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Unit 1B Cards 1. The Production Function a. Make a graph and corresponding table that shows marginal product, total product, and average product (TP/Q of input). You must have at least 5 units of inputs (labor). It is better if you graph average and marginal together and total on a graph directly above it (Google Production function and you’ll see what I’m talking about) b. Label the following parts on the total product line: Increasing marginal returns, decreasing marginal returns , negative marginal returns c. State out to the side— i. When marginal product is declining, total product is ___________ but at a __________________ rate. ii. If marginal product is negative, total product is ________________. iii. Marginal product crosses average product at AP’s (highest or lowest) point. We didn’t focus on this, but it could be a question. If you graph it correctly, then you’ll see the answer. 2. Short-Run Costs (Assuming perfect comp.) a. Graph—ATC, AVC, AFC, MR & D (for perfect comp.) b. Explain why MC/AVC goes down then goes up c. Explain why average fixed costs are downsloping d. Show on the graph where price would have to be if the firm needed to shut down 3. Long Run Average Total Costs a. Show the LR ATC curve with its 3 portions b. Explain what each portion means. 4. Perfect Competition—Long-Run Equilibrium a. Draw a side by side graph of the market and the firm in perfect competition, long run equilibrium. Show the profit maximizing point. b. Explain why it is allocatively efficient and why it is productively efficient. c. State the differences between economic profit, accounting profit, and normal—which can a business in perfect competition have in the long run d. State the characteristics of the perfectly competitive market 5. Perfect Competition—Short-Run Profits/Losses to Long Run Equilibrium a. Increase or decrease demand for the market, then show what happens in the SR to the firm. Shade the area of profit or loss. i. Tell why demand (decreased/increased) b. Show how it adjust to reach the LR equilibrium. i. You may want to create another set of graphs with this starting point of a profit/loss (so that way you don’t have too many lines on the same graph. Unit 1C Cards 1. Monopoly— a. Draw a monopoly—ATC, MC, MR, D curves, show the profit maximizing quantity and price b. Explain why a monopoly is NOT allocatively and productively efficient 2. Regulated Monopoly a. Draw a natural monopoly (ATC should be downsloping when crossing demand) b. Show the socially optimal price (D=MC) and quantity c. Show the fair market price (D=ATC) and quantity d. State the benefits and drawbacks of setting the price at the socially optimal price and the benefits and drawbacks of setting the price at the fair market price. 3. Price Discriminating Monopoly a. Draw a price discriminating monopoly b. State what happened to CS and PS c. Is there deadweight loss? Why or why not? 4. Monopolistic Competition a. Draw a side-by side of a firm in a monopolistically competition and the market in the short run with a profit (shade the profit box) b. Draw the last graph again. Show the SR to LR process. What happens in the LR? c. Explain why it is NOT allocatively or productively efficient 5. Oligopoly a. TBA b. This will be the last card for the unit