ECON 003 Lecture Notes - Lecture 14: Scantron Corporation, Inferior Good, Economic Equilibrium

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blackbutterfly766

22 Mar 2017

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Test covers the material that we covered in class from chapters 1-11 (not including chapters 5 and 6 which we did not go over) You can miss 1 and still get 100 points. 12:00 pm 3:00 pm on monday, tuesday, and wednesday of finals week. The four pitfalls to avoid in economic thinking. Be able to do a cost-benefit analysis question like those in discussion session activity 2. Chapter 2: voluntary trade creates value (transaction costs and middlemen) The production possibilities curve (ppc: efficient, inefficient, and unattainable points, what is produced at a certain point, what is given up and gained when going from one point to another, what shifts the ppc. The law of supply and supply curve: consumer surplus, change in demand vs. change in quantity demanded, producer surplus, change in supply vs. change in quantity supplied, market equilibrium. The labor market: price controls, price floors, price ceilings.

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Essay questions are due at the end of the course. It is strongly recommended that you accumulate your answers as you complete each unit and don't leave them all until the last minute. Please type your responses to the following short answer/discussion questions and short problems. Although your answers need not be lengthy (generally, 1-2 short paragraphs is fine), you should be careful to respond to all parts of the question asked. It is very important that your answers demonstrate that you have made the effort to read the chapter that relates to the question and thoroughly studied the relevant topic. Answers should be submitted in complete sentence and paragraph form, and writing presentation is important. Please remember that late essay questions are NOT accepted. 1. How is a "market" defined? Distinguish between an industry and a market. (1 point) 2. Suppose a market becomes more competitive over time. What happens to the elasticity of demand for a particular firm's good as its market becomes more competitive? (1 point) 3. Why are the monopolist's and the monopolistically competitive firm's demand curves downward sloping while the competitive firm's demand curve is horizontal? (1 point) 4. Why is a perfectly competitive firm's long-run supply curve the same as its marginal cost curve above the average total cost curve? (1 point) 5. Explain why monopolists do not achieve efficiency. (1 point) 6. Another student advocates the forced break-up of large firms, such as Microsoft and AT&T, on the grounds that they have a lot of monopoly power, which they use to charge inefficiently high prices. According to Schumpeter, would breaking apart these gigantic firms guarantee consumers lower prices? Explain. (1 point) 7. Explain why firms should not shut down in the short run until price falls below average variable cost. (2 points) 8. Suppose your economics professor publicly states that she grades on a curve (i.e., the top 10% of the students get an A, the next 20% get a B, the next 40% get a C, the next 20% get a D, and the lowest 10% fail). The whole class could save itself a lot of work by agreeing privately not to study at all for the final exam and just letting the rankings thus far determine the final grades. Why might such an agreement be difficult to maintain and enforce? Which market structure, if any, is this situation most analogous to? (1 point) 9. Why do firms practice price discrimination? Is efficiency affected by price discrimination? If so, how? (1 point)

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ECON 003 Lecture Notes - Lecture 14: Scantron Corporation, Inferior Good, Economic Equilibrium

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