Second Micro Exam

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Principles of Microeconomics Second Exam: March 15th

Chapters: 11, 12, 13, 14, 15

Ideas on the Exam (a good list, but not an exhaustive list; you are responsible for all material from the text and lectures even if it's not listed here)

Game Theory

The Prisoners' Dilemma

Dominant strategies

Nash equilibrium

Supply Costs

The meaning and behavior of business costs:

a.      Implicit and explicit costs

b.      Fixed and variable costs

c.      TC, ATC, FC, AFC, VC, AVC, MC

d.      The link between the Law of Diminishing Returns and the behavior of VC and TC

e.      The relationship between ATC, AVC, and MC

Economic profit, accounting profit, and normal Profit

Perfectly Competitive Industries

Characteristics of a perfectly competitive industry

Shape of the demand curve for a perfectly competitive firm and the industry

Behavior of the MR curve

The profit-maximizing choice of output (MR = MC)

The shut down decision for a perfectly competitive firm

Why perfectly competitive industries will tend toward normal profit in the LR

Monopolistic Industries

Characteristics of a monopoly

Natural and legal monopolies

Shape of the demand curve for a monopoly firm and the industry

Behavior of the MR curve

The profit-maximizing choice of output (MR = MC) and price

Price discrimination

Effects of monopolies on consumers

Anti-monopoly legislation

Problems you should be able to work

Use payoff matrices in a game theory example

Calculating costs and revenues, including TC, FC, VC, ATC, AFC, AVC, MC, MR, and TR

Calculating economic and accounting profits

Determining the profit-maximizing level of output for a firm

Determining the amount of profit or loss from a level of output

Determining whether a firm should operate or shut down

Determining the price a monopolist will set