Practice Quiz Chapter 2
Which of the following would lead to a DECREASE in the demand for tennis balls?
An increase in the price of tennis balls
A decrease in the price of tennis rackets
An increase in the cost of producing tennis balls
Practice Quiz Chapter 4
A firm will maximize profit by producing that level of output at which
the additional revenue from the last unit sold exceeds the additional cost of the
last unit by the largest amount.
the additional revenue from the last
Practice Quiz Chapter 6
If Mary prefers bananas to plums and plums to peaches, but is indifferent between bananas and oranges, she
prefers oranges to peaches.
prefers plums to oranges.
is indifferent between oranges and plums.
The Theory of Optimization
Optimizing Theory deals with the task of
finding the best outcome or alternative
What output will lead to maximum profit?
What combination of inputs will lead to
minimum cost of producing a given level
Basic Estimation Techniques
The relationships we theoretically develop
in the text can be estimated statistically
using regression analysis,
Regression analysis is a method used to
determine the coefficients of a a functional
Chapter 7 The Theory of
The Theory of Consumer behavior provides
the theoretical basis for buyer decisionmaking and the foundation for demand.
In essence, we will assume that the
consumers goal is to maximize utility
subject to a budge
Chapter 7 Empirical Demand
Optimal pricing is critical to the success of
Given the stakes, it is frequently worth
investing significant resources in
determining the optimal price.
Large firms have pioneered the use of
Chapter 9 Production & Cost in
the Short Run
Our focus has been on the fact that firms
attempt to maximize profits. However, so
far we have only focused on the revenue
side of profits and have ignored costs.
Increased globalization of markets has
Chapter 10 Theory of Production
and Cost in the Long Run(LR)
The theory of production in the LR provides the
theoretical basis for firm decision-making and LR
costs and supply.
In essence, we will assume that the firms goal is
to maximize output subject
Market structure in the output market.
Number of firms
Type of product
Ease of entry/exit
Market info and knowledge
Price and output are strongly related to
Homogeneous or standardized prod
Firms with Market Power
Essentially firms with market
power(aka.monopoly power) include all firms that
are not price-takers or are not confronted with a
perfectly elastic demand curve.
Thus, market power means that the firm has some
control over price.
Elasticity and Demand
Elasticity concept is very important to
It measures the responsiveness of quantity
demanded to changes in price
It is also important for public policy-makers
when dealing with tax issues on
commodities if we in
Demand, Supply and Market
Demand reflects buyers decision making
Supply reflects sellers decision making
Put supply and demand together, we have a
The amount of a good or service that
consumers are willing and able to purchas
What is it?
Applied microeconomic theory
A systematic way of analyzing business
Although focus is on for profit firms, tools
are relevant for not for profit firms also
Profit is the differenc
Practice Quiz Chapter 3
The coefficient of demand elasticity, E,
is the percentage change in the price of the good divided by the percentage change in the quantity demanded.
measures the responsiveness of quantity demanded to changes in the price
Chapter 5 - Study Questions
Replicate the output for problem #2 (all parts) on page 189 using Excel or any statistic
package you prefer (I'll use Excel for any test problems involving regression). Also
answer the questions.
Linear Demand Estimation
Assignment 1 Chapters 5 & 7
Excel has the ability to perform regression analysis. However, to accomplish this you
must make sure you have installed the Data Analysis add-in. You can determine if you
have the add-in installed by go