# Chapter 33: Terms of Trade

Size: px
Start display at page:

Transcription

1 Chapter 33: Terms of Trade 1

2 The Terms of Trade The division of the gains from trade depends on the terms of trade. The terms of trade are measured by the ratio of the price of exports to the price of imports. Terms of Trade = Index of Export Prices Index of Import Prices x 100 Copyright 2011 Pearson Canada Inc.

3 A rise in the index: country gets more imports per unit of exports a favourable change for the country A fall in the index: country gets fewer imports per unit of exports an unfavourable change for the country Copyright 2011 Pearson Canada Inc.

4 Index Numbers 4

5 5 Index Numbers Used to compare changes in some variable relative to some base period. Important when the variables are measured in different units. Value of index in given period = absolute value in given period absolute value in base period X 100 Expresses the value of some series in any given year as % of its value in the base year

6 Index Numbers: An Example 6

7 7 Index Numbers: An Example For each index number the value in the base year is 100. Index Steel in 2011=122.5 that means that in 2011 the steel output was 22.5% greater than in 2001.

8 8 How much steel output changed from 2005 to 2007? Index steel output in 2005=125.0 Index steel output in 2007=132.5 Percentage increase: ( )/125.0=0.06, or 6%

9 9 Changes in quantity demanded and shifts of the demand curve

10 10 of 21 Demand Schedules and Demand Curves Demand Schedule Demand curve 140 U V W X Y Price per Tonne Quantity Demanded Price of Carrots Y X W V U D Quantity of Carrots Copyright 2011 Pearson Canada Inc.

11 11 of 21 A change in variables other than price will shift the demand curve to a new position. average household income prices of other products distribution of income or population expectations about the future Price of Carrots D 0 Y D 1 X W V U Quantity of Carrots Copyright 2011 Pearson Canada Inc.

12 12 Do I need to know the algebra of market equilibrium? YES!

13 Price Elasticity of Demand 13

14 The Measurement of Price Elasticity 14 of 24 Elasticity (Greek letter eta:η) is defined as: η = percentage change in quantity demanded percentage change in price Demand elasticity is negative, but economists usually emphasize the absolute value. It is also unit free. Copyright 2011 Pearson Canada Inc.

15 The Measurement of Price Elasticity 15 of 24 We are interested in the arc elasticity. η = ΔQ D /Q D Δp/p Price A B Elasticity usually measures the change in p and Q relative to some base values of p and Q. Which ones to use? Quantity We will use the average price and quantity Copyright 2011 Pearson Canada Inc.

16 Demand elasticity between point A and point B on some demand curve is: 16 of 24 η = ΔQ D /Q D Δp/p where p and Q D are the average price and average quantity, respectively. It can also be written as: η = (Q B -Q A )/[(Q B + Q A )/2] (p B -p A )/[(p B + p A )/2] (Q B -Q A )/Q = (p B -p A )/p Copyright 2011 Pearson Canada Inc.

17 17 of 24 Elasticity falls as you move down a linear demand curve. 10 Elastic η>1 Price 5 Unit Elastic η=1 η<1 Inelastic Quantity Demanded Copyright 2011 Pearson Canada Inc.

18 Other elasticities 18 of 24 Price elasticity of supply: Similar to price elasticity of demand. Income elasticity of demand: Normal (elasticity>0) Inferior goods (elasticity<0) Cross elasticity of demand: Complement (elasticity<0) Substitute (elasticity>0) Copyright 2011 Pearson Canada Inc.

19 Price floor, price ceiling and quotas 19

20 Price floor and price ceiling 20 of 24 Price p 1 p 0 p 2 Excess supply E Excess demand S Price floor Price ceiling D Q 1 Q 0 Q 2 Quantity Copyright 2011 Pearson Canada Inc.

21 Substitution and Income Effects 21

22 Substitution and Income Effects 22 of 24 Copyright 2011 Pearson Canada Inc.

23 Marginal and Total Utility 23

24 24 of 20 Utility Schedules and Graphs Movies Attended per Month Total Utility Marginal Utility Utility Marginal Utility total utility Quantity of Movies marginal utility Quantity of Movies Copyright 2011 Pearson Canada Inc..

25 25 of 20 Utility Maximizing Condition A utility-maximizing consumer allocates expenditures so that the utility obtained from the last dollar spent on each product is equal. For two products X and Y, the utility-maximizing condition is: MU X p X = MU Y p Y or MU X MU Y = p X p Y In the second equation, we see the consumer adjusting her consumption (and thus the ratios of MUs) in response to changes in relative prices. Copyright 2011 Pearson Canada Inc..

26 Producers in the short run 26

27 27 of 20 TP AP MP Total product Quantity of Labour Quantity of Labour MC TC Cost ATC AVC AFC Cost TVC TFC Output Output Copyright 2011 Pearson Canada Inc..

28 28 of 20 Remember! Make sure you understand the relationship between: MP and AP MC and AVC and ATC Make sure you understand table 7-2. Assume that all firms have the same structure of costs (remember that natural monopolies are special!) Copyright 2011 Pearson Canada Inc..

29 29 of 20 Study Guide. Ex. 11 page 183 If the level of production is 50 units, TFC is a) \$350 b) \$7 c) \$500 d) \$10 e) Indeterminable with data provided Copyright 2011 Pearson Canada Inc..

30 Producers in the long run 30

31 31 of 15 The relationship between long-run and shortrun costs Cost per Unit SRATC curves LRAC Output per Period A short-run ATC curve cannot fall below the LRAC curve. Each SRATC curve is tangent to the LRAC curve at the level of output for which the quantity of the fixed factor is optimal. Copyright 2011 Pearson Canada Inc.

32 32 of 20 Long Run Average Cost Curve For two factors K and L, the cost-minimizing condition is: MP K MP = L or p K p L MP K MP L = p K p L Copyright 2011 Pearson Canada Inc..

33 33 Diminishing marginal returns and diseconomies of scale

34 34 of 20 Diminishing Marginal Product vs. Diseconomies of Scale Say Q = f(k,l) Diseconomies of scale: multiply K and L by a>1, then f(a*k,a*l) < a*f(k,l) Diminishing marginal product: At some point, for fixed K, f(k,l+1)-f(k,l) < f(k,l)-f(k,l-1) Copyright 2011 Pearson Canada Inc..

35 Different market structures 35

36 36 of 20 Idea: consider both costs and demand! MC p ATC AVC AFC Q New concepts: TR, AR and MR Copyright 2011 Pearson Canada Inc..

37 37 of 20 Idea: consider both costs and demand! MC ATC AVC AFC Q New concepts: TR, AR and MR Copyright 2011 Pearson Canada Inc..

38 38 of 20 Should the Firm Produce at All? The rule: firm does not shut down if p>avc How Much Should the Firm Produce? The rule: choose output where MR = MC. Profits = (p - ATC) x q Copyright 2011 Pearson Canada Inc..

39 39 of 20 Summary Perfect Competition Monopolistic Competition Oligopoly Monopoly Many small firms. All firms are price takers. Free entry and exit. Zero profits in the long run equilibrium. AR = MR = price Price = MC Many small firms. Some market power. Free entry and exit. Zero profits in the long run equilibrium. Excess capacity Price > MC Few large firms. Considerable market power. Often significant entry barriers. Profit depend on the nature of the rivalry and on entry barriers. Price > MC Single firm faces the entire market demand. Total market power. Entry barriers Profits can persist if sufficient entry barriers. Price > MC Copyright 2011 Pearson Canada Inc..

40 40 of 20 Perfect competition vs other market structures Copyright 2011 Pearson Canada Inc..

41 41 of 20 Perfect Competition: Short Run Perfect Competition: Long Run Copyright 2011 Pearson Canada Inc..

42 42 of 20 Monopolistic Competition: Short Run Monopolistic Competition: Long Run Copyright 2011 Pearson Canada Inc..

43 43 of 20 Monopoly Cartels Effects of cartels, problems that cartels face Price discrimination Types of price discrimination Consequences of perfect price discrimination Copyright 2011 Pearson Canada Inc..

44 Oligopoly: Nash Equilibrium 44

45 45 A s output One-half monopoly output Two-thirds monopoly output B s output One-half monopoly output Two-thirds monopoly output Cooperative Outcome Nash equilibrium But notice that the Nash equilibrium does not maximize joint profits this is the classic example of the prisoners dilemma! Copyright 2011 Pearson Canada Inc..

46 46 Demand curves for firms in different market structures

### AP Microeconomics Review Session #3 Key Terms & Concepts

The Firm, Profit, and the Costs of Production 1. Explicit vs. implicit costs 2. Short-run vs. long-run decisions 3. Fixed inputs vs. variable inputs 4. Short-run production measures: be able to calculate/graph

### MICRO EXAM REVIEW SHEET

MICRO EXAM REVIEW SHEET 1. Firm in Perfect Competition (Long-Run Equilibrium) 2. Monopoly Industry with comparison of price & output of a Perfectly Competitive Industry 3. Natural Monopoly with Fair-Return

### ECON 102 Kagundu Final Exam (New Material) Practice Exam Solutions

www.liontutors.com ECON 102 Kagundu Final Exam (New Material) Practice Exam Solutions 1. A A large number of firms will be able to operate in the industry because you only need to produce a small amount

### AP Microeconomics Review With Answers

AP Microeconomics Review With Answers 1. Firm in Perfect Competition (Long-Run Equilibrium) 2. Monopoly Industry with comparison of price & output of a Perfectly Competitive Industry (which means show

### Contents. Concepts of Revenue I-13. About the authors I-5 Preface I-7 Syllabus I-9 Chapter-heads I-11

Contents About the authors I-5 Preface I-7 Syllabus I-9 Chapter-heads I-11 1 Concepts of Revenue 1.1 Introduction 1 1.2 Concepts of Revenue 2 1.3 Revenue curves under perfect competition 3 1.4 Revenue

### Eco201 Review Outline for Final Exam, Fall 2018, Prof. Bill Even

Note: The outline is intended to provide the student with a list of the major topics that will be on the final exam. The instructor is not limited to questions that fit into one of these precise categories,

### Eco201 Review Outline for Final Exam, Fall 2013, Prof. Bill Even

Note: The outline is intended to provide the student with a list of the major topics that will be on the final exam. The instructor is not limited to questions that fit into one of these precise categories,

### Practice EXAM 3 Spring Professor Walker - E201

Practice EXAM 3 Spring 2009 - Professor Walker - E201 1. The theory behind short run production costs can be narrowed to an assumption that MC is expected to initially fall, but rise at larger levels of

### ECON 102 Brown Final Exam (New Material) Practice Exam Solutions

www.liontutors.com ECON 102 Brown Final Exam (New Material) Practice Exam Solutions 1. B A very large percent of their earnings comes from economic rent 2. B Any funds left, after everyone who has a claim

### Contents EXPLORING ECONOMICS

Contents About the authors I-5 Preface to second edition I-7 Chapter-heads I-9 Syllabus : Choice Based Credit System (CBCS) I-19 1 EXPLORING ECONOMICS 1.1 Why study economics? 1 1.2 Meaning of economics

### 2000 AP Microeconomics Exam Answers

2000 AP Microeconomics Exam Answers 1. B Scarcity is the main economic problem!!! 2. D If the wages of farm workers and movie theater employee increase, the supply of popcorn and movies will decrease (shift

### Practice Exam 3: S201 Walker Fall with answers to MC

Practice Exam 3: S201 Walker Fall 2007 - with answers to MC Print Your Name: I. Multiple Choice (3 points each) 1. If marginal utility is falling then A. total utility must be falling. B. marginal utility

### Total Costs. TC = TFC + TVC TFC = Fixed Costs. TVC = Variable Costs. Constant costs paid regardless of production

AP Microeconomics Total Costs TC = TFC + TVC TFC = Fixed Costs Constant costs paid regardless of production TVC = Variable Costs Costs that vary as production is changed Cost TFC TVC TFC Output Profit

### Pure Competition in the Short Run

08 Pure Competition in the Short Run McGraw-Hill/Irwin Copyright 2012 by The McGraw-Hill Companies, Inc. All rights reserved. LO1 8-2 Four Market Models Pure competition Pure monopoly Monopolistic competition

### Practice Exam 3: S201 Walker Fall 2009

Practice Exam 3: S201 Walker Fall 2009 I. Multiple Choice (3 points each) 1. Which of the following statements about the short-run is false? A. The marginal product of labor may increase or decrease. B.

### Micro Semester Review Name:

Micro Semester Review Name: The following review is set up to emphasize certain concepts, graphs and terms. It is the responsibility of the individual teachers to emphasize and review the analysis aspects

### Week One What is economics? Chapter 1

Week One What is economics? Chapter 1 Economics: is the social science that studies the choices that individuals, businesses, governments, and entire societies make as they cope with scarcity and the incentives

### Syllabus item: 42 Weight: 3

1.5 Theory of the firm and its market structures - Production and costs Syllabus item: 42 Weight: 3 Definition: Total product (TP): The total output that a firm produces, using its fixed and variable factors

### 1. Why is utility subjective? 2. What are inferior options? 3. Suppose the price of A is 1, the price of B is 2 and the price of C is 1.

Study Questions for Chapters 7-11 Chapter 7 1. Why is utility subjective? 2. What are inferior options? 3. Suppose the price of A is 1, the price of B is 2 and the price of C is 1.50 a. Complete the following

### = AFC + AVC = (FC + VC)

Chapter 13-14: Marginal Product, Costs, Revenue, and Profit Production Function The relationship between the quantity of inputs (workers) and quantity of outputs Total product (TP) is the total amount

### ECO 162: MICROECONOMICS

ECO 162: MICROECONOMICS PREPARED BY Dr. V.G.R. CHANDRAN Email: vgrchan@gmail.com Website: www.vgrchandran.com/default.html UNIVERSITI TEKNOLOGI MARA 0 P a g e TUTORIAL QUESTIONS ALL RIGHTS RESERVED 2010

### AP Microeconomics. Content Skills Learning Targets Assessment Resources & Technology

St. Michael Albertville High School Teacher: Matthew Rooker AP Microeconomics October 2014 Content Skills Learning Targets Assessment Resources & Technology November 2014 Content Skills Learning Targets

### SCHOOL OF ACCOUNTING AND BUSINESS BSc. (APPLIED ACCOUNTING) GENERAL / SPECIAL DEGREE PROGRAMME

All Rights Reserved No. of Pages - 07 No of Questions - 08 SCHOOL OF ACCOUNTING AND BUSINESS BSc. (APPLIED ACCOUNTING) GENERAL / SPECIAL DEGREE PROGRAMME YEAR I SEMESTER I INTAKE VIII (GROUP B) END SEMESTER

### Microeconomics Exam Notes

Microeconomics Exam Notes Opportunity Cost What you give up to get it Production Possibility Frontier Maximum attainable combination of two products (Concept of Opportunity Cost). Main Decision Makers:

### Chapter 1- Introduction

Chapter 1- Introduction A SIMPLE ECONOMY Central PROBLEMS OF AN ECONOMY: scarcity of resources problem of choice Every society has to decide on how to use its scarce resources. Production, exchange and

### AGENDA Mon 10/12. Economics in Action Review QOD #21: Competitive Farming HW Review Pure Competition MR = MC HW: Read pp Q #7

AGENDA Mon 10/12 Economics in Action Review QOD #21: Competitive Farming HW Review Pure Competition MR = MC HW: Read pp 173-176 Q #7 QOD #21: Competitive Farming A purely competitive wheat farmer can sell

### Slides and Images, Worth Publishers Inc. 8-1

Perfect Competition Michael J. Murray Slides and Images, Worth Publishers Inc. 8-1 Market Structure Analysis By observing a few industry characteristics, we can predict pricing and output behavior of the

### Chapter 4. Elasticity. In this chapter you will learn to. Price Elasticity of Demand

Chapter 4 Elasticity In this chapter you will learn to 1. Explain the meaning of price elasticity of demand and how it is measured. 2. Describe the relationship between demand elasticity and total expenditure.

### 1.3. Levels and Rates of Change Levels: example, wages and income versus Rates: example, inflation and growth Example: Box 1.3

1 Chapter 1 1.1. Scarcity, Choice, Opportunity Cost Definition of Economics: Resources versus Wants Wants: more and better unlimited Versus Needs: essential limited Versus Demand: ability to pay + want

### ADVANCED PLACEMENT MICROECONOMICS Maple Grove Senior High School Jeff Rush Social Studies Department

ADVANCED PLACEMENT MICROECONOMICS Maple Grove Senior High School Jeff Rush rushj@district279.org Social Studies Department Required textbook Economics, McConnell and Brue, 17 th edition, 2008. Course description

### SCHOOL OF ACCOUNTING AND BUSINESS BSc. (APPLIED ACCOUNTING) GENERAL / SPECIAL DEGREE PROGRAMME END SEMESTER EXAMINATION JULY 2016

All Rights Reserved No. of Pages - 08 No of Questions - 08 SCHOOL OF ACCOUNTING AND BUSINESS BSc. (APPLIED ACCOUNTING) GENERAL / SPECIAL DEGREE PROGRAMME END SEMESTER EAMINATION JULY 2016 BEC 30325 Managerial

### Practice Exam 3: S201 Walker Fall 2004

Practice Exam 3: S201 Walker Fall 2004 I. Multiple Choice (3 points each) 1. Which of the following statements about the short-run is false? A. The marginal product of labor may increase or decrease. B.

### Faculty of Economics, Thammasat University EE 211 Principles of Microeconomics (3 credits)

Faculty of Economics, Thammasat University EE 211 Principles of Microeconomics (3 credits) Semester 1/2014 ----------------------------------------------------------------------------------------------

### Faculty of Economics, Thammasat University EE 211 Principles of Microeconomics (3 credits)

Lecture Time: Lecture Venue: Instructor: Faculty of Economics, Thammasat University EE 211 Principles of Microeconomics (3 credits) Semester 1/2015 ----------------------------------------------------------------------------------------------

### Teaching about Market Structures

Teaching about Market Structures Felix B. Kwan, Ph.D. Professor of Econ/Finance, Maryville University AP Econ Conference - FRB St. Louis June 17-19, 2015 Profits Foundational Concepts Some basic terms/concepts

### MICRO FINAL EXAM Study Guide

AP MICROECONOMICS-217 Name: MICRO FINAL EXAM Study Guide Instructions: Please fight senioritis! Study & be efficient with your time. DUE: Friday April 28 th (Multiple choice block 4/26 th or 27 th Free

### Sample Multiple-Choice Questions

E03 3 Microeconomics Summative Exam SAMPLE QUESTIONS Sample Multiple-Choice Questions Circle the letter of each correct answer 1 True statements about the theory of the firm in the short run and long run

### ECONOMICS ASSIGNMENT CLASS XII MICRO ECONOMICS UNIT I INTRODUCTION. 4. Is free medicine given to patients in Govt. Hospital a scarce commodity?

ECONOMICS ASSIGNMENT CLASS XII MICRO ECONOMICS UNIT I INTRODUCTION 1. What is the Slope of PPC? What does it show? 2. When can PPC be a straight line? 3. Do all attainable combination of two goods that

### Chapter 7 Consumer/Producers and Market Efficiency

Midterm #2 Exam Study uestions: (A subset of these questions/concepts will be on the exam) Chapter 5 - Elasticity Define rice elasticity of demand. What does it mean to say demand is highly elastic? What

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

PRACTICE FOR PERFECT COMPETITION Fatma Nur Karaman MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) What is the difference between perfect competition

### Managerial Economics & Business Strategy. Final Exam Section 2 May 11 th 7:30 am-10:00 am HH 076

Managerial Economics & Business Strategy Final Exam Section 2 May 11 th 7:30 am-10:00 am HH 076 Grading Scale 5% - Attendance 8% - Homework (Drop the lowest grade) 7% - Quizzes (Drop the lowest grade)

### Cost schedules include the market value of all resources used in the production process.

By the end of this learning plan, you will be able to: Relate factor markets to production Assess the role price plays in a market economy Use marginal (Cost-Benefit) analysis in decision-making Cost schedules

### ECON 102 Brown Final Exam Practice Exam Solutions

www.liontutors.com ECON 102 Brown Final Exam Practice Exam Solutions 1. B 2. C 3. C All products are identical (homogenous) in perfect competition so there is no such thing as brand preference. 4. C Breakeven

### The Production and Cost

The Production and Cost The Role of the Firm l The firm is an economic institution that transforms factors of production into consumer goods. It l Organizes factors of production. l Produces goods and

### ECO 211 Microeconomics Yellow Pages ANSWERS. Unit 3

Spring 2013 ECO 211 Microeconomics Yellow Pages ANSWERS Unit 3 Mark Healy William Rainey Harper College E-Mail: mhealy@harpercollege.edu Office: J-262 Phone: 847-925-6352 1 Four Market Models CHARACTERISTIC

### 2) A production method that relies on large quantities of labor and smaller quantities of capital equipment is referred to as a: 2)

Micro: TA Session 4, Problem set MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) The main difference between a short-run production function and

### ECON 101 KONG Midterm 2 CMP Review Session. Presented by Benji Huang

ECON 101 KONG Midterm 2 CMP Review Session Presented by Benji Huang Chapter 5 Efficiency and Equity Benefit, Cost, Surplus Consumers (1) A consumer benefits from the consumption of a product this benefit

### 23 Perfect Competition

23 Perfect Competition Learning Objectives After you have studied this chapter, you should be able to 1. define price taker, total revenues, marginal revenue, short-run shutdown price, short-run breakeven

### Monopoly and How It Arises

13 MONOPOLY Monopoly and How It Arises A monopoly is a market: That produces a good or service for which no close substitute exists If a good has a close substitute, even if it is produced by only one

### Chapter 14 Perfectly competitive Market

Chapter 14 Perfectly competitive Market But first lets look at this Profit Maximization Profit Maximization This occurs where marginal revenue (MR) = marginal cost (MC). MR = MC Marginal revenue is the

### CHAPTER NINE MONOPOLY

CHAPTER NINE MONOPOLY This chapter examines how a market controlled by a single producer behaves. What price will a monopolist charge for his output? How much will he produce? The basic characteristics

### Unit 6 Perfect Competition and Monopoly - Practice Problems

Unit 6 Perfect Competition and Monopoly - Practice Problems Multiple Choice Identify the choice that best completes the statement or answers the question. 1. One characteristic of a perfectly competitive

### To produce more beach balls, you must give up ever increasing quantities of ice cream cones.

Unit 01: Basic Concepts (Macro/Micro) Scarcity The Economic Problem: Unlimited wants, limited economic resources Factors of Production: -Land -Labor -Capital -Entrepreneurship Big 3 Questions: -What to

### BUSINESS ECONOMICS (PAPER IV-PART I)

BUSINESS ECONOMICS (PAPER IV-PART I) (60 MARKS) Q1: Macroeconomics is also called economics (a) applied (b) aggregate (c) experimental (d) none Q2: A Study of how increase in the corporate income tax rate

### 2010 Pearson Education Canada

What Is Perfect Competition? Perfect competition is an industry in which Many firms sell identical products to many buyers. There are no restrictions to entry into the industry. Established firms have

### THE UNIVERSITY OF WESTERN ONTARIO. E. Rivers ECONOMICS 1021B-001 March 18, 2012 MIDTERM #2. 2. Check that your examination contains 50 questions.

NAME THE UNIVERSITY OF WESTERN ONTARIO LONDON CANADA E. Rivers ECONOMICS 1021B-001 March 18, 2012 MIDTERM #2 INSTRUCTIONS: 1. You will have 2 hours to complete the exam. 2. Check that your examination

### Refer to the information provided in Figure 12.1 below to answer the questions that follow. Figure 12.1

1) A monopoly is an industry with A) a single firm in which the entry of new firms is blocked. B) a small number of firms each large enough to impact the market price of its output. C) many firms each

### Graded exercise questions. Level (I, ii, iii)

Graded exercise questions Level (I, ii, iii) 248 MICRO ECONOMICS LEVEL 1 GRADED EXERCISE QUESTIONS (LEVEL I, II, III) INTRODUCTION 1. Why does an economic problem arise? 2. What is economics about? 3.

### FINAL Examination Paper (COVER PAGE) Programme : Diploma in Quantity Surveying. Time : 8.00 am am Reading Time : 10 Minutes

FINAL Examination Paper (COVER PAGE) Session : January 2013 Programme : Diploma in Quantity Surveying Course : ECO1141 : Principles of Economics Date of Examination : April 30, 2013 Time : 8.00 am 10.10

### Chapter 6: Market Structure

Managerial Economics and Organizational Architecture, 5e Chapter 6: Market Structure McGraw-Hill/Irwin Copyright 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved. Market Structure What is a

### 2. What is Taylor s marginal utility per dollar spent on the 2 nd race? a. 2 b. 3 c. 4 d. 5

ECON 251 Practice questions based on Spring 2013 Exam 2 Taylor has \$100 to spend on playing golf and running in races. The price of a round of golf is \$20 and the price of running a race is \$10. The total

### Chapter 7 Consumer/Producers and Market Efficiency

Midterm #2 Exam Study uestions: (A subset of these questions/concepts will be on the exam) Chapter 5 - Elasticity Define rice elasticity of demand. What does it mean to say demand is highly elastic? What

### Quiz #5 Week 04/12/2009 to 04/18/2009

Quiz #5 Week 04/12/2009 to 04/18/2009 You have 30 minutes to answer the following 17 multiple choice questions. Record your answers in the bubble sheet. Your grade in this quiz will count for 1% of your

### Review Chapters 1 & 2

Review Chapters 1 & 2 ECON 1 Midterm 1 Review Session Scarcity or No Free Lunch Principle. Cost-Benefit Principle. Reservation Price. Economic Surplus = Benefit Cost. Opportunity Cost (DO NOT FORGET!!).

### CH 15: Monopoly. Lecture

CH 15: Monopoly Lecture Characteristics of Monopolies A monopoly is a market structure in which one firm makes up the entire market Firm=Industry Characteristics of Monopolies The monopolist is a price

### ECON 251 Practice Exam 2 Questions from Fall 2013 Exams

ECON 251 Practice Exam 2 Questions from Exams Gordon spends all his income on spatulas and mixing bowls. Spatulas cost \$4 and mixing bowls cost \$12. Gordon has \$60 of income and considers both spatulas

### Where are we? Second midterm on November 19. Review questions on th course web site. Today: chapter on perfect competition

Where are we? Second midterm on November 19 Review questions on th course web site. Today: chapter on perfect competition Topic for the second paper: Pick a chapter in Ariely after Chapter 4 and compare

### Eco402 - Microeconomics Glossary By

Eco402 - Microeconomics Glossary By Break-even point : the point at which price equals the minimum of average total cost. Externalities : the spillover effects of production or consumption for which no

### NB: STUDENTS ARE REQUESTED IN THEIR OWN INTEREST TO WRITE LEGIBLY AND IN INK.

1 INFORMATION & INSTRUCTIONS: DURATION: THREE (3) HOURS TOTAL MARKS: 300 INTERNAL EXAMINER : PROFESSOR D. MAHADEA EXTERNAL EXAMINER: MR R. SIMSON NB: STUDENTS ARE REQUESTED IN THEIR OWN INTEREST TO WRITE

### Short-Run Costs and Output Decisions

Chapter 8 Short-Run Costs and Prepared by: Fernando & Yvonn Quijano 2007 Prentice Hall Business Publishing Principles of Economics 8e by Case and Fair Short-Run Costs and 8 Chapter Outline Costs in the

### 1.5 Big Ideas.. Key concepts. Webnote 150-Theory of the Firm

1.5 Big Ideas.. Key concepts 1 9 Bits to look our for DMR/Returns to scale Economies of scale Efficient resource allocation (AC curve) 3 goals of a Firm Price discrimination Goals of firms: Profit maximisation

### Question Paper Business Economics I (MB1B3): January 2009

Question Paper Business Economics I (MB1B3): January 2009 Answer all 78 questions. Marks are indicated against each question. 1. Which of the following is not responsible for an increase in demand for

### Micro Economics M.A. Economics (Previous) External University of Karachi Micro-Economics

Micro Economics M.A. Economics (Previous) External University of Karachi Micro-Economics Annual Examination 1997 Time allowed: 3 hours Marks: 100 Maximum 1) Attempt any five questions. 2) All questions

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.

AUBG, Fall 2015, Principles Micro with P. Stankov, Sample MT2 NOTE: The actual no. of questions on the actual MT will be 30, each for 0.67 grade points. MULTIPLE CHOICE. Choose the one alternative that

### Costs in the Short Run: NOTE: Costs depend upon output!! Fixed Costs (FC) costs which do not change when a business changes its quantity of output.

Costs in the Short Run: NOTE: Costs depend upon output!! Fixed Costs (FC) costs which do not change when a business changes its quantity of output. Variable Costs (VC) costs which do change when a business

### FINAL EXAMINATION. Special Instructions: Date: DECEMBER 15, 2000 School Year: Course and No.: ECON1006EA Time: 1:30 PM- 3:30 PM

FINAL EXAMINATION Date: DECEMBER 15, 2000 School Year: 2000-2001 Course and No.: ECON1006EA Time: 1:30 PM- 3:30 PM Professor: SARLO, C Department: Arts & Science Number of Pages: 11 + cover Time Allowed:

### Economics 323 Microeconomic Theory Fall 2016

green=b SECOND EXAM Chapter Ten Economics 323 Microeconomic Theory Fall 2016 1. The markets for many come close to satisfying the conditions required for perfect competition. a. agricultural goods b. transportation

### Economics 101 Section 5

Economics 101 Section 5 Lecture #22 April 13, 2004 Chapter 10 Monopolistic Competition Oligopoly Game Theory Monopolistic Competition 3 characteristics of a monopolistically competitive market 1) Many

### ECON111 Sample Questions. 1.) Please fill in the table below for a perfect competetive firm.

ECON111 Sample Questions 1.) Please fill in the table below for a perfect competetive firm. Q P TC MC FC VC AFC AVC ATC TR MR 0-220 10 40 5 7 20 10 85 20 400 1000 20 100 24 a) Calculate profit at each

### Principles of Microeconomics

Principles of Microeconomics By A. V. Vedpuriswar October 15, 2016 Economics: The Basics When wants exceed the resources available to satisfy them, there is scarcity. Faced with scarcity, people must make

### GACE Economics Assessment Test I (038) Curriculum Crosswalk

Subarea I. Fundamental Economic Concepts (20%) Objective 1: Demonstrates an understanding of the fundamental concepts of economics A. Understands the concepts of scarcity, choice, and opportunity cost

### MARKETS. Part Review. Reading Between the Lines SONY CORP. HAS CUT THE U.S. PRICE OF ITS PLAYSTATION 2

Part Review 4 FIRMS AND MARKETS Reading Between the Lines SONY CORP. HAS CUT THE U.S. PRICE OF ITS PLAYSTATION 2 On May 14, 2002 Sony announced it was cutting the cost of its PlayStation 2 by 33 percent,

### Final Term Examination Spring 2006 Time Allowed: 150 Minutes. Question No. 1 Marks :1. Question No.

www.vustuff.com WWW.VUTUBE.EDU.PK ECO402 Microeconomic s Final Term Examination Spring 2006 Time Allowed: 150 Minutes Question No. 1 Marks :1 Economies of scale and economies of scope are synonymous. Question

### Theories of Returns. Total Product. Unit of workers

Theories of Returns Production Function: It shows a mathematical relationship between input factors and the output. Production function may be of the short run or the long run. A rational producer always

### CH 14: Perfect Competition

CH 14: Perfect Competition Characteristics of Perfect Competition 1. Both buyers and sellers are price takers A price taker is a firm (or individual) who takes the price determined by market supply and

### Firms in Competitive Markets

1 Basic Economics Chapter 14 Firms in Competitive Markets Competitive markets (1) Market with many buyers and sellers (e.g., ) (2) Trading identical products (e.g., ) (3) Each buyer and seller is a price

### Economics 101 Section 5

Economics 101 Section 5 Lecture #21 April 6, 2004 Monopoly Chapter 9 Price discrimination Chapter 10 Monopolistic Competition Oligopoly Game Theory Figure 4 Comparing Monopoly and Perfect Competition Price

### Introduction to Business (Managerial) Economics

Contents Unit 1 Introduction to Business (Managerial) Economics Meaning of Managerial Economics... 2 Definitions of Managerial Economics... 2 Features (Characteristics) of Managerial Economics... 5 Nature

### Comprehensive Microeconomics Test (c) Dick Brunelle and Steve Reff

Comprehensive Microeconomics Test (c) Dick Brunelle and teve Reff 1. The Reffbru Pork Corporation is the largest provider of pork products in the country. They own pig farms in several states. Currently

### Unit 13 AP Economics - Practice

DO NOT WRITE ON THIS TEST! Unit 13 AP Economics - Practice Multiple Choice Identify the choice that best completes the statement or answers the question. 1. A natural monopoly exists whenever a single

### Chapter Summary and Learning Objectives

CHAPTER 11 Firms in Perfectly Competitive Markets Chapter Summary and Learning Objectives 11.1 Perfectly Competitive Markets (pages 369 371) Explain what a perfectly competitive market is and why a perfect

### MICROECONOMICS - CLUTCH CH PERFECT COMPETITION.

!! www.clutchprep.com CONCEPT: THE FOUR MARKET MODELS Market structure describes the environment in which a firm operates, determined by the Perfect Competition Monopolistic Competition Oligopoly Monopoly

### Monopoly. 3 Microeconomics LESSON 5. Introduction and Description. Time Required. Materials

LESSON 5 Monopoly Introduction and Description Lesson 5 extends the theory of the firm to the model of a Students will see that the profit-maximization rules for the monopoly are the same as they were

### MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. FIGURE 1-2

Questions of this SAMPLE exam were randomly chosen and may NOT be representative of the difficulty or focus of the actual examination. The professor did NOT review these questions. MULTIPLE CHOICE. Choose

### FOR MORE PAPERS LOGON TO

ECO401- Economics Question No: 1 ( Marks: 1 ) - Please choose one In pure capitalism, the role of government is best described as: Significant. Extensive. Nonexistent. Limited. Question No: 2 ( Marks:

### Econ 300: Intermediate Microeconomics, Spring 2014 Final Exam Study Guide 1

Econ 300: Intermediate Microeconomics, Spring 2014 Final Exam Study Guide 1 Chronological order of topics covered in class (to the best of my memory). Introduction to Microeconomics (Chapter 1) What is

### ECON 102 Wooten Final Exam Practice Exam Solutions

www.liontutors.com ECON 102 Wooten Final Exam Practice Exam Solutions 1. A monopolist will increase price and decrease quantity to maximize profits when compared to perfect competition because a monopolist