APEC 3001 First Review Session Marc F Bellemare
APEC 3001 – First Review Session Marc F. Bellemare Fall 2015
Structure of the Exam • Four multi-part questions • No huge surprises: Everything on the exam (save for bonus question) is stuff I discussed in lecture/similar to book problems. • 60 points -> 75 minutes. Budget your time wisely, and you’ll have an extra 15 minutes at the end. • Don’t leave anything blank.
Structure of the Exam • Non-scientific, non-graphing calculator OK. Everything else (scientific, graphing calculator, phones) is NOT OK. • Mixture of more technical and essay-type questions. Maybe some true-false questions with justifications, maybe some definitions—I want to reward all types of learner. • Don’t leave anything blank.
Structure of the Exam • For the love of God and all that is holy, don’t leave anything blank!
Chapter 1 • The definition of economics • The definition of scarcity • Know and understand the first seven (i. e. , micro) principles of economics and know when to recognize their application • Understand the efficiency versus equity tradeoff
Chapter 1 • Know the definition of and understand the notion of opportunity cost • Understand what rationality means and economics • Understand the notion of choice at the margin • Understand what incentives are • Know the definition of market
Chapter 1 • Understand the notion of market failure and give examples: externality, market power, etc. • Efficiency versus equity in public policy making
Chapter 2 • Examples of opportunity cost • Understand the process by which we gain scientific knowledge, and how economists employ the scientific method • Understand what a model is • Know what factors of production are, as well as goods and services • Understand the many relationships between households and firms in an economy
Chapter 2 • Know what a production possibilities frontier (PPF) is, and know how to graph one • Understand how the PPF illustrates an important tradeoff • Know why economic growth displaces the PPF outward • Make sure you think about why a PPF might be bow-shaped
Chapter 2 • Know the difference between positive and normative statements
Chapter 3 • Understand the notion that trade can (this does not mean will) make everyone better off – recall our trinkets experiment • Know how to graph a PPF if you haven’t learned in chapter 2 • Know the definition of export • Know the definition of imports • Understand absolute versus comparative advantage
Chapter 4 • Understand what a market is • Understand what a competitive market is, and what a perfectly competitive market looks like • Understand what was so great about our market experiment with playing cards • Know the Law of Demand • Know the difference between demand (i. e. , the demand curve) and quantity demanded
Chapter 4 • Know how to graph a demand schedule • Know how to add up demand curves so as to obtain market demand • Know what makes us move along the demand curve and what shifts the demand curve around • Know the Law of Supply • Know the difference between supply (i. e. , the supply curve) and quantity supplied
Chapter 4 • Know how to graph a supply schedule • Know how to add up supply curves so as to obtain market supply • Know what makes us move along the supply curve and what shifts the supply curve around • Supply and demand put together – understand the notion of market equilibrium • Equilibrium prices and quantity
Chapter 4 • Shortage or excess demand • Surplus or excess supply • Understand how market forces push price and quantity toward equilibrium • Also understand the distortionary (i. e. , shortage or surplus) of certain policies (e. g. , rent control) • Know how to analyze changes in equilibrium (i. e. , the three-step method).
Chapter 4 • Think about how prices allocate resources, and how the price did that in our playing-cards experiment
Chapter 5 The formula for elasticity: Q P/ P Q Why we use the midpoint method What determines price elasticity The variety of demand curves (perfectly inelastic, unit elastic, perfectly elastic) • Why a linear demand curve does not have constant elasticity • •
Chapter 5 • Price elasticity of demand the maximization of total revenue • Price elasticity of supply • The variety of supply curves (perfectly inelastic, unit elastic, perfectly elastic) • The determinants of supply elasticity • Other elasticities
Chapter 6 • Government policies that distort market equilibrium: price ceilings and price floors, taxes • Shortages and rationing • Evaluating price controls • Taxes on buyers, taxes on sellers – what’s the difference?
Chapter 6 • The incidence of a tax • No matter who you tax, the incidence is the same • Elasticity and tax incidence – the incidence largely falls on the side of the market who can least avoid the tax (i. e. , who has the lowest price elasticity).
Chapter 7 • Welfare Economics • How is welfare measured in the context of our supply and demand graphs? • Willingness to pay and the D curve • Consumer surplus • Willingness to sell (or cost) and the S curve • Producer surplus
Chapter 7 • • Total surplus Efficiency Evaluating different equilibria Who consumes the good? Who sells it? How is total surplus maximized? Adam Smith and the Invisible Hand Free market versus government intervention
- Slides: 22