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Final Exam Study Guide(Exam: Thursday, June 5, 9-10:15 a.m(Coverage: Chapter5-7Concepts of MV (and demand), MC (and supply)Various elasticity ideas in chapters 2-3 as well the market equilibrium andeconomic efficiency discussed in chapter 4.Related class notes:Session 10-18Related practice questions on textbook:All previous assigned practice questions;For Chapter 7: “Review Questions”: numbers 1-5 and in the “Problems” section:numbers 1-9, 11-15.7 There is also a set of extra problems with answers and hintstitled, “Some Extra Questions for Ch. 7” under Files and then Practice Questionsfor Exams on the course websiteKey Points Check List:Chapter 5 (session 10-12) Other forces effect on Demand (e.g. income, related good price)Income and Cross Price Elasticity of demand Other forces effect on Supply Perfectly elastic and inelastic on demand and supply Predict effects of change in one market on a related market S and D application: Short run VS. Long run, graph Effect of tax on steel on car market Effects of Tax and Subsidy Who pays the tax (graph), analysis Who receives the subsidy (graph), analysis Price control: price ceiling VS price floor, graph Non-price competition when a price ceiling is presentChapter 6 (session 13-14) Concept of productivity  Production Possibility Frontier (PPF), graph Joint Production Possibility Frontier (Joint PPF), graph Marginal Cost of production of a good rises as more of the good is produced.(Reason: run out of “suitable” resources.) MC rises due to our inability to replicate the resources suitable forproduction of increasing amounts of a good.  Use of principle of comparative advantage to international trade PPF with Many producers (smooth curve) Phenomenon: Increasing Costs at the Extensive Margin1 How to define the industry supply curve (with many producers of a good):The industry S curve is the lateral sum of firm’s MC curves.  What are rents Why do rents exist (example, textbook, p212) Rents show the excess of valuation of consumers over the cost of resourcesused in production. Definition of property rights How do definition, protection, and enforcement of private property rightsaffect the efficiency of resource allocation Concept of economic efficiency (“economic pie”!)Chapter 7 (session 15-17) Law of diminishing returns Two forms of property rights: private and common Marginal Product of an input-Labor (MPL) Value of Marginal Product of Labor (VMPL) = P * MPL Total Product of Labor (TPL), related table calculation One thought: As we add labor (to the fixed capital and factory spaces) each additional unitof labor is as good (as suitable) a resource as the previous units of labor. Why not compare wage with VAPL (Value of Average Product of Labor) Why employees apply with a firm, not firms apply with employees. (Becauseof falling MPL) Law mattersOther Related Material: Summary Note 18 (for review); Quiz 3, 4, and 5 Representative graphs from past quizzes:Quiz 4, Question 1 (“Other factors” effect on demand and supply curve):New textbooksUsed textbooksQ QPPSDDSS’ D’2Quiz 5, Question 1 (Joint PPF):Q of fishQ of coconuts11166 fish and 8

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UW ECON 200 - Final Exam Study Guide

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