(Revised April 25, 2008)
You are going to take a multiple choice exam in microeconomics. The following material should help you prepare for the exam.
- Explain the concept of opportunity cost & explain why accounting profits and economic profits are not the same.
- Explain the principle of comparative advantage and how it leads to specialization and gains from trade.
- Understand how various factors shift supply or demand and understand the consequences for equilibrium price and quantity.
- Show how prices affect the allocation of resources and coordinate a decentralized market economy.
- Discuss factors that determine demand and supply elasticity. Explain how demand and supply elasticity affect tax policy and the consequences of business decisions.
- Be able to explain and calculate average and marginal cost to make production decisions.
- Contrast market outcomes under monopoly and competition.
- Apply principles of consumer/producer surplus to explain efficient level of production and sales in a market.
- Explain externalities and public goods and how they affect efficiency of market outcomes.
- Explain why exchange rates indicate the price of international currencies and how exchange rates are determined by supply and demand for currencies in international markets.
- There is also video material available in Microeconomics.