Microeconomics Midterm Exam
09/18/2018
Instructor: Ivan Major
Study Guide

1.	When would you consume more of any commodity?
•	If the additional unit of that commodity provides you with higher satisfaction?
•	If it provides you with larger extra benefit than the price you pay for it?
•	If you paid a flat rate price for it before you started consuming it?
 
2.	What is the opportunity cost of any action, decision?

3.	What is the scarcity principle?

4.	When you calculate the total cost of any decision you make, do you or do you not take into account the opportunity cost (implicit cost) of your decision?

5.	If you know the market demand curve and the market supply curve, how can you find the equilibrium price in this market?

6.	You need to be familiar with the concepts of “opportunity cost”, “absolute advantage” and “comparative advantage”. How do you find a person’s or a country’s comparative advantage in some activity or in an industry, respectively?

7.	We derived the production possibilities’ curve, PPC (or production possibilities’ frontier, PPF) from knowing the workers’ productivity level in different industries, and the size of employment in a country. You need to be familiar with the notions of “attainable and efficient production level” “attainable, but inefficient production level”, and “unattainable production level”.

8.	You have seen the following formula in class:, where represent the price of product X, and product Y, respectively, while are the marginal product of labor (in other words, the workers’ productivity level) in producing product X or product Y. The left-hand side of the formula shows product X’s relative price, while the right-hand side reflects relative productivity levels of producing X or Y. This latter one is the opportunity cost of producing product X.

9.	If market demand and market supply are given by linear curves, how would you find total consumer surplus and producer surplus at the equilibrium price?

10.	Is the “first comes first served” pricing policy better for consumers and for producers than selling the product to those who value it higher and compensate those customers who give step back from purchasing the product?

11.	You are buying two commodities: A and B. If your income has risen and the price of commodity B increased, too, in which case will the demand curve of commodity A shift upwards (to the right)?

12.	If the number of suppliers in an industry increases, what changes would we expect to occur with regard to the quantity supplied of this industry’s product; with the product’s price; with the supply and the demand curve?

13.	If the price of a commodity falls but government imposes a quantity tax on that commodity, can you tell what will ultimately happen to quantity demanded?

14.	If two commodities, X and Y are complements to each other, what will happen to the price and quantity demanded of commodity Y if the price of commodity X increases?

15.	You need to find the equilibrium price and quantity if the demand function is , while the supply function is given as .

16.	You need to be familiar with the concept of the consumer’s budget constraint.

17.	You need to be familiar with the substitution and the income effect of a price change.

18.	What is the difference between the own price elasticity and cross price elasticity of demand?

19.	If the price of a commodity is increasing (or decreasing) how can you find out whether it will result in a larger or in a smaller revenue for the seller of this product?

20.	Why are economists usually against subsidies or against pre-set (minimum or maximum) prices that are used to support low income citizens?

21.	Why are economists against rent control of leased apartments?

22.	How did we define normal goods, inferior goods and Giffen goods?