Topics for Exam II
Spring 2000
Principles of Microeconomics
Chapters 11, 6, 8, 12, 5, 13
I. The Role of Government (con't)
A. Address Monopoly
1. market failure
2. price too high, quantity too low
3. policy
a. antitrust
b. regulation
c.public ownership
B. The problem of public goods
1. non-rival and non-excludable
2. private markets won't provide an efficient amount
3. quasi-public goods
a. open access resources
(overuse)
b. excludable public goods
(quantity too low)
4. Policy
C. Address income distribution
1. taxes deductions and credits
2. transfers
2. special programs and market intervention
a. price floors
b. price ceilings
D. Taxes
1. sales tax analysis
a. price to consumer increases
b. quantity decreases
c. price to producer decreases
d. revenue to government
e. deadweight loss
F. Cost Benefit Analysis
1. methods
2. problems
a. valuing non-monetary cost or benefits
b. discounting
c. subject to manipulation
G. Public Choice Theory
1. voters
a. rent-seeking
b. rational ignorance
2. politicians
3. civil servants
II. Elasticity
A. Price elasticity of Demand
1. inelastic, elastic, unitary elastic
2. elasticity and total revenue
3. determinants of elasticity
B. Cross elasticity
1. complements
2. substitutes
3. unrelated goods
C. Income elasticity
1. normal goods
2. inferior goods
D. Elasticity of Supply
1. inelastic, elastic, unitary elastic
2. determinants of elasticity
3. long run and short run
III. Short run costs
A. total fixed cost
B. total variable cost
C. total cost
D. average fixed cost
E. average variable cost
F. average total cost
G. marginal cost
IV Other Cost concepts
A. implict and explict costs
B. dimishing returns and increasing marginal cost
C. marginal and average cost
1. U-shaped
2. minimum average cost is at intersection of AC
and MC
D. Costs and Profit
1. profit (P>ATC)
2. loss (P<ATC)
3. breakeven (P=ATC)
Chuck Stull's class
page
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