1 / 13

AAE 320 Exam # 1 Review

AAE 320 Exam # 1 Review. Paul D. Mitchell. Goal. Explain what to expect for exam Overview topics on exam Give idea of how to study. What to Expect. Organization & format similar to last year Mostly problems that test your knowledge of major concepts

angie
Download Presentation

AAE 320 Exam # 1 Review

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. AAE 320 Exam # 1 Review Paul D. Mitchell

  2. Goal • Explain what to expect for exam • Overview topics on exam • Give idea of how to study

  3. What to Expect • Organization & format similar to last year • Mostly problems that test your knowledge of major concepts • Few other questions: maybe true false or short answer? • Look at previous exams on the class page for example format and questions

  4. Major Topics • We have covered three main topics 1) Economically optimal input use with a single input production function 2) Economically optimal input use with a multiple (2) input production function 3) Cost Economics: opportunity cost and economically optimal output level

  5. Single Input Production • Examined economically optimal input use in tabular and functional forms • Economic problem: Choose x to maximize p = pf(x) – rx • Optimality condition: VMP = r or MP = r/p • Tabular Approach: Think Brk #1 and #2, Problem Set #1 Question 1 • Calculus Approach : Think Brk #3 and #4, Problem Set #1 Question 2

  6. Single Input Production • You will want to know calculus, as there will be a problem like Think Break #4, or Problem Set #1 Question #2 • See Calculus review on homepage, plus notes and Think Break #3 • Remember: set up problem, find FOC, solve for input X, check SOC, then find output and net returns/profit.

  7. Multiple Input Production • Examined economically optimal input use in tabular and functional forms • Economic problem: Choose x and y to maximize p = pf(x,y) – rxx – ryy • Optimality conditions: VMPx = rx and VMPy = ry, plus MPx/MPy = rx/ry • Ratio of MP’s = Marginal Rate of Technical Substitution = Slope of Isoquant = – DY/DX – DY/DX = rx/ry(notice the switch in x and y)

  8. Multiple Input Production • Know how to find economically optimal input combination • Tabular approach: MRTS = input price ratio (Think Break #6, Problem Set #2 Question 1) • Calculus approach: (Think Break # 7, Problem Set #2 Question 2 • Partial Derivatives review: Think Break # 5 • Remember: set up problem, find FOC’s, solve for inputs X and Y, check SOC, then find output and net returns/profit.

  9. Cost Economics • We covered three topics within cost economics • 1) Opportunity cost and economic profit • 2) Different types of cost functions and their relations: TC, VC, FC, ATC, AVC, MC • 3) Economically optimal output condition: p = MC, connection with min ATC, min AVC, profit and supply

  10. Opportunity Cost • How to calculate opportunity costs (Problem Set #2 Question 3) • What it means if economic profit is positive, zero, or negative • Using economic profit for decision making: Think Brk #8, Problem Set #2 Question 3

  11. Cost Functions • Know the definitions (TC, MC, etc.) and how to draw them in proper relations (see class overheads, plus old exam) • Know how to calculate them in Tabular form and how to identify economic optimum in table (Think Break #11, Problem Set #3 Question 2) • Interpretation: p = pQ – C(Q), so p = MC defines p max which is supply curve, but have lower limits: min ATC, min AVC (see class overheads, plus old exam) • Use calculus to maximize p = pQ – C(Q) (Problem Set #3, Question 3)

  12. Don’t Forget • Don’t forget about the first few lectures! • Last year’s exam had some true/false that tested basic knowledge of these materials • Wisconsin Agriculture • Strategic Management • What it takes to be great • The Flat Objective Problem • Agribusiness Job Market Preparation

  13. How to Study • Know the Think Breaks and the Problem Sets and how to work these types of problems from memory • Read over or do from memory the old exams • Exam will focus on the optimality conditions and their use to make decisions on input use/output production, with a few question on the material covered in the first lectures • Email/call me with questions, we can meet in my office if needed

More Related