ECON1101

Revision

Playconomics, LHS

Final Exam
Exam format:
2 hours (+10 minutes reading time)
50 Multiple Choice Questions (2.4 min./question)
5 possible answers

When/Where?
10 June, 8:45am

What to bring?
Pencils
Non-programmable calculator (no phones!).
Playconomics, LHS

Course Overview
Chapter 1: Opp. Cost and Comparative Advantage

Chapter 2: Costs of Production and Supply

Chapter 3: Utility and Demand
Chapter 4: Market Equilibrium

Playconomics, LHS

Course Overview
Chapter 4: Competitive Market is Pareto Efficient
Chapter 5: Costs of Government Intervention (DWL)
Chapter 6: International Trade

Chapter 7: Monopoly
Chapter 8: Oligopoly
Chapter 9: Externalities
Chapter 10: Public Goods
Playconomics, LHS

Key Concepts

Individual PPC
The gains from specialisation
Economy-wide PPC
Consumption Possibilities Curve (CPC)

Costs (MC, ATC, AVC)

Profit maximisation: MC = MR (=P)
Producer reservation price
Supply curve (=MC curve above ATC)
Playconomics, LHS

Key Concepts
Utility maximisation:

Income vs. Substitution effect

Consumer reservation price and Demand curve
Complements vs. Substitutes

Demand and Supply aggregation (sum horizontally)

Definition: =
Consumer and Producer surplus
Shifting supply and demand curves
(Pareto) Efficiency of competitive market equilibrium!
Playconomics, LHS

Key Concepts

Price ceiling and price floor

Taxes and subsidies
Costs of government policies (DWL)
Elasticity, tax burden (incidence), and DWL

The gains from trade (importing and exporting)

Tariffs and quotas
The costs of restricting international trade (DWL)
Playconomics, LHS

Key Concepts

MR for a firm with market power (<P)

Profit maximisation (MR=MC)
DWL in a monopoly market (P=MB>MC)
Regulation of monopolies
Price discrimination

Playconomics, LHS

Key Concepts
Components of a game (Players, strategies, payoffs)
Equilibrium strategy profile:
Dominant strategies
Iterated elimination of dominated strategies
Nash equilibrium

Common types of games:

Prisoners dilemma (cartel game)
Entry game
Coordination game
Playconomics, LHS

Key Concepts

Adding external costs and benefits (sum vertically)

DWL in market with externalities ( )
Private solutions: Coase Theorem
Public Solutions: Tax/Subsidy

Rivalry and Excludability

Aggregate demand for a public good (sum vertically)
Free-rider problem
Lindahl prices (free-rider will opt out if possible)
Government provision and associated problems.
Playconomics, LHS

 Playconomics, LHS