilibrium result in shortages•Given a table, be able to identify the equilibrium price and quantity-page 90•Know what impact an external benefit/cost will have on resource allocation- An external benefit is when a third party does no work but enjoys the benefits.....
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This homework help was uploaded on 04/07/2008 for the course ECON 201 taught by Professor Ohalloran during the Spring '07 term at Monmouth University-West Long Branch.
- Spring '07