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FINAL EXAM REVIEW EXERCISE Econ 201



Short Answer
 

 1. 

What are fixed costs?
 

 2. 

What are variable costs?
 

 3. 

What is the relationship between fixed, variable and total costs?
 

 4. 

What are some examples of “Barriers to entry”?
 

 5. 

At what point will any firm in any industry chose to produce?
 

 6. 

What does the demand curve represent?
 

 7. 

When unsold items exist in the market (a surplus), what does this say about the actual price vs. equilibrium price?     
 

 8. 

If there are buyers who want to buy at the existing market price, but cannot find the product or sellers, what does this say about actual price vs. equilibrium price?
 

 9. 

What is a price floor?
 

 10. 

How does economic profit differ from accounting profit?
 

 11. 

What is a “normal rate of return”?
 

 12. 

What happens to prices and quantities consumed when a tarriff is levied?
 

 13. 

What’s an opportunity cost?
 

 14. 

What do points underneath (but not on) the PPF curve represent?
 

 15. 

Can a nation ever consume at a point outside and above the PPF curve?
 

 16. 

What are economies of scale?
 

 17. 

If an event occurs that disrupts only the sellers and producers of a product (something not the price changing), but doesn’t directly affect the buyers, how is it reflected in supply and demand graphs?
 

 18. 

A firm makes/offers a slightly different product or service from it’s competitors, but the competitor products are still decent substitutes. There are no significant barriers to entry. What type of market structure is this?
 

 19. 

A firm makes/offers a product that is equivalent to those of it’s many, many competitors. Customers care only about who is cheapest.  There are no barriers to entry.  What type of market structure is this?
 

 20. 

A firm makes/offers a unique product or service. There are no good substitutes or competitors and there are significant barriers to entry. What type of market structure is this?
 

 21. 

A firm is in monopolistic compeititon.  It initially has a better product and makes good profits. Eventually competitors copy it and it’s uniqueness disappears as competitors copy it.  What happens to profits?
 

 22. 

A firm is considering hiring an additional worker.  Economically, what will they consider?
 

 23. 

A firm that is losing money because of poor prices in the market is considering whether to produce some units and sell them, even if it results in negative profit short-run, or whether they should shut-down (produce zero) temporarily, even if that means having to pay fixed costs without any revenue.  How do they decide?
 

 24. 

If price elasticity of demand is inelastic (absolute value of e < 1.0), and a firm raises prices, what happens to revenue and quantities sold?
 

 25. 

What is price elasticity of demand?
 

 26. 

What is the relationship between price, quantity, and total revenue?
 

 27. 

Given a total revenue for each quantity sold, how do we find marginal revenue?  What is marginal revenue?
 

 28. 

What are common results of manopoly markets compared to competitive markets?
 

 29. 

How does trade (according to theory) between rich countries and poor countries affect people in those countries?
 

 30. 

Know how to recognize the short-run graphs for monopoly/monopolistic competition (they look similar) vs. a short-run graph of perfect competition. Know how to find the profit maximizing output (Q), the highest price the firm can charge, the average total cost the firm has for that Q, and whether the firm is making a profit, loss, or break-even.
 



 
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