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AP Microeconomics Section 9 (Modules 46-51)& 10 (Modules 52-54) Test on Tuesday 3/10/15 Test Checklist Please bring a #2 pencil and a non- graphing calculator Section 9 (Modules 46- 51) 1.) Be able to calculate and interpret the following elasticity coefficients, and interpret what they mean: a. Price Elasticity of Demand b. Price Elasticity of Supply c. Cross Elasticity of Demand d. Income Elasticity of Demand Perfectly elastic = horizontal supply or demand curve Perfectly Inelastic = vertical supply or demand curve 2.) Know the determinants of elasticity (both supply and demand). 3.) Know the Total Revenue (TR) Test – what happens to TR when price changes depends on whether demand is elastic or inelastic. 4.) Who bears the burden of an excise tax? – The party whose supply or demand is more inelastic. Be able to graph this (there will be a problem on this) and use formula to calculate what proportion of tax the buyer and seller bears: Pd/Ps = Es/Ed 5.) Know what the Law of Diminishing Marginal Utility means. Understand the relationship between Total Utility and Marginal Utility. 6.) Know how to apply the Optimal Purchase Rule (allows you to determine the number of units of a particular product a consumer will buy to maximize consumer surplus). 7.) Know how to calculate a consumer’s optimal consumption bundle (Module 51 -states that a consumer will maximize her satisfaction if she allocates her income so that the last dollar spent on each good gives her the same amount of extra benefit). MUa = MUb Pa Pb 8.) Know how to calculate consumer/producer surplus and deadweight loss. Section 10 (Modules 52-54) Review Module 53 and 54 Reading Questions 1. Be able to define diminishing returns to input (applies only in the shortrun when only 1 resource is variable and the plant capacity is fixed). 2. Definitions of implicit costs, explicit costs, accounting profits and economic profits. 3. Understand the relationship between total product, average product and marginal product curves. 4. The marginal product curves and marginal cost curves are mirror images of each other (see widget simulation graph)