Study Guide for Test #1

1.  Know how to calculate market equilibrium and disequilibrium

2.  Understand disequilibrium and its correction by market forces

3.  Be able to apply supply and demand analysis to evaluate the impact of different events

4.  Be able to calculate the price elasticity of demand

5.  Know the factors affecting the price elasticity of demand

6.  Know how the price elasticity affects the demand curve

7.  Understand the relationship between the price elasticity and revenue

8.  Be able to calculate the income elasticity of demand

9.  Understand the implications of the possible magnitudes of the income elasticity of demand

10.  Be able to calculate the cross-price elasticity of demand

11.  Understand the implications of the possible magnitudes of the cross-price elasticity of demand

12.  Understand why increasing, diminishing, and negative marginal returns occur

13. Understand the difference between explicit and implicit costs

14. Be able to calculate economic and accounting profits

15.  Know the relationship between production and costs

16.  Know the relationship between short-run costs and long-run costs

17.  Understand the difference between economies and diseconomies of scale

18. Know the factors leading to economies of scale

19. Know the factors leading to diseconomies of scale

20. Understand the distinction between the learning curve and economies of scale

21. Understand the implications of the minimum efficient scale on the size and number of firms in an industry

22. Understand the long-run implications of perfect competition

23. Be able to show graphically the profit maximizing equilibrium in a monopoly

24.  Know the sources of market power (barriers to entry)

25.  Understand the different methods to lock-in consumers

26.  Be able to calculate the Lerner Index and understand its implications in determining market power

27.  Be able to calculate the N-firm concentration ratio and the Herfindahl Index

28. Be able to use the Herfindahl Index to evaluate mergers

29. Understand the long-run implications of monopolistic competition

30.  Understand the strengths and weaknesses of cartels

31.  Know the methods that can be used to promote tacit collusion

32.  Be able to determine the dominant strategy in game theory

33.  Understand what is meant by the Prisoners' Dilemma

34.  Be able to determine the Nash equilibrium in game theory

35.  Be able to apply the maximin strategy in game theory

36.  Be able to apply probability in game theory

37.  Understand how unique situations such as product choice and the battle of the sexes can be illustrated with game theory

38.  Understand how repeated games can change the likely outcome of a game

39. Be able to use game trees to solve sequential games

40. Understand how game theory can be applied to competitive strategy

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Recommended Problems

Chapter 2 - 1, 2, 6, 7, 8

Chapter 3 - 1, 3, 5, 6

Chapter 5 - 4

Chapter 8 - 5, 6

Chapter 9 - 2

Reading 2 - 5

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Answers to recommended problems