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College of Business and Economics

Microeconomics Review

(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.

1. Explain the concept of opportunity cost & explain why accounting profits and economic profits are not the same. 
2. Explain the principle of comparative advantage and how it leads to specialization and gains from trade. 
3. Understand how various factors shift supply or demand and understand the consequences for equilibrium price and quantity.
4. Show how prices affect the allocation of resources and coordinate a decentralized market economy.
5. Discuss factors that determine demand and supply elasticity.  Explain how demand and supply elasticity affect tax policy and the consequences of business decisions. 
6. Be able to explain and calculate average and marginal cost to make production decisions.
7. Contrast market outcomes under monopoly and competition.
8. Apply principles of consumer/producer surplus to explain efficient level of production and sales in a market.
9. Explain externalities and public goods and how they affect efficiency of market outcomes.
10. 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.

Important Notices:

• Students should be prepared to bring proof of pre-requisites to the first day of class.
• Please be sure to register for both BUS 302 and BUS 302L.