New User Special Price Expires in

Let's log you in.

Sign in with Facebook


Don't have a StudySoup account? Create one here!


Create a StudySoup account

Be part of our community, it's free to join!

Sign up with Facebook


Create your account
By creating an account you agree to StudySoup's terms and conditions and privacy policy

Already have a StudySoup account? Login here

Econ 2010 Final Study Guide

by: Rosie Briggs

Econ 2010 Final Study Guide ECON 2010

Marketplace > University of Colorado > Economcs > ECON 2010 > Econ 2010 Final Study Guide
Rosie Briggs
GPA 4.0

Preview These Notes for FREE

Get a free preview of these Notes, just enter your email below.

Unlock Preview
Unlock Preview

Preview these materials now for free

Why put in your email? Get access to more of this material and other relevant free materials for your school

View Preview

About this Document

Study guide for the final exam. Key ideas from the section that will be on the exam!
Principles of Economics: Microeconomics
Dr. De Bartolome
Study Guide
50 ?




Popular in Principles of Economics: Microeconomics

Popular in Economcs

This 4 page Study Guide was uploaded by Rosie Briggs on Thursday April 28, 2016. The Study Guide belongs to ECON 2010 at University of Colorado taught by Dr. De Bartolome in Spring 2016. Since its upload, it has received 140 views. For similar materials see Principles of Economics: Microeconomics in Economcs at University of Colorado.


Reviews for Econ 2010 Final Study Guide


Report this Material


What is Karma?


Karma is the currency of StudySoup.

You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!

Date Created: 04/28/16
Microeconomics Final Exam Study Guide Key Ideas ● Firm Production Decisions ○ Short Run ■ Presence­ should the firm produce or shut down? ● If Rev > VC, or Price > Min AVC ■ Level­ at what output should they produce? ○ Long Run ■ Presence­ should the firm produce or exit the  industry? ■ Level­ what output would make the most profit? ● If Rev > TC, or Price > Min ATC ○ Depending on whether the firms in the industry are making profits  or losses, new firms will either enter or existing firms will exit. However, this will  cause a shortage or a surplus, and the price will always return to what it was  originally.  ○ New Technology­ who gains? ■ Short Run: Shareholders gain from high profits,  consumers gain with low prices.  ■ Long Run: Consumers gain (profits go away, price  stays low) ● Remember: No one makes profit in  the LONG run! ● Profits ○ Revenue ­ Variable Costs = Operating Profit ○ Operating Profit ­ Fixed Legal Cost = Accounting Profit ○ Accounting Profit ­ Cost of Shareholder Funds = Economic Profit ● Monopoly­ 1 firm and many buyers ○ As the market moves away from being perfectly competitive, net  benefit falls ○ Monopoly raises price above competitive levels ■ Higher profits for the one industry/company  ○ Barriers to entry ■ Legal barrier: Patent/copyright ● Provides incentive for original  ideas/research ■ Technical barrier ● Other firms don’t have the  technology/knowledge to make it ■ Resource barrier ● Key resource owned by a single firm ■ Cost barrier ● High fixed cost­ firms can’t afford to  enter ○ Industries with large  fixed cost: better to only have 1 firm because FC is only  paid once ○ Monopoly demand curve = market D curve = downward sloping ○ Monopolies are price­MAKING ○ If price falls in a monopoly, price falls on all existing sales too  ○ Monopoly decision­making: Can either: ■ Choose price and this sets output or ■ Choose output and this sets price ○ Net benefit loss w/ monopoly  ■ Total well­being not as large as possible in  monopolies ■ Produces all units until MR = MC ■ To find output and price: intersection of MR and  MC, followed up to the price at that quantity on the D curve.  ● NET BEN FROM BUYING= MB­P  (from buying first unit) + …. MB­P (from buying last unit at  whatever quantity is at the intersection­ 60).  ● OPERATING PROFIT= P­MC (of  first unit) +.... P­MC (of 60th unit)  ● TOTAL NET BEN CREATED = NB  FROM BUYING + OPERATING PROFIT (Shareholder profit) ■ Deadweight loss = NB lost because not enough  units get made ● = MB ­ MC (of 61st unit) + … MB ­  MC (of unit of competitive market equilibrium Q­ what it would be if it wasn’t a monopoly) ● Causes: ○ Monopoly raises the  price to get more profits, and thereby reduces the quantity. Well­being is lost on goods not made.  ○ Monopoly shifts  surplus from consumers to shareholders. In doing so,  some surplus is lost.  ○ Comparison: Monopoly vs Competitive Firm ■ Competitive firm: ● P = MC ● When individual compares MB = P,  in fact compares MC = MB ● Individual decisionmaking  maximizes well­being ■ Monopoly: ● Price > MR = MC ● So when indiv compares MB w/  price, actually comparing MB w/ something BIGGER than MC ● So they buy less units than in a  competitive market ○ Monopolies short­lived ■ Profits lead to entry of new firms ■ Price falls, well­being increases ○ Firms take over competitors or merge ■ Fewer firms = higher price = higher profit ○ Government price regulations ■ Set at where the monopoly would break even ● Oligarchy ○ Few firms (cars, airlines) ○ Fewer firms raise price, increase well­being LOST ● Externalities ○ When 1 person’s actions directly affect another person­ the effect  is outside of the decisionmaker ○ EMC= External Marginal Cost ■ Well­being lost by others if an individual undertakes extra unit of activity ○ EMB= External Marginal Benefit ■ Well­being gained by others if an indiv undertakes  extra unit of activity ○ MB of society = MB of buyer + EMB ­ EMC ○ MC of society = MC of firm + EMC ­ EMB ○ Net benefit ■ Market maximizes NB of buyers and sellers. If they  ignore externalities, well­being of society is not maximized. ■ Firm not paying full cost of actions. Thinks MC of  firm < MC society, thinks production is cheaper than it is b/c ignores EMC, produces too much ■ Planner compares MC of society with MC of  society, and produces MORE if MC society < MB society ● Firm compares MC firm with Price ● Market sets Price = MB buyer ● So in the market, firm compares MC  firm w/ MB buyer. Planner and firm make different comparisons.  ● Net benefit is lost on additional units  because MC>MB.  ■ NB lost = MC soc­ MB soc (of first unit) +... MC soc  ­ MB soc (of unit at original intersection).  ● Pigou Taxes ○ Pigou tax = price of EMC ○ Makes firm internalize everything, makes MC = MC, maximizes  well­being of society  ○ ALWAYS WORKS ● Cap and Trade  ○ Government figures out how many units of pollution maximize Net  Benefit, sells that many to firms.  ■ Within that limit, firms can sell if they have extra,  buy if they need more.  ○ If government GIVES permits to firms, they usually distribute it  unevenly.  ■ Firms will sell and buy to get it back to what the Q  would be under a Pigou Tax, or the intersection of S and D. This way, the  government doesn’t make revenue.  ○ If government SELLS permits to firms, firms buy this same  quantity ^ ■ Government makes revenue ● Crude Regulation ○ EPA sees that without government intervention, pollution is at  3800. We want it to be at 2800, which is the amount that will maximize well­ being.  ○ So, they order industries to cut back a certain percentage ○ This makes it uneven­ could cut back one industry too much, and  another not enough.  ● Incentives ○ With Pigou Taxes and Cap and Trade, firms and industries are  incentivized to pollute less so that they pay less tax. ○ With regulation, firms are incentivized to bargain with the EPA,  which leads to government agencies being “captured by industry”. 


Buy Material

Are you sure you want to buy this material for

50 Karma

Buy Material

BOOM! Enjoy Your Free Notes!

We've added these Notes to your profile, click here to view them now.


You're already Subscribed!

Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'

Why people love StudySoup

Jim McGreen Ohio University

"Knowing I can count on the Elite Notetaker in my class allows me to focus on what the professor is saying instead of just scribbling notes the whole time and falling behind."

Amaris Trozzo George Washington University

"I made $350 in just two days after posting my first study guide."

Bentley McCaw University of Florida

"I was shooting for a perfect 4.0 GPA this semester. Having StudySoup as a study aid was critical to helping me achieve my goal...and I nailed it!"

Parker Thompson 500 Startups

"It's a great way for students to improve their educational experience and it seemed like a product that everybody wants, so all the people participating are winning."

Become an Elite Notetaker and start selling your notes online!

Refund Policy


All subscriptions to StudySoup are paid in full at the time of subscribing. To change your credit card information or to cancel your subscription, go to "Edit Settings". All credit card information will be available there. If you should decide to cancel your subscription, it will continue to be valid until the next payment period, as all payments for the current period were made in advance. For special circumstances, please email


StudySoup has more than 1 million course-specific study resources to help students study smarter. If you’re having trouble finding what you’re looking for, our customer support team can help you find what you need! Feel free to contact them here:

Recurring Subscriptions: If you have canceled your recurring subscription on the day of renewal and have not downloaded any documents, you may request a refund by submitting an email to

Satisfaction Guarantee: If you’re not satisfied with your subscription, you can contact us for further help. Contact must be made within 3 business days of your subscription purchase and your refund request will be subject for review.

Please Note: Refunds can never be provided more than 30 days after the initial purchase date regardless of your activity on the site.