Microeconomics Final Exam

Microeconomics: Learning Objectives for review.

1. Describe the basic problem of economic scarcity and tasks of an economic system, using economics terms.

a) Purpose of economic systems and economics

· 3 basic tasks

b) Rational Choice:

· marginal costs and benefits

c) Opportunity cost

d) Efficiency in Allocation and Production

2. Explain the elements of market demand

a) Determinants of demand, what causes demand to shift vs. Movements along the curve

b) Elasticity of demand:

· what determines it

· how price changes affect revenues /depends on elasticity

c) how demand represents consumer benefits (willing ness to pay) and how consumer surplus is determined.

3. Explain the elements of market Supply

a) Determinants of demand, what causes demand to shift vs. Movements along the curve

b) Define and compute short and long run costs of production and explain the profit maximizing decisions of a competitive firm

4. Describe the competitive market model:

a) What are the necessary assumptions of the competitive model

b) Explain short and long run outcomes in market equilibrium.

5. Evaluate the market structure of non-competitive markets and discuss various models to explain firm strategies.

a) Monopoly, Oligopoly, monopolistic competition

b) Barriers to entry, product differentiation, concentration measures

c) Marginal revenue, game theory, Nash equilibrium, rivalry

d) Antitrust policy

6. Discuss the causes of market failure other than market structure and the use of antitrust, regulation, tax or other policies to correct market failure.

a) Externalities

b) Natural monopoly

c) Information problem