PRIN OF ECON (MICRO)
PRIN OF ECON (MICRO) ECON 201
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This 1 page Class Notes was uploaded by Arturo Runolfsson on Saturday September 26, 2015. The Class Notes belongs to ECON 201 at James Madison University taught by Bruce Brunton in Fall. Since its upload, it has received 10 views. For similar materials see /class/214164/econ-201-james-madison-university in Economcs at James Madison University.
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Date Created: 09/26/15
Economics 201 Fall 2010 FINAL EXAM REVIEW Main Concepts and Topics covered this semester you should still remember 0 principle of opportunity cost the marginal principle and the principle of diminishing marginal returns 0 the distinction between a change in demand or supply and a change in quantity demanded or supplied price elasticity of demand relationships between the cost variables basics of profitmaximization39 distinguishing features of the four different types of markets the basic game theory model prisoner s dilemma Role of Government Our first topic after the 3rd exam was the role of government Look over your notes for a definition of the concept of market failure see pp606l in the book You can also find material on this topic on Blackboard go to Course Documents 9 Notes folder 9 find item titled market failure Aside from providing a stable institutional environment necessary for markets to function effectively remedying market failures is the main rationale for government involvement in markets Two examples of market failure are public goods and externalities For both be able to explain why market failure occurs and how a better outcome might be achieved A related issue in chapter 6 is tax shifting Tax shifting refers to the fact that the burden incidence of a tax is rarely borne entirely by the producer who initially pays it Be able to graph and explain this issue recognizing that elasticity is the key determinant of how much of a tax is shifted forward or backward see ppl4044 Public choice economics tries to explain how governments actually operate Be familiar with the three different median voter selfinterest and specialinterest models presented in ch15 Economics of Pollution The theme is to use economic concepts to explain both the causes of pollution and possible ways to reduce it Know the distinction between social instead of social I sometimes used the term full cost and private cost how this relates to the concept of externalities and the market effects of a pollution tax What is the concept of an optimal level of pollution see the first part of chapter 16 I used this application of the marginal principle to explain how the EPA evaluates site cleanups the example lused in class is posted on blackboard in the Notes folder Another policy option is to use a system of marketable pollution permits Why would it be advantageous for firms to trade permits and how could you determine the equilibrium price Regarding marketable permits be familiar with problems like the ones we did in assignment 6 The assignment and key are on blackboard Imperfect Information It is important to understand the initial example in chapter 14 of the market for used cars The assumption for this topic is asymmetric information instead of the normal economic assumption that both buyer and seller have complete perfect information Notice how there are supply curves for different qualities that demand is referred to as willingness to pay how this is related to expectations and how the market reaches an equilibrium Note the conditions necessary for a market to achieve equilibrium with a mix of qualities eg a thin market We did a problem in assignment 7 that is a good example Aside from the usedcar example also be familiar with the insurance examples These models explain the real world problem of adverse selection What does moral hazard mean
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