Third Exam Study Guide
Popular in Micro Economics
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This 11 page Study Guide was uploaded by Mike Meng on Saturday March 28, 2015. The Study Guide belongs to ECON 142 at Kansas taught by Dr. Brian Staihr in Spring2015. Since its upload, it has received 148 views.
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Date Created: 03/28/15
First lecture after the second exam 03282015 Chapter 2 and 9 International trade Trade de cit when there are more import than export The US import form China Canada Mexico and European Union The US export to Canada Mexico China and European Union Oil Less oi import in the US because the US became the largest oil roducer in 2014 lllllllllllllll Production possibility frontierPPF or PPC P39 All possible combinations of output that can be produced Like Levi s can produce some amount of jeans or some amount of jean jackets with some of it s input There are three options to produce all jeans a jean jackets or some of each D p D D D D P43 PPC the quantity of each goods are on each axis PPC can represent a rm or a entire country P48 lt represent the tradeoff the resources used on one production and another D It s the fact that one country is better on producing a certain goods and another country is better on producing another goods lllllll D So of they specialize the goods they are good at producing and trade then both counties end up better off people in the counties consume more than counties operate by themselves B Any point to the right of a country s PPF means quothaving morequot It s more than the country can produce on it own The country is better off D D Terms of trade D Using money as tool of trading D 2 goods for 4 goods is the same term of trade as 2000 for 4000 D B When a country is better at both goods trading still make it better Comparative advantage P47 A country has a comparative advantage in the thing where the opportunity cost is lowest D The country should export the thing where the opportunity cost is lowest The country has the comparative advantage on this thing and the other country must have comparative advantage on the other goods Calculating Opportunity cost Country A Number produced of anumber produced of a Number produced of bnumber produced of a Country B Number produced of anumber produced of a Number produced of bnumber produced of a llllllllllllll Compare the opportunity cost who has the lower opportunity cost n which goods should trade out that goods Absolute Advantage P276 Autarkyljdon t trade P277 Decided the term of trade Find the number falls in between the opportunity cost of the each ood of each country Find the common denominator and look for the number in between If the opportunity costs are 14 and 34 Then we nd 12 Then the term of trade would be 1 and 2 or 2 and 1 Who doesn39t like the trading Producer The looser from free trade Free trade produces net bene t 5 for both countries Policy that restrict trade P285 Tariffs Quotas Also known as barriers to trade Tariffs Tariffs are simply taxes on imports politically strategy specific tariffs an amount of speci c Ad valorem tariffs the percentage of value The price increase the axes will increase Fun facts SmootHawley Taxes on older laborincentive industries imports clothing textiles shoes taxes should be put on products imported that compete with what produced in the country SmootHawley put taxes even on goods not produced in US which made the depression worse D B When tariffs is impose on imports P285 lllllllllf 39Illlllllllllll D The international price is shifted up to the new price it s added on the tariffs imposed D the quantity of imports is reduced the price consumer pays is higher the price the producers within the country is higher D D D and the quantity supplied by domestic producers increase D D The area of the rectangle is the amount of the revenue that government earns by imposing the tariffs The width of the rectangle is the amount imported D D After free trade the consumer surplus increase dramatically the producer surplus decrease the economic surplus increase in total but the producer are worse off B after imposing the tariff the import price increase with the country producer are better off but it cause dead weight loss most economists don39t support this D D Quotas P286 D Simply a numerical restriction on the quantity of a good that can be imported D Impacts of quota Same as tariff in terms of higher prices being paid Only difference is tariff revenue becomes quota rent Rent in an economics class in not what you pay your landlord Rent is additional D D D D D D D Impose a quota on goods imported H Price will increase until the quota ts the gap between the demand curve and supply curve by the domestic producers D D D D D The steps of sample question 1take demand and supply solve them for Q 2make difference between them 30 3 nd the P that makes that happen Effects of tariffs and quotas are the same consumers are worse off domestic producers who compete with imports are made better off both create dead weight loss Argument in support of tariffs and quotas P293294 1saving jobs increase employment but the increasing price caused by tariffs and quotas hurts more people who are in the market of good competed by domestic producers and imports lllllllllllllllll D tariff increase costs to customers D 2protecting higher wages D 3protecting infant industry P293 D growing industry It will be competitive will become bigger Quota will protect them until them become strong D but we spends more time and effort keeping protection then receiving bene ts from the growing 4protecting national security Next exam is next Monday Chapter 2 9 11 and part of 12 lllllllll Chapter 11 D Firms D Production is what rms do they take inputs and make output D How much a rm can produce the supply side Inputs Fixed don t have to increase to increase output Variable do need to increase to increase output graph of total output P358 D D D Production function D relationship of the maximum output that can be produces with different combinations of inputs P356 The addition output a rm produces when it hires one more unit of 39nputabor Marginal product change in production output change in input D D Marginal product of labor P357 D D D D The law of diminishing marginal productivitydiminishing marginal returns P357 B When adding units of variable input to xed input total output will increase but the increase will get smaller D There are less thing for more labor to do D D Average product total outputquantity of input D D Quantity total output total product D D What is the right amount of inputs and outputs D D Costs D 1Tota cost xed costs Variable costs B when the total cost increases the variable cost increases but the xed cost stay the same D 2Average total costATCtotal inputs total output P355 D 3the shape of the graph U shaped D 4marginal cost D the change in total costthe change in total output D the change in total cost when produce one more or one less P361 D the graph of the marginal cost is the one starts with going down and shots up P362 D 5Average Variable costs variable costtotal outputs D the shape of the curve is U shaped D D Formulas TC FC VC D ATC TC Q AVC VCQ AFC FCQ MC CHANG IN CCHANG IN Q TC Q ATC VC Q AVC Average variable cost is always lower that average total cost Exam cover until Chapter 12 P395 llllllllllllll Relationship between MC and AVC and MP and AP If labor is the variable input W is wage MC WMP AVC WAP When the scale of the rm changes the xed input changes Cost curves would shifts Changing the xed input take the production form short run from long run In the long run every inputs will change which causes a new good amount to produce if xed input increase the productivity will increase if the scale of the rm expands too big the productivity of the production will decrease P368 Long run cost curve Economies of scale When MC and LRATC decrease when output increase lt s related to the scale of return Scale of return often resulted by large xed costs the average cost reduces because the cost is spread on more products which is on the left side of the minimum Chapter 12 D Market structure D What is market D The set of buyers and sellers whose actions affect the price of a product or service D D Market structures D 1 Monopoly D Single rm provides this goodservice no close substitutes no other providers D Example local water company D 2 Oligopoly D small number212 of rms provide this goodservice D competing with each other substitutes for each other the price is charge based on the price other rms in the oligopoly charge D Example over night delivery D 3 Monopolistic Competition D large number of rms provide these goods or services D substitutes for each other H Example fast food restaurants Service industry D 4 Perfect competition D Very large number of rms provide the same good or service D Easy to enter the market as a seller D All rms produce the same product D ldentical product that rms have no control over the price the price is set in the over all market D There are so many substitutes B Any rm increase the selling price will not sell any thing D The demand curve of a single rm production in a perfect competition market is a horizontal line The price in the market stays the same The demand is perfect elastic D B When the marginal cost is bigger than the price the pro t starts to go down D We look for the point where the marginal cost is smaller and closest to the price which is the point where the rm is making the most pro t D For this rm price marginal revenue P280 D Marginal revenueprice in the table the change in total revenuechange in Quantity D The change in total revenue by selling one mire good D Where the P come close to the MC D In the table and the intersection of two curves in the graph D P283 Pro t per unit P ATC the vertical distance between the intersection between P curve and MC curve and the ATC curve B Total unit Pro t per unit time number of pro ts which is the squire lllllll
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