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# Term 111: Principles of Microeconomics Exam 2: Review Chapter 6 1. Determinants of household(HH) demand 2. Budget Constraint(BC): a. Mathematical equation. b.

Graphical representation c. How does BC shift and pivot? 3. Utility a. Total Utility and Marginal Utility b. Law of Diminishing MU c. Calculate TU and MU d. Calculate MU per dollar e. Utility maximization by the HH: i. Mathematical condition ii. Graphical representation. 4. Indifference Curve(IC) and BC a. Shape and slope of IC: How is DMU related to shape of IC? b. Utility maximization by the HH by using IC and BC c. How to derive demand curve (DD) from the utility maximization? 5. Income effect(IE) and Substitution effect(SE) a. Definitions of IE and SE b. IE and SE for normal and inferior good. 6. Labor supply decision, IE and SE a. If leisure is a normal good, what is the shape of the labor supply curve? b. If leisure is an inferior good, what is the shape of the labor supply curve?

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Optimal production and MP 4. Isoquant and Isocost Line a. How does IQ and IC shift. marginal product. Production a. Definitions. Cost minimization rule: a. Law of diminishing returns. Accounting 2. pivot? 5. Relationship between Average Product and MP: graphical and theoretical d. Optimal method of production: a. Economic. What is it? b. General rule: marginal product per dollar rule b. Profit: a. 2 . Total. b. b. b. Shape of IQ and IC c. Rule base on slope of the IQ and IC: Graphical treatment. What information is needed to get optimal method of production? 3.Chapter 7 1. shape of TP AND MP c.

How much profit does a firm earn in the long run? 3 . Mathematical. ATC. AVC. g. Long run Average cost curve(LAC): a. AFC. Demand curve for a firm in the short run f. Mathematical. Shape of AC. ii. Shape of supply curve for a firm in the short run? b. 4. Definition and properties of prefect competition (PC). MC: Graph and how to calculate from table or equations b.Chapter 8 1. a. AFC and MC and Law of diminishing returns. What does different part of LAC imply? c. Shut-down point/breakeven point. Costs in the short run a. TFC. AVC. ii. Graphical. d. TVC. Supply curve for a firm in the short run and in PC Chapter 9 1. e. iii. How it is derived? b. Graphical. Marginal and total revenue. diseconomies of scale. Economies. 2. Profit maximization by a firm in perfect competition and in the short run: i. TC. c. Conditions under which a firm operates at a loss in the short run. Profit maximization condition of a firm in the LR? i. 3. Operating profit.

How does factor demand curve shift? i. ii. Definition. Price of other inputs 1. Concept of derived demand in the input market. Effect of technology: a. Profit maximization by a firm in the input market: i. 4. In factor demand. c. If inputs are substitutes.Chapter 10 1. Definition of price of different inputs ii. b. If inputs are complements. Does profit maximization imply cost minimization? iii. b. Complementarity and substitutability between factors: a. In production. Mathematical condition. 3. Graphical representation. iv. Definition. 2. MRP curve e. Derivation. b. d. Output price. 2. Graphical representation. In profit maximization 4 . Marginal revenue product(MRP) a. c.

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