Wedneday, 10/31/2007. We will have a review day on Monday. A review sheet will be posted on the course webpage. Bring a calculator if you need one. You do not need to bring scantrons.
If I receive any good questions concerning the material in the test, I will post them as a comment under this post.
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13 comments:
Q: What Chapters in the text correspond with Exam 2?
A: Chapters 6-12, remember anything not discussed in class will not be on the test.
Q: I am having trouble with #9... I am unsure how to find d(profit)/dL=0 by using
profit = P(2L^3/4)-wL-10.
A: Take the derivative of the profit function with respect to L using those same rules we used on homework 1. Then set this derivative equal to 0 and solve for L.
d(profit)/dL=P*2*(3/4)*L^(-1/4)-w=0
Q: For problems 8 (a) and (b), how do I find the derivative?
A: Just follow the same rules you have been, you are not using the Lagrangian function here. Just apply the rules you used for Homework 1.
Q: We are getting negative profit for number 8. Are we and the right path?
A: Yes.
Q: On Problem 2b of the review sheet (calculate CS and PS). On the answer sheet it says CS=.5(1500-1071)(2142)=459223. I was wondering how you get the 1500? The equation is 7500-5P=Qd.
A: Set Qd=0 and solve for P. This gives you the price at which Quantity demanded is zero.
Q: I can't find exactly where the law of diminishing marginal returns is in my notes, I think I might have missed it.
A: This should be one of the first topics in your notes immediately after exam 1, in fact I think it was the first class after exam 1. Law of diminishing marginal returns (not revenue), I did a demonstration in class for this where people stood over a table and tried to assemble nuts-and-bolts...ring any bells? It is the idea that for a fixed amount of capital, with each new worker you add you increase the amount of production by a smaller and smaller amount.
Q: Problem 15 on the review sheet, where it asks the difference in social welfare between MC and PC. Is it that there is a DWL in a monopolistic competition?
A: The difference in social welfare between MC and PC is that because MC has higher prices and lower output, you have less consumer and producer surplus, hence lower social welfare. There is no DWL in monopolistic competition.
Q: What is the format of the exam?
A: 15 multiple choice worth 2 points each. 2 math problems worth 4 and 6 points.
Q: Any suggestions for studying the material?
A: Know the review sheet and both homeworks (3 and 4) really well and you'll do great.
Format change: I've decided instead that the exam will have 15 multiple choice and 3 math problems instead of 2.
However, you only have to answer 2 of the 3 math problems, and you may pick which 2 you answer.
Q: The second problem on the study guide, what does P" represent?
A: P' is the price the market adjusts to after the consumer takes into account that he will have to pay a tax at the end. So the market adjusts to $1,000 price from the shift left in demand and this is what the seller receives. After the consumer pays the $1,000 to the seller he has to write a check for ten percent of the price ($100). So the consumer actually pays in total $1,100 for the good, which is P".
Q: The Review Sheet in problem #3 on part C, when it says P>AVC how is P=12?
A: Look closely at the profit function. Revenue is pq, and in the profit function you see 12q, thus p=12. Remember, things that are positives in a profit function have to be part of revenue, things that are negative are costs.
Q: I'm having trouble answering 8A on the review sheet. I was able to
answer parts B and C but I can't find anything on Capture Theory
anywhere in my notes so I really dont know what it is or how to answer
the question can you please give me any information to help answer
8A? Thank You!
A: Capture Theory is the idea that government regulatory agencies will ultimately be captured by the groups they are supposed to regulate. They then use the regulatory agency to their own advantage. Expand on this answer in terms of why this will usually be the outcome, how they use it to their advantage. Remember that I discussed the Morgantown Bar owners have control over the Bar licensing, so that they can keep out new competing bars.
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