Econ 201 1st Edition Final Exam Study GuideEcon 201 – Professor Lotspeich - Spring 2015 Review Outline for Exam 3 ~ Final Exam Coverage: Chapters (Mankiw – Principles of Microeconomics ): 7, 8, 10, 11, 13 –15 handouts and class notes.Structure: Part I - about 40 multiple choice questions & Part II – short essay and analytical questions.Bring a number 2 pencil for use on the scoring sheet for Part I.Study tips A. 1. Review the chapters, noting problem areas to come back to later.2. Study in detail the main graphs and key terms in each chapter.3. Review handouts and notes from class. Focus on issues presented in both class and in the textbook.4. Study the problem areas identified in step 1 above.5. Work on problems & applications assigned from the ends of chapters. Consult previous exams.B. Get a good night’s rest before exam day.Open Review Session with Dr. L: Sunday 3 May, 4 to 6 pm – Holmstedt Hall room 007Chapters & Topics For each topic listed here, you should know the central issue addressed, and for most you should know an analyticalapproach to describe it. This includes uses of standard graphs and related calculations.7 Market Efficiency: Consumer surplus (concept, calculation and graphical representation); Producer surplus(concept, calculation and graphical representation); Total surplus; Relation of surplus to market efficiency;Analysis of price controls using producer and consumer surplus; Changes in producer and consumer surplus;Handout: Story of Bert & Ernie.8 Efficiency Analysis of Taxes & Subsidies: Impacts of taxes & subsidies on buyers and sellers; These notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.Calculation of taxrevenue and subsidy burden; How market efficiency is affected; Deadweight losses; Relationships between taxrates and (i) tax revenues (Laffer Curve) & (ii) deadweight loss (DwL ); How deadweight loss is affected by priceelasticities; Analysis of land tax (proposal of Henry George); Handout: Beer tax; Handout: Fuel subsidy.10 Externalities: Concept, different types; Logic of market failure under externalities; Graphical analysis usingstandard market model; Efficiency aspects (deadweight losses); Coase Theorem: solutions without governmentregulation, transaction cost; Corrective policies: Direct regulation, Pigovian tax, emissions fee, tradable permits;Handouts: Dick, Jane & Spot; Marina & Tannery, Externalities from motor fuels and vaccination.11 Public Goods and Common Resources: Taxonomy of goods according to two characteristics: Rival or nonrival& Excludable or non-excludable, examples; Grey areas of the characteristics; Free-rider problem; Pricingproblem of non-rival goods; Tragedy of the commons; Policies to improve efficiency; Logic of collectivedecisions; Cost-benefit analysis; Handouts: Fireworks shows, Herdsmen on a pasture, Commons Sense (article)13 Cost Analysis for a Firm: Economic v. accounting cost and profit; Handout: Farm Profit; Short-run vs. Longrun;Product concepts: TP , AP , MP ; From Product to Cost: How cost is related to production & diminishing MP to increasing marginal cost; Seven cost concepts: FC , VC , TC , AFC , AVC , ATC and MC ; graphs of each; Average- marginal rule; Relevance of inflection points: Analysis of cost with inflection point in total product and VC curves; Returns to scale: increasing, constant and decreasing, related to LR Average Cost; Handout: Fishproduction.14 Firms in Competitive Markets: Conditions for competitive markets; Firms as price takers; Revenue concepts:TR , AR , MR ; Maximizing profit; One firm’s decisions: output, shutdown, exit & entry; Graphs and algebra of thedecisions; MC as the supply curve for a firm; Using average and marginal cost graphs to analyzefirm decisions;Aggregation to short run market supply; Market adjustment in the Short Run and in Long Run; Long run marketsupply; Zero profit theorem; Handout: Supply in Perfect Competition.15 Monopolized Market: Concept of monopoly; Continuum of market structures; Measures of concentration;Barriers to entry; Natural monopoly; Concept of market power; Revenue concepts: TR , AR , MR ; Relation betweenDemand and MR ; Price effect and quantity effect on TR ; Monopoly output decision; Graphs and algebra of thedecision; Evaluating profit at monopoly equilibrium; Handout: Profit maximization for a monopolist; Comparisonof Monopolized & Competitive markets: output, price and total surplus; Efficiency loss (DwL ) under monopoly;Handout: Patent Expiration & Truck Merger problems; Policies to address monopoly; Price
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