MicroeconomicsQ&A by dot point

Topic 1.4 Comparative Advantage and Gains from Trade: distinguish absolute from comparative advantage, calculate opportunity costs from output or input data, identify who should specialize, and find mutually beneficial terms of trade.

Topic 1.5 Cost-Benefit Analysis: explain rational decision-making by comparing marginal benefit and marginal cost, distinguish explicit from implicit costs, and find the optimal quantity where marginal benefit equals marginal cost.

Topic 1.6 Marginal Analysis and Consumer Choice: explain diminishing marginal utility, and use the utility-maximizing rule (equal marginal utility per dollar) to find the consumption bundle that maximizes total utility given a budget.

Topic 1.3 The Production Possibilities Curve: draw and interpret the PPC, calculate opportunity cost from it, explain its shape in terms of constant versus increasing opportunity cost, and show efficiency, unattainable points, and growth.

Topic 1.2 Resource Allocation and Economic Systems: identify the three basic economic questions, and explain how command, market, and mixed economies use planning, prices, property rights, and incentives to allocate scarce resources.

Topic 1.1 Scarcity: explain how scarcity forces individuals and societies to make choices, distinguish needs from wants, identify the factors of production, and explain why every choice involves a trade-off.

Topic 2.1 Demand: state the law of demand, distinguish a change in quantity demanded from a change in demand, and identify the determinants that shift the demand curve.

Topic 2.8 The Effects of Government Intervention in Markets: analyze binding price ceilings and floors, per-unit taxes and subsidies, and quantity controls, showing the resulting shortages, surpluses, tax incidence, and deadweight loss.

Topic 2.9 International Trade and Public Policy: analyze the effect of free trade at the world price on consumer and producer surplus, and the effect of tariffs and import quotas on prices, quantities, surplus, and deadweight loss.

Topic 2.7 Market Disequilibrium and Changes in Equilibrium: explain how shortages and surpluses arise and self-correct, predict the new equilibrium after a single shift, and handle the indeterminate cases of a double shift.

Topic 2.6 Market Equilibrium and Consumer and Producer Surplus: find equilibrium price and quantity, identify consumer and producer surplus on a graph, and explain why the competitive equilibrium maximizes total surplus (allocative efficiency).

Topic 2.5 Other Elasticities: calculate and interpret the income elasticity of demand (normal versus inferior goods) and the cross-price elasticity of demand (substitutes versus complements).

Topic 2.3 Price Elasticity of Demand: calculate price elasticity of demand using the midpoint formula, classify demand as elastic, inelastic, or unit elastic, apply the total revenue test, and identify the determinants of elasticity.

Topic 2.4 Price Elasticity of Supply: calculate price elasticity of supply using the midpoint formula, classify supply as elastic, inelastic, or unit elastic, and explain why time is the key determinant.

Topic 2.2 Supply: state the law of supply, distinguish a change in quantity supplied from a change in supply, and identify the determinants that shift the supply curve.

Topic 3.6 Firms' Short-Run Decisions to Produce and Long-Run Decisions to Enter or Exit: apply the shut-down rule using average variable cost, and the entry and exit conditions using average total cost and economic profit.

Topic 3.3 Long-Run Production Costs: explain the long-run average total cost curve as an envelope of short-run curves, and identify economies of scale, diseconomies of scale, and constant returns to scale.

Topic 3.7 Perfect Competition: describe the characteristics of perfect competition, draw the short-run profit, loss, and break-even cases, explain the long-run zero-profit equilibrium, and show why perfect competition is efficient.

Topic 3.5 Profit Maximization: explain the marginal revenue equals marginal cost rule, apply it to find the profit-maximizing output, and use the average total cost curve to measure profit or loss.

Topic 3.2 Short-Run Production Costs: define fixed, variable, total, marginal, and average costs, calculate each from data, and explain the shapes of the short-run cost curves and how marginal cost relates to the averages.

Topic 3.1 The Production Function: define total, marginal, and average product, explain the law of diminishing marginal returns, and relate the product curves to one another.

Topic 3.4 Types of Profit: distinguish accounting profit from economic profit using explicit and implicit costs, define normal profit, and explain what positive, zero, and negative economic profit signal.

Topic 4.1 Introduction to Imperfectly Competitive Markets: compare the four market structures, explain why a price maker faces a downward-sloping demand curve with marginal revenue below price, and define barriers to entry.

Topic 4.4 Monopolistic Competition: describe the structure, find short-run profit or loss, explain the long-run zero-economic-profit outcome from entry and exit, and explain excess capacity and inefficiency.

Topic 4.2 Monopoly: find the monopolist's profit-maximizing price and output using marginal revenue equals marginal cost, measure profit or loss, identify the deadweight loss, and explain natural monopoly and regulation.

Topic 4.5 Oligopoly and Game Theory: describe oligopoly and interdependence, analyze a payoff matrix to find dominant strategies and Nash equilibrium, and explain collusion, cartels, and the incentive to cheat.

Topic 4.3 Price Discrimination: state the conditions for price discrimination, and analyze perfect (first-degree) price discrimination, including its effect on output, profit, consumer surplus, and deadweight loss.

Topic 5.2 Changes in Factor Demand and Factor Supply: identify the determinants that shift factor demand and factor supply, and predict the effect on the equilibrium factor price and quantity.

Topic 5.1 Introduction to Factor Markets: explain that factor demand is derived demand, define and calculate marginal revenue product, and state the hiring rule that marginal revenue product equals marginal factor (resource) cost.

Topic 5.4 Monopsonistic Markets: explain why a monopsonist's marginal factor cost lies above the labor supply curve, find the monopsony wage and employment, and compare them with the competitive outcome.

Topic 5.3 Profit-Maximizing Behavior in Perfectly Competitive Factor Markets: apply the marginal revenue product equals wage rule for a wage-taking firm, and use the least-cost and profit-maximizing input combination rules across multiple factors.

Topic 6.4 The Effects of Government Intervention in Different Market Structures: analyze antitrust policy, the regulation of a natural monopoly through marginal-cost and average-cost pricing, and how intervention can reduce deadweight loss when a market failure exists.

Topic 6.2 Externalities: distinguish negative from positive externalities, show the divergence of private and social cost or benefit, identify the resulting overproduction or underproduction and deadweight loss, and explain corrective taxes and subsidies.

Topic 6.5 Income and Wealth Inequality: distinguish income from wealth, measure inequality with the Lorenz curve and Gini coefficient, identify the sources of inequality, and explain how progressive taxes and transfers redistribute income.

Topic 6.3 Public and Private Goods: classify goods by rivalry and excludability, explain the free-rider problem for public goods, and explain why markets under-provide public goods and how government provision responds.

Topic 6.1 Socially Efficient and Inefficient Market Outcomes: define allocative efficiency as marginal social benefit equal to marginal social cost, identify deadweight loss, and explain what causes market failure.