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USMA / Macro Economics / ECON 201 / economics midterm study guide

economics midterm study guide

economics midterm study guide

Description

School: United States Military Academy
Department: Macro Economics
Course: Economics
Professor: Major bate
Term: Fall 2016
Tags: Economics, Microeconomics, Microeconomic, and Economics Microeconomics ECON 200 UW
Cost: 50
Name: Economics Midterm Study Guide
Description: This study guide goes over problems that will assist in law of demand, law of supply, shifters in demand and supply, fixed costs vs. average costs, and elasticity.
Uploaded: 11/15/2016
8 Pages 167 Views 0 Unlocks
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SS201 Study Guide 16­2 for MICRO WRIT Definitions+Terms Economics Positive Statements Normative Statements Controlled Experiment Randomization Correlation  Causation Omitted variable bias Marginal Benefit  Marginal Benefit/$ Demand Opportunity Cost Marginal Cost Variable Cost+ Average Variable Cost Fixed Cost + Average Fixed Cost Total Cost + Average Total Cost Consumer Surplus Producer Surplus  Social Surp lus  Dead­weight loss  Price Elasticity of Demand+ Elastic & Inelastic demand Cross Price Elasticity + compliments & substitutes Income Elasticity+ normal & inferior goods Law of Demand Law of Supply Factors that shift demand Factors that Shift supply Solve  Equilibrium quantity & price in perfect competition (from equations) Optimal bundles of goods (given prices and marginal benefits) Graph  Supply, Demand, equilibrium price, equilibrium quantity (from equations) Supply & Demand shifts, equilibrium  Firm MC, ATC, AVC, identify prices where firm is profitable, zero profit, negative profits but produce in  short run, and negative profits/shut down Indifference Curve and Budget ConstraintCadet ID Number:_____________________                          Section:  ____, _____hr SS201/SS251                          Micro Writ A  Arc Price Elasticity of Demand = (Q1+Q2)/2÷(P2−P1) (Q2−Q1) (P1+P2)/2


(3) What will the change in consumer surplus be if the government decided to fix and hold the price of cell phones at $80?



 a. (3) Define “correlation” and explain what is meant by a negative correlation.   b. (3) Describe the omitted variable bias and give one example of this bias. Brazil is the world's biggest coffee grower and exporter, and the size of its annual harvest can have a  strong effect on the global market. Brazilian farms experienced a major freeze this year, and seriously  damaged their annual crop.  Assume the market for coffee is perfectly competitive.   a. (4) Using a graph of supply and demand, show how this shock affects the world market for  coffee, and predict what will happen to the equilibrium and price.  Label your graph to depict the  correct axis, supply and demand curves, and the following points: P1, P2, Q1, Q2, E1, and E2. 1 Cadet ID Number:_____________________                          Section:  ____, _____hr SS201/SS251                          Micro Writ A  A home is probably the largest purchase the average American will make in his or her life.  Last year,  however, consumers’ income fell substantially.  Assume the market for housing is perfectly competitive. a. (4) Using a graph of supply and demand, show how this shock affects the US housing market, and  predict what will happen to the equilibrium and price.  Label your graph to depict the correct axis,  supply and demand curves, and the following points: P1, P2, Q1, Q2, E1, and E2. 2Cadet ID Number:_____________________                          Section:  ____, _____hr SS201/SS251                          Micro Writ A  Given the market for corn with a demand curve represented by  (Qd = ­P + 9) and a supply curve  represented by (Qs = 2*p): P ($/bushel of wheat) 10 8 6 4 2 4 8 12 16 20 Q (bushels of wheat) a. (4) Graph and label the supply curve, demand curve, equilibrium price, equilibrium quantity for  corn exchanged in this market. b. (4) Calculate algebraically the market equilibrium price and quantity of corn. 3Cadet ID Number:_____________________                          Section:  ____, _____hr SS201/SS251                          Micro Writ A  IV. Consumers and Incentives (22 points) Jack has an income of $150 per month that has to be spent on two goods: Shoes and Jeans.  Quantity (units) Shoes ($20/pair)

Jeans ($10/pair)

Marginal Benefits 

Marginal Benefits 

0 ­

­

1 40

35

2 33

33

3 28

22

4 23

15

5 20

10

6 15

7.5


What might be going on in the market to account for this observation?



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a. (3) Given Jack’s choices for goods, calculate Jack’s opportunity cost for consuming 1 pair of  shoes. b. (4) From the table above, estimate the bundle that maximizes Jack's well­being. 4Cadet ID Number:_____________________                          Section:  ____, _____hr SS201/SS251                          Micro Writ A  a. (3) Calculate the market­wide consumer surplus when the market price is $50. b. (3) What will the change in consumer surplus be if the government decided to fix and hold the  price of cell phones at $80? 5Cadet ID Number:_____________________                          Section:  ____, _____hr SS201/SS251                          Micro Writ A  Use the following table that contains actual price and quantity data for the U.S. gasoline market from the  United States Energy Information Agency (EIA) to answer the following questions. Gasoline Market Data Date Price Gallons Sold May 2014 3.60 20.40M Jun 2014 3.63 20.73M Jul 2014 3.54 20.71M Aug 2014 3.43 20.86M Sep 2014 3.35 20.75M Oct 2014 3.12 27.01M


14 per unit, how many workers should the bakery hire, and how many units should the bakery produce in order to maximize profits?



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a. (3) Calculate the price elasticity of demand for the change in price between July 2014 and August  2014 using the midpoint formula.  Interpret this price elasticity as inelastic or elastic.  If the oil  industry would like to increase revenue, should it increase or decrease its prices?  b. (3) Use your knowledge of the determinants of price elasticity of demand to give reason for your  answer. c. (3) Notice that between May and June 2014 it appears that the gasoline market does not follow the  law of demand.  What might be going on in the market to account for this observation? 6Cadet ID Number:_____________________                          Section:  ____, _____hr SS201/SS251                          Micro Writ A  The following table shows the output and employment figures for a bakery Number of Workers Output per Day (units) Marginal Product Variable Cost ($) Fixed Cost ($) Total Cost ($) Average Total Cost ($) Average Fixed Costs ($) Average Variable Cost ($) Marginal Cost ($) 0 0 x 0 300

x x x x 1 150

20 300

2 325

40 300

3

150 60 300

4

143 80 300

We also discuss several other topics like write orbital diagram for au . determine if the ion is diamagnetic or paramagnetic.
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a. (6) Calculate the missing values in the table.  b. (3) This firm begins to experience diminishing returns when the _____ worker is hired. c. (3) Explain why this firm does not experience diminishing marginal returns prior to that worker  being hired. d. (3) Given a market price of $0.14 per unit, how many workers should the bakery hire, and how  many units should the bakery produce in order to maximize profits?  7
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