×
Log in to StudySoup

Forgot password? Reset password here

IC - ECON 12200 - Study Guide - Final

Created by: Eliza Shedden Elite Notetaker

> > > > IC - ECON 12200 - Study Guide - Final

IC - ECON 12200 - Study Guide - Final

School: Ithaca College
Department: Economics
Course: Principles of Economics: Microeconomics
Professor: Elizabeth Kaletski
Term: Spring 2016
Tags: Microeconomics, final, monopoly, oligopoly, competition, and costs
Name: Principles of Microeconomics Final Study Guide
Description: Includes Chapter 10,11,13,14,17. Everything that is included on the final exam.
Uploaded: 12/16/2017
0 5 3 83 Reviews
This preview shows pages 1 - 2 of a 3 page document. to view the rest of the content
background image Microeconomics  Final  Exam  Study  Guide     Chapter  10:  
 
Externalities  in  our  daily  lives:  It  is  an  uncompensated  impact  of  a  person’s  actions  on  
the  well  being  of  a  bystander.  
•  Negative  Externalities=  Air  pollution,  barking  dog,  second-­‐hand  smoke   o  Social  Cost  (Private+  External  Cost),  External  Cost  (Value  of  the  negative   impact  on  bystanders)   o  Market  quantity  larger  than  socially  desirable  (tax  goods  with  negative   externalities)   •  Positive  Externalities=  vaccinations,  people  going  to  college,  not  contaminating     o  Private  value  (direct  value  to  buyers),  External  Benefit  (Value  of  positive   impact)   o  Market  quantity  smaller  than  socially  desirable  (subsidize  goods  with   positive  externalities)   Public  Policies  Toward  Externalities:   •  Command  and  control  policies:  limits  quantity  of  pollution  emitted,  firms  have  to   adopt  particular  technology  to  reduce  emissions.     •  Market-­‐  Based  Policies:  Provide  incentives  so  that  private  decision-­‐makers  will   choose  to  solve  problem  by  themselves.  (Corrective  taxes/tradable  pollution  
permits)  
Tradable  Pollution  Permits:   •  Reduces  pollution  with  a  lower  cost  
•  If  firms  have  a  lower  cost  then  they  can  sell  their  permits/only  a  fixed  amount  of  
permits   •  Firms  with  high  costs  have  to  buy  permits  from  others   Coase  Theorem:   •  Private  parties  bargain  over  allocation  of  resources,  can  figure  out  themselves    
•  Example:  Neighbors  dog  barking,  can  pay  them  off  if  their  benefit  is  lower  than  
cost     •  Doesn’t  always  work  because  of  stubbornness,  coordination  problems,   transaction  costs    
Chapter  11:  
 
Characteristics  of  Goods:  
•  Excludableà  If  person  can  be  prevented  from  using  it  (wireless  internet)  
•  Rival  in  Consumption  à  If  one  person’s  use  of  it  diminishes  another’s  (food)  
•  Private  goods  à  Excludable,  rival  in  consumption  (food)  
•  Public  Goods  à  Not  excludable,  non  rival  (national  defense)  
•  Common  resources  à  Rival  but  not  excludable  (fish  in  ocean)  
•  Club  Goods  à  Excludable  but  not  rival  (cable  TV)  
•  Tragedy  of  the  Commons  à  Illustrates  why  common  resources  get  used  more  
than  socially  desirable     •  Free  Rider  à  Person  who  receives  benefit  of  a  good  but  avoids  paying  for  it,  in   the  end  the  good  is  not  products,  even  if  they  value  good  higher  than  cost    
background image Chapter  13:    
 
What  are  costs?   •  Assume  firm’s  goal  is  to  maximize  profit.    
•  Profit  =  Total  Revenue  –  Total  Cost    
•  Explicit  Costs  =  Require  outlay  of  money  (paying  wages)  
•  Implicit  Costs  =  Do  not  require  outlay  (opportunity  cost  of  owners  time)  
Economic  Profit  vs.  Accounting  Profit:   •  Accounting  Profit  =  total  revenue  –  total  explicit  costs    
•  Economic  Profit  =  total  revenue  –  total  costs  (implicit  and  explicit)  
Production  Function:   •  Shows  relationship  between  quantity  of  inputs  used  to  produce  and  quantity  of   output  of  the  good   Marginal  Product:   •  Is  the  increase  in  output  arising  from  additional  unit  of  that  input  
•  Marginal  product  of  labor  (MPL)=  Change  in  quantity/change  in  labor  
•  Diminishing  marginal  product:  declines  as  quantity  of  input  increases  
Fixed  and  Variable  Costs:   •  Fixed  Costs:  Do  not  vary  w/  quantity  of  output  increased  (rent)  
•  Variable  Costs:  Vary  with  quantity  produced  
•  Total  Cost  =  FC+VC  
•  Marginal  Cost  =  change  in  TC/change  in  quantity  
•  Average  total  cost  =  total  cost/quantity  of  output  
Costs  in  the  Short  Run  and  Long  Run   •  Short  run:  some  inputs  are  fixed  (factories)  à  FC  
•  Long  Run  All  inputs  are  variable  (build  more  factories)  
•  LRATC:  The  firm  can  change  to  a  different  factory  size  in  the  long  run,  but  not  the  
short  run   •  Economies  of  Scale:  Occur  when  increasing  product  allows  greater  specialization  
•  Diseconomies  of  scale:  due  to  coordination  problems  in  large  organizations  
  Chapter  14-­‐17:  
 
Monopoly  and  Competition:  
•  Perfect  Competition:  Many  firms,  all  the  same   o  Each  buyer  and  seller  is  a  “price  taker”,  takes  price  as  given    
o  Freely  enter  and  exit  the  market    
o  Internet  related  industries,  financial  markets,  food  vendors  
o  TR=  PxQ  
o  Marginal  Revenue  =  change  in  total  revenue/change  in  quantity  
•  Monopoly:  One  firm     o  There  is  market  power,  they  can  influence  prices    
o  Other  firms  cant  enter  the  market    
o  Natural  monopoly:  gas/electricity  companies    
o  Price  discrimination:  Selling  same  good  at  different  prices  to  different  
buyers  (age)   •  Oligopoly:  Only  a  few  sellers  offer  similar  or  identical  products   o  Game  theory:  study  how  people  behave  in  strategic  situations  

This is the end of the preview. Please to view the rest of the content
Join more than 18,000+ college students at Ithaca College who use StudySoup to get ahead
3 Pages 39 Views 31 Unlocks
  • Better Grades Guarantee
  • 24/7 Homework help
  • Notes, Study Guides, Flashcards + More!
Join more than 18,000+ college students at Ithaca College who use StudySoup to get ahead
School: Ithaca College
Department: Economics
Course: Principles of Economics: Microeconomics
Professor: Elizabeth Kaletski
Term: Spring 2016
Tags: Microeconomics, final, monopoly, oligopoly, competition, and costs
Name: Principles of Microeconomics Final Study Guide
Description: Includes Chapter 10,11,13,14,17. Everything that is included on the final exam.
Uploaded: 12/16/2017
3 Pages 39 Views 31 Unlocks
  • Better Grades Guarantee
  • 24/7 Homework help
  • Notes, Study Guides, Flashcards + More!
Join StudySoup for FREE
Get Full Access to IC - ECON 12200 - Study Guide - Final
Join with Email
Already have an account? Login here