Marie Guldin
ECON 300E: Intermediate Micro
Problem Set 1
Please hand in written (or typed if you so choose) answers to this problem set at the beginning of
class on Wednesday (4/16). This homework will be graded out of 20 points: 10 points will be
based o
ECON 300: Intermediate Micro
Handout 7
Costs of Production
1. Definition of Costs
Firms decisions depend on two broad topics: revenues and costs.
Revenues are
The production process, which we covered in Firms and Production, determines the quantity and we
ECON 300: Intermediate Micro
Handout 8
1. Firms in Competitive Markets
In profit maximization we talked about the two components of profit: revenue and cost. Revenue is always
equal to price times quantity, but the price that a firm charges depends on the
ECON 300: Intermediate Micro
Handout 10
Monopoly
A monopoly is
1. Barriers to Entry
As we will see later monopolist profits can be large compared to a competitive firm, so if it were possible firms
would be eager to join the monopolists market. The reason
ECON 300: Intermediate Micro
Additional Practice Questions Solutions Part 1
Supply & Demand Questions
1.
a.
b.
c.
d.
e.
2. a.
b.
c.
d.
e.
The demand curve shifts to the right.
The demand curve shifts to the left.
The demand curve shifts to the right.
The
ECON 300: Intermediate Micro
Handout 1
Math Review
1. Functions
A function f x , maps an element of x, in the set A, to a value of y in the range B.
y = f (x)
The inverse of a function exists if for y f x f 1 y x for some function f 1 y
Solving for the i
ECON 300: Intermediate Micro
Handout 9
Economic Efficiency
When we talk about efficiency in economics we want to
In the welfare framework we can analyze the impact of different market structures, government policies, and
other economically relevant events
ECON 300: Intermediate Micro
Handout 12
Oligopoly
An oligopoly is defined as
As in the duopoly market setting, because each firms output affects the market price there will be a strategic
interaction in the profit maximization decision of firms in an olig
ECON 300: Intermediate Micro
Handout 4
Consumer Choice
The supply and demand model is helpful for determining the price and quantity that will prevail for an entire
market. However, we need a different approach to understand how individuals decide what to
ECON 300: Intermediate Micro
Handout 2
Supply and Demand
The supply and demand model is the most famous and widely used economic model. There are many good
reasons why this model is so ubiquitous, but we will focus our attention on the following:
1. Compr
ECON 300: Intermediate Micro
Additional Practice Questions Part 1
Supply & Demand Questions
1. In each case below, identify the effect on the market for steak.
a. An increase in the price of lamb.
b. A decrease in the population.
c. An increase in consume
ECON 300: Intermediate Micro
Handout 6
Firms and Production
1. Production function
In economics we try to model firm decisions in a similar way to consumer decisions. The first step to the theory
of the firm is the production function.
The production func
ECON 300: Intermediate Micro
Handout 3
Applying Supply & Demand
1. Elasticity
Well approach elasticity the three ways we think about most topics in microeconomics: intuition, math, and
graphs.
1. Intuition
2. Math - xy
xy = the elasticity of X with res
ECON 300: Intermediate Micro
Additional Math Review Practice Problems:
1. Differentiate the following functions with respect to (wrt) x. Do not simplify.
i.
f x 2 x 2 3ln x x 4 x
ii.
f ( x) ln( x)2 x3
1
2
100 x
2 x 2 3x
iii.
f ( x)
iv.
f x e3 x ln x
10
ECON 300: Intermediate Micro
Handout 5
Consumer Choice and Demand
Its useful to talk about abstract concepts such as utility and indifference curves in the setting of consumer
choice, but there are also important practical applications of our consumer cho
ECON 300: Intermediate Micro
Handout 11
Game Theory
1. Introduction to Game Theory
In game theory the term game is actually a misnomer for a multi-person decision problem, or a situation
where welfare depends on strategic interaction. In contrast, most mi