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AP Econ – Micro Review. Housekeeping. Bring books to class. Morning review sessions – 7:15-7:45 Current event assignment - Thursday. Overview. Elasticity – DWL Profit & Pure Competition Monopoly & Oligopoly Factor Markets Market Failure. Market failure FRQ. Mark David Marvin Yucin

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Presentation Transcript
housekeeping
Housekeeping

Bring books to class.

Morning review sessions – 7:15-7:45

Current event assignment - Thursday

overview
Overview

Elasticity – DWL

Profit & Pure Competition

Monopoly & Oligopoly

Factor Markets

Market Failure

market failure frq
Market failure FRQ

Mark

David

Marvin

Yucin

Christina

Also – pollution homework Rahul and Ashwini

today
Today

Self assessment in micro concepts.

Return & review comparative advantage quiz.

Work on elasticity and DWL

student review
Student Review

Income and substitution effects

Price elasticity

Determinants of price elasticity

Income elasticity – normal and inferior goods

Cross price elasticity – complements & substitutes

Supply elasticity - determinants of supply elasticity

summary
Summary

Elastic vs. inelastic parts of demand curve

Elasticity and firm revenue

Cross price – complements vs. substitutes

Income elasticity – inferior vs. superior.

Producer and consumer surplus

DWL under tax or quota

ap econ micro review1

AP Econ – Micro Review

Day 2 – Profit and Pure Competition

do now
Do Now

Create an example of an accounting profit.

Expand the example to show an economic profit.

individual practice
Individual Practice

Graph a firm under pure competition showing a short term profit.

Graph firm under pure competition in the long-run.

mid term info
Mid-Term Info

Thursday 2/6

12:30 to 2:00 p.m.

Period 3 – Room D265

Period 5 – Room D264

reminder
Reminder

Test reviews

C 250

7:15 – 7:45 a.m.

2:45 – 3:30 p.m.

Bring competition, monopoly, oligopoly, and factor tests.

summary1
Summary

Accounting vs. economic profits (opportunity cost)

Normal economic profit

Optimal output rule: MR=MC

Lowest cost output: ATC at min.

summary2
Summary

Shutdown price: P<AVC

Breakeven price: P=ATC

Long run equilibrium under pure competition: P=MC=ATC

Productive and allocative efficiency

ap econ micro review2

AP Econ – Micro Review

Day 3 – Monopoly and Oligopoly

mid term info1
Mid-Term Info

Thursday 2/6

12:30 to 2:00 p.m.

Period 3 – Room D265

Period 5 – Room D264

reminder1
Reminder

Test reviews

C 250

7:15 – 7:45 a.m.

2:45 – 3:30 p.m.

Bring competition, monopoly, oligopoly, and factor tests.

summary3
Summary

Accounting vs. economic profits (opportunity cost)

Normal economic profit

Optimal output rule: MR=MC

Lowest cost output: ATC at min.

summary4
Summary

Shutdown price: P<AVC

Breakeven price: P=ATC

Long run equilibrium under pure competition: P=MC=ATC

Productive and allocative efficiency

class relay
Class Relay

Industry structure matrix

  • # of firms
  • Uniform or differentiated
  • Price make or taker
  • Non-price competition
  • Long-term profitability – excess or normal
student summary
Student Summary

Monopoly pricing and elasticity

Monopoly regulation

Oligopoly – Cournot vs. Bertrand

Oligopoly – strategic behavior

Monopolistic competition – short-term

Monopolistic competition – long-term

summary monopoly
Summary - Monopoly

Monopoly MR=MC

Price on elastic part of the demand curve

Regulate to MC=P unless there is a loss.

If loss, “fair return price” = ATC = normal profit

summary oligopoly
Summary - Oligopoly
  • Oligopoly – collusion or competition
    • Collusion similar to monopoly
    • Competition similar to pure competition
  • Game theory
    • Nash equilibrium (non-cooperation)
    • Prisoners dilemma (perils of cooperation)
    • Strategic behavior – tit for tat, price leadership.
summary monopolistic comp
Summary – Monopolistic Comp

Differentiation = downward sloping demand

Long-term equilibrium ATC = P = normal profit

Not allocatively efficient. P>MC

Not productively efficient – excess capacity.

ap econ micro review3

AP Econ – Micro Review

Day 4 – Factor Markets

mid term info2
Mid-Term Info

Thursday 2/6

12:30 to 2:00 p.m.

Period 3 – Room D265

Period 5 – Room D264

summary monopoly1
Summary - Monopoly

Monopoly MR=MC

Price on elastic part of the demand curve

Regulate to MC=P unless there is a loss.

If loss, “fair return price” = ATC = normal profit

summary oligopoly1
Summary - Oligopoly
  • Oligopoly – collusion or competition
    • Collusion similar to monopoly
    • Competition similar to pure competition
  • Game theory
    • Dominant strategy (works in all scenarios)
    • Nash equilibrium (non-cooperation)
    • Prisoners dilemma (perils of cooperation)
    • Strategic behavior – tit for tat, price leadership.
summary monopolistic comp1
Summary – Monopolistic Comp

Differentiation = downward sloping demand

Long-term equilibrium ATC = P = normal profit

Not allocatively efficient. P>MC

Not productively efficient – excess capacity.

factor markets major ideas
Factor Markets – Major Ideas

Optimal mix

Profit maximizing mix

Pure competition model

Monopoly model

Monopsony model

Income inequality

final exam review
Final Exam Review

61 points total

11 points for FRQ

50 points for MC

+ 2 point adjustment to points earned.