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Micro Economics Study Guide Test 2

by: Kaci Peel

Micro Economics Study Guide Test 2 Econ 101

Marketplace > Washington State University > Economcs > Econ 101 > Micro Economics Study Guide Test 2
Kaci Peel

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About this Document

This study guide includes practice problems from the homework and vocab.
Micro Economics
Alejandro Prera
Study Guide
Economics, micro, exam
50 ?




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This 2 page Study Guide was uploaded by Kaci Peel on Sunday February 21, 2016. The Study Guide belongs to Econ 101 at Washington State University taught by Alejandro Prera in Fall 2015. Since its upload, it has received 47 views. For similar materials see Micro Economics in Economcs at Washington State University.


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Date Created: 02/21/16
Micro Economics Study Guide Exam 2▯ Example Problems: ▯ 1. If a quota is set above the equilibrium quantity, there will be: —>no effect from the quota ▯ 2. To be binding, a price ceiling must be set at a price: —>lower than the equilibrium price ▯ 3. Because there is often a trade-off between equity and efficiency, policies that promote equity often come at the cost of ————— efficiency, and policies that promote efficiency often result in ————— equity: —>decreased; decreased ▯ 4. Rent controls set a price ceiling below the equilibrium price and therefore the quantity demanded ————— the quantity supplied: —>exceeds ▯ 5. Maria wants to give away her book for free but her neighbor is willing to pay her $10 for it. Maria experiences a ————— surplus —————:—>producer; gain▯ 6. When the government removes a binding price floor: —>quantity demanded will increase and quantity supplied will decrease ▯ 7. Suppose supply has an upward slope and demand has a downward slope. If there is a decrease in demand, total surplus will: —>decrease ▯ Vocab and Other Notes: ▯ *Elasticity: measure of responsiveness ▯ *elastic: e>1 (flat)▯ *inelastic: e<1 (steep)▯ *unit elastic: e=1▯ *perfectly elastic: e=infinity (horizontal line)▯ *perfectly inelastic: e=0 (vertical line)▯ *traditional % change: ((ending-initial)/initial)x100▯ *midpoint % change: ((ending-initial)/((ending+initial)/2))x100▯ *PED: % change in quantity demanded/% change in price ▯ *PED will always be negative ▯ *more substitutes=more elastic ▯ *luxuries are more elastic; necessities are less elastic ▯ *price effect: change in price leads to a change in revenue ▯ *quantity effect: change in price leads to a change in units sold ▯ *consumer problem: maximize satisfaction from goods/services ▯ *producer problem: maximize profits ▯ *Explicit cost: cost that can be monetized ▯ *Implicit cost: Opportunity cost of an activity ▯ *Accounting Profit=total revenue-total cost▯ *Economic Profit=total revenue-total cost-opportunity cost ▯ *Optimal Quantity: quantity that generates the maximum possible net gain ▯ *Principle of Marginal Analysis: optimal quantity is the quantity at which MB=MC


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