Econ 112: Principles of Microeconomics
Econ 112: Principles of Microeconomics
Final Exam Study Questions
1. Suppose you are a poor person infected with AIDS and living on the continent of Africa. Would you want the citizens of the USA to badger pharmaceutical companies into lowering the price of prescription drugs to treat AIDS? Would this raise or lower the prospects for a cure? Can you think of a better way for USA citizens to help you afford your medication? (Hint: Think about how concerned people could help the poor person without jeopardizing the patent system.)
2. Explain why economists like perfect competition as a market structure. Why is it important to you personally that P=ATC? Draw a graph illustrating the long run outcome of a perfectly competitive market.
3. Explain the difference between Economic Profit and Accounting Profit. Why is Zero Economic Profit important in microeconomic theory? If a firm is earning Zero Economic Profit, does that mean the firm isn’t making any money?
4. Explain the concept of Price Elasticity of Demand. How could you potentially use this concept in a career in business?
5. In which case do you think you are treated more fairly: When you buy corn? Or when you buy a diamond? Explain your answer.
6. Draw a graph of a monopoly firm. Illustrate the profit maximizing quanity and price. Further, shade the profit area and identify the deadweight loss (DWL). Why does the DWL exists? Would a perfect price discriminating monopoly result in a DWL? Why or why not?
7. Explain the Prisoner’s Dilemma. How does it relate to the price you pay for gasoline?
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