ECON 110Lecture 16Outline of Last Lecture I. Exam 2 InformationII. International Trade continueda. Summarization of previous learningb. Tariffsc. Other types of trade restrictionsd. Arguments/Counterarguments for trade restrictionsOutline of Current Lecture I. Exam back toady/review questions on examII. Makeup Exam informationIII. Comprehensive Makeup ExamIV. Clicker QuestionV. Test ReviewVI. Today’s Notes: Production and CostsCurrent Lecture – Test ReviewWe reviewed the test problem by problem. If you missed the test review and have questions, you can look back at the old notes, email the professor at [email protected], talk to the professor before/after class, or visit his office hours in 232 Alston Hall.The makeup exam for Exam 2 is Friday, October 24th at 1:00 p.m. It will be held in Bruno - Students must register to take this exam by using the makeup exam signup sheet link on the course tools. - Students should also go to the business computer lab to register their account to help the test run smoother on Friday.A comprehensive makeup exam will be available on November 21st that all students can take, and the score will replace the lowest exam score if it is higher. More details to come. Clicker Question- Using the midpoint method, the price elasticity of demand for a good is computed to be approximately 0.75, in absolute value. Which of the following events is consistent with a 10 percent decrease in the quantity of the good demanded?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.B. A 13.3 percent increase in the price of the good.TEST REVIEWWhile in college Marty and Laura each buy 15 bus tickets per month. After they graduate and have full-time jobs, Marty buys 0 bus tickets per month and Laura buys 28 bus tickets per monthand Laura buys 28 bus tickets per month. Comparing income elasticity of demand for bus tickets, Marty’s- is positive, and Laura’s is negativeIf the government removes a binding price ceiling from a market then the price paid by buyers will-Increase and the quantity sold in market will increaseA tax on the sellers of coffee will increase the price of coffee paid by buyers-Decrease the effective price of coffee received by sellers and decrease the equilibrium.Production and Costs- Part 1: The Production ProcessProduction: We now examine what firm do and how they do what they do: The production process- The dependent on the technology avail- Can be translated into more precise- mathematical- termsThe production function—for a given production technology the production function tells us how much output you can get from a particular combination of inputs.- Key actor in this process: The Firm- Central Actor- The FirmWhat are firms? - A way of organizing resources to provide goods and services to a market - An organization specializing in the production of some good or service What do firms do? - They engage in production. - Production is a transformation process in which inputs are transformed into outputs.Why do they do it? – For profit What is profit? - Once again: Profits = Revenue - Costs o Revenue: still easy--what you sell, how much you sell it for  This can be obtained from demand curve  Revenue = Price * Quantity o Costs: Two types of costs we considered Explicit costs (paid to others) Implicit costs (opportunity costs to