Review powerpoint chapters 7 9
Download
1 / 40

Review PowerPoint Chapters 7-9 - PowerPoint PPT Presentation


  • 99 Views
  • Uploaded on
  • Presentation posted in: General

Review PowerPoint Chapters 7-9. AP Microeconomics Mr. Meier Penn Manor HS. Test 1-9 estimated Breakdown. Unit 1 (~3 questions) Unit 2 (~3-4 questions) Unit 3 (~12-14 questions) Unit 4 (~20-24 questions). A – AVC+AFC = ATC … ATC * Q = TC. Which of the following is true?

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha

Download Presentation

Review PowerPoint Chapters 7-9

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.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -

Presentation Transcript


Review PowerPointChapters 7-9

AP Microeconomics

Mr. Meier

Penn Manor HS


Test 1-9 estimated Breakdown

Unit 1 (~3 questions)

Unit 2 (~3-4 questions)

Unit 3 (~12-14 questions)

Unit 4 (~20-24 questions)


A – AVC+AFC = ATC … ATC * Q = TC

  • Which of the following is true?

    • TC = (AVC + AFC) * Q

    • TFC = TC at all levels of output

    • AVC + AFC = TC

    • MC = TC – TFC

    • ATC = AVC + MC


MCcurve above the Shutdown Point

  • A firm’s short run supply curve is equivalent to its _________________ above _________________.


C – Implicit costs = TC – accounting costs

  • Implicit costs of a “Mom & Pop” owned business include

    • Their accounting profits

    • Their to accounting costs

    • The earnings that could have been earned by using resources elsewhere

    • The revenue their business earned this year

    • The Average Revenue of other Mom & Pop businesses


B – that would be DISeconomies of Scale

  • Which of the following is NOT correct about economies of scale?

    • They are associated with increases in output

    • They are associated with the increasing portion of the LR ATC curve

    • They are associated with the decreasing portion of the LR ATC curve

    • They demonstrate decreases in per unit average total costs as plant size increase

    • They may be caused by increased specialization and technology


D = but can you EXPLAIN why?

  • Marginal Cost (MC) is equal to average variable cost (AVC) and Average Total Cost (ATC) when:

    • MC intersects AVC and ATC at their maximum points

    • AVC and ATC intersect MC at its maximum point

    • AVC and ATC intersect MC at its minimum point

    • MC intersects AVC and ATC at their minimum points

    • The economy is in the recovery phase of the business cycle


Productive: YESAllocative: YES

  • In the long run, a perfectly competitive firm without government intervention will ALWAYS achieve:

    • Productive Efficiency?

    • Allocative Efficiency?

      (Yes or no – for each)


A – P.C. has the most competitors

  • For which of the following market structures are the most substitutes available to consumers?

    • Perfect Competition

    • Monopolistic Competition

    • Oligopoly

    • Monopoly

    • All of the above


A – Perfectly competitive firm… means perfectly elastic demand (why don’t they just drop the price $0.01 and get all the business???

  • Which of the following market structures has the greatest degree of elasticity?

    • Perfect Competition

    • Monopolistic Competition

    • Oligopoly

    • Monopoly

    • All of the above


P3, P1, P3

  • At what P will this firm earn a normal profit?

  • Below what P will this firm shut down in the short run?

  • Above what P will this firm earn economic profit?


P4, Q3, because P<AVC (shutdown pt.) .. Aka they would not even be covering their variable costs.

  • At what P will this firm earn an economic profit?

  • In the long run, what will be this firm’s output level?

  • A firm never choose to produce at price P BECAUSE…


D same, S decreases, P increasesATC same, MR increases, Output for typical firm increases as P rises.

  • Is this graph showing a firm in SR or LR ?

  • In the LR, how will the following change?

    • On MarketGraph: Demand, Supply, Price

    • On FirmGraph: ATC, MR, Output level


A – Tons of sellers

  • Which of the following market structures has the largest number of sellers?

    • Perfect Competition

    • Monopolistic Competition

    • Oligopoly

    • Monopoly

    • All of the above


A – P.C. is a PRICE TAKER

  • Which of the following market structures is NOT a price maker?

    • Perfect Competition

    • Monopolistic Competition

    • Oligopoly

    • Monopoly

    • All of the above


B –- MC = MR !MC = MR !!!MC = MR !!!!!!!!!!!!!!!!!!!!!

  • Firms maximize their profits by producing a level of output at which

    • MC = AFC

    • MC = MR

    • P = ATC

    • MR = AVC

    • P = AVC


B –- MC = MR !MC = MR !!!MC = MR !!!!!!!!!!!!!!!!!!!!!

  • All Firms maximize their profits by producing where:

    • MC = AFC

    • MC = MR

    • P = ATC

    • MR = AVC

    • P = AVC


C – If a firm cannot even cover its VARIABLE costs, it would be better off telling its workers to stay home (profit maximizing Q = zero

  • In the short run, the shutdown point is equal to

    • Minimum point on the ATC curve

    • Maximum point on the ATC curve

    • Minimum point on the AVC curve

    • Maximum point on the AVC curve

    • Minimum point on the MC curve


D – remember MR=D=AR=P ??

  • The demand curve for a typical firm operating under perfect competition is

    • Upward sloping

    • Downward sloping

    • Perfectly vertical

    • Perfectly horizontal

    • Concave to the origin


C – P does not equal min. AVC if there are any fixed costs at all.

  • Which of the following is NOT typically true for the perfectly competitive firm in the long run?

    • P = Minimum ATC

    • P = Marginal Revenue

    • P = Minimum AVC

    • P = Marginal Cost

    • The firm earns a normal profit


D – C.S. = willingness to pay MINUS what you actually pay

  • Consumer surplus is

    • The price of a good divided by its marginal utility

    • The marginal utility of a good divided by its price

    • The total utility of the good

    • The difference between what the good is worth to the consumer and its market price

    • Consumers’ annual savings


(a) PS1 = $4.5 million(b) PS2 = $2 million(c) DWL = $1 million(d) GR = $4 million

  • Given this $2 per unit tax, calculate the following:

    (a) PS before the tax

    (b) PS after the tax

    (c) DWL

    (d) Total Gov’t Revenue


E – if MU/P for each is equal, and you spent all your money, you have maximized

  • The utility maximizing rule is to choose the combination of goods that …

    • Has the highest marginal utility of each good in the basket.

    • Has the lowest prices for the goods

    • Has the greatest difference between marginal utility and price

    • The marginal utility over price for each good is equal.

    • The marginal utility over price for each good is equal, within the budget constraint.


C … A … B

  • Copy this graph, and label the following with the given letter

    • Constant Returns to Scale

    • Diseconomies of Scale

    • Economies of Scale


A. specialization/division of laborB. Becoming TOO large, management/bureaucratic issues

  • Give one possible cause your firm could experience:

    • Economies of Scale

    • Diseconomies of Scale


C – the other options COULD happen… but MU will decrease after the first unit for almost all goods.

  • According to the principle of diminishing marginal utility, as you increase the quantity consumed…

    • Marginal utility stays the same

    • Total utility stays the same

    • Marginal utility decreases

    • Marginal utility and total utility both decrease

    • Total utility declines


ATC – AVC = AFC

  • At any given output level, on a firm graph, the vertical difference between ATC and AVC is equal to what?


NOTHING. They could be earning an economic profit, a normal profit, or an economic loss.All you know is that they are covering their explicit costs.

  • If a firm is earning an accounting profit, what do you know must be true about the firm’s economic profit?


Right edge of PROFIT box are:MC=MRcarry that straight down/up to ATC

  • Draw a side-by-side graph for perfectly competitive Industry/Firm earning short run profits.

    • What two points are used to define the right edge of the PROFIT box?


Right edge of LOSS box are:MC=MRcarry that straight down/up to ATC

  • Draw a side-by-side graph for perfectly competitive Industry/Firm earning a short run loss.

    • What two points are used to define the right edge of the LOSS box?


Productive: NOAllocative: YES

  • In the short run, a perfectly competitive firm without government intervention will ALWAYS achieve:

    • Productive Efficiency?

    • Allocative Efficiency?

      Yes or no.


5 utils5 utils per dollarcannot determine – dollars vs. utils

  • If tacos cost $2 each, Identify the following:

  • MU for the 4th taco

  • MU/P for the 3rd taco

  • How many tacos will this consumer choose to purchase?


BECAUSE as soon as MC is above ATC, ATC must be increasing (due to adding the higher marginal).

  • Why must the Marginal Cost curve ALWAYS intersect ATC and AVC at their minimums?


Explicit – paid out of pocketImplicit – value of forgone resources

  • If you open a McDonald’s Franchise, list (a) two expenses that would be considered EXPLICIT costs, and two expenses that would be considered IMPLICIT costs.


A. decrease, B. decrease, C. decrease, D. increase/exist

  • If the government imposes a tax on the production of pencils, what will happen to each of the following?

    (increase or decrease)

    • Price sellers receive

    • Quantity of pencils sold

    • Consumer surplus

    • DeadWeightLoss (DWL)


A. decrease, B. increase, C. increase, D. increase/exist

  • If the government imposes a subsidy on milk, what will happen to each of the following?

    (increase or decrease)

    • Price paid by the buyers

    • Quantity of milk produced

    • Producer Surplus

    • DeadWeightLoss (DWL)


All costs are variable in the LR, only Labor is variable in the SR.

  • How are costs different in the LONG RUN different than the SHORT RUN?


Capital goods, since they are used to produce more goods. (“stuff to make more stuff”)

  • Which is more likely to promote future economic growth?

    • Investment in more capital goods

    • Investment in more consumer goods

      WHY?


50% / 25% … +2.0 … positive means substitutes

  • If the price of frosted flakes increases from $4 to $5 per box, and as a result the quantity demanded of a DIFFERENT good (X)increases from 20 million to 30 million …

    • Calculate the cross elasticity of demand for good X with respect to Frosted Flakes.

    • What does this tell you about how these goods are related?


Firms will enter or exit because of low/no barriers to entry… so supply shifts, moving MR=D=AR=P, eliminating profit/loss in LR

  • WHY is it impossible for a perfectly competitive firm to earn a profit or loss in the long run?

  • Yes, they are a price taker, and Mr. Meier says so… but what actually CHANGES in the LR to eliminate SR profits or losses??


ad
  • Login