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Final Exam Monday, 12/15, 8-10 a.m. 80 multiple choice bring pencil, Oswego ID cumulative study guide is posted if taking MAT 102, 120, 210, 220 makeup is Tues., 12/16, 2- 4 makeup ONLY if you have a conflict with MAT Monday, 12/15, 8-10 a.m. 80 multiple choice bring pencil, Oswego ID cumulative study guide is posted if taking MAT 102, 120, 210, 220 makeup is Tues., 12/16, 2- 4 makeup ONLY if you have a conflict with MAT

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Final exam review some stuff NOT on the exam supply and demand elasticity production & costs market structures labor demand some stuff NOT on the exam supply and demand elasticity production & costs market structures labor demand

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this review selected topics NOT exhaustive! see the study guide selected topics NOT exhaustive! see the study guide

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requested for today, but NOT on the exam: game theory (10) indifference curves (6) CALCULATING elasticity (5) income & substitution effects (12) accounting vs. economic profit (7) graphs of perfect competition (8) price discrimination (9) game theory (10) indifference curves (6) CALCULATING elasticity (5) income & substitution effects (12) accounting vs. economic profit (7) graphs of perfect competition (8) price discrimination (9)

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Supply and Demand how events shift demand or supply? how shifts in demand and/or supply will change P & Q? DRAW THE PICTURE! how events shift demand or supply? how shifts in demand and/or supply will change P & Q? DRAW THE PICTURE!

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market for oranges orange juice discovered to prevent cancer what shifts? demand (change in tastes) what direction? increase orange juice discovered to prevent cancer what shifts? demand (change in tastes) what direction? increase

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P Q S D D’ P rises Q rises

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both demand and supply increase what happens to price and quantity? both demand and supply increase what happens to price and quantity?

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P Q S D D’ P rises Q rises increase in demand

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P Q S D S’ P falls Q rises increase in supply

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so if both S and D increase Q rises change in P is uncertain so if both S and D increase Q rises change in P is uncertain

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ElasticityElasticity questions about INTERPRETING elasticity elastic Q very responsive to price changes inelastic Q not responsive to price changes questions about INTERPRETING elasticity elastic Q very responsive to price changes inelastic Q not responsive to price changes

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exampleexample elasticity of supply = 2 supply is ELASTIC supply curve is relatively steep a 1% increase in P cause a 2% increase in Qs elasticity of supply = 2 supply is ELASTIC supply curve is relatively steep a 1% increase in P cause a 2% increase in Qs

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elasticity of demand and TR inelastic TR will rise when P rises elastic TR will fall when P rises what makes the demand for something elastic? elasticity of demand and TR inelastic TR will rise when P rises elastic TR will fall when P rises what makes the demand for something elastic?

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cross elasticity change in Qd when P of RELATED good changes < 0 for compliments > 0 for substitutes income elasticity change in Qd when income changes? > 0 for normal goods < 0 for inferior goods cross elasticity change in Qd when P of RELATED good changes < 0 for compliments > 0 for substitutes income elasticity change in Qd when income changes? > 0 for normal goods < 0 for inferior goods

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Production & costs total costs total fixed costs incur even if output = 0 total variable costs = 0, if output = 0 total costs total fixed costs incur even if output = 0 total variable costs = 0, if output = 0

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given total product calculate marginal product calculate average product given total cost calculate marginal cost given total product calculate marginal product calculate average product given total cost calculate marginal cost

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economic profit if = 0, normal profit profit above opportunity cost > 0, if P > ATC < 0, if P < ATC economic profit if = 0, normal profit profit above opportunity cost > 0, if P > ATC < 0, if P < ATC

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Market structures perfect competition monopolistic competition oligopoly monopoly perfect competition monopolistic competition oligopoly monopoly

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productproduct identical perfect comp. differentiated mon. comp. oligopoly unique monopoly identical perfect comp. differentiated mon. comp. oligopoly unique monopoly

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entry/exitentry/exit free entry exit perfect comp. mon. comp. barriers to entry monopoly oligopoly free entry exit perfect comp. mon. comp. barriers to entry monopoly oligopoly

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economic profit zero, in the LR perfect comp. mon. comp. may be > 0 in the LR monopoly oligopoly zero, in the LR perfect comp. mon. comp. may be > 0 in the LR monopoly oligopoly

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demand curve perfectly elastic (horizontal) perfect comp. downward sloping all others perfectly elastic (horizontal) perfect comp. downward sloping all others

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MR and P P = MR perfect comp. P > MR all others P = MR perfect comp. P > MR all others

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collusion/interdependencecollusion/interdependence ONLY in oligopoly

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choosing Q MR = MC except oligopoly, which is uncertain MR = MC except oligopoly, which is uncertain

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choosing P perfect comp price determined by market supply and demand monopoly & mon. comp. use firm demand curve oligopoly uncertain perfect comp price determined by market supply and demand monopoly & mon. comp. use firm demand curve oligopoly uncertain

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monopoly vs. perfect competition monopoly has higher price lower output less efficient (loss of output) monopoly has higher price lower output less efficient (loss of output)

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cartelcartel oligopoly firms collude to act like a monopoly split up monopoly output charge monopoly price split monopoly profits oligopoly firms collude to act like a monopoly split up monopoly output charge monopoly price split monopoly profits

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labor demand what is MRP? what happens to MRP as Q of labor rises? given # workers, total output calculate MRP # workers hired, given wage what is MRP? what happens to MRP as Q of labor rises? given # workers, total output calculate MRP # workers hired, given wage

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example: smoothies price of smoothie = $2 smoothies per hour price of smoothie = $2 smoothies per hour Q laborTP MPMRP= MP x P 0 1 6 2 11 3 15 4 18 5 20 6 5 4 3 2 12 10 8 6 4 wage = $6 hire 4 workers wage = $10 hire 2 workers

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