What is the definition of technological efficiency?
What is a production function, and how do we define it?
Y=f(K,L,E,M) is interpreted in what way?
Long run vs. short run variables.
Definition of the long run.
What is the definition of the marginal product? The average product? Know both in terms of the math definition and the geometric representation.
Where does the marginal product curve cross the average product curve and why?
How do we explain the shapes of the total product curve, the average product curve, and the marginal product curve?
Distinguish between diminishing marginal returns and diminishing returns.
What is the definition of an isoquant?
What are the properties of isoquants (further better, do not cross, slope downward).
What determines shape? Substitutability of inputs.
What is the MRTS, and how does it relate to the isoquant.
What is the relationship between changes in input quantities and the marginal product of the inputs along a given isoquant?
What are returns to scale, and how do we tell increasing returns to scale from constant and decreasing returns to scale.
How do returns to scale relate to levels of input use in general (low input IRS, medium CRS, high DRS) and why does this hold.
What is opportunity cost?
What are sunk costs?
What are the short run cost concepts and how are they defined?
What are the long run cost concepts and how are they defined?
How do we draw them all?
What is an isocost line?
What is the slope of the isocost line?
What are the three ways of identifying a cost-minimizing (economically efficient) point – lowest isocost, tangency, last dollar?
What is the expansion path?
What is relationship between MC and AC in long run?
What is the interpretation of the MC cost curve in the long run?
What are economies of scale and diseconomies of scale?
What characterizes a perfectly competitive market?
What does “price taking” mean and how does it relate to competitive markets?
What is the definition of a profit function?
How does one decide on the profit maximizing level of output in a perfectly competitive market in the short run?
How does one decide whether it is better to produce nothing than produce something?
How does one decide these things in the long run?
How do we arrive at the market supply curve?
What leads to a flat long run market supply curve?
What is long run economic profit for a competitive firm?
Does zero economic profit mean no accounting profit?
What is marginal willingness to pay?
How do we locate producer surplus, consumer surplus, and variable cost on a graph representing supply and demand in a competitive market.
What is relationship between profit and producer surplus in the long run?
How can we use the producer surplus / consumer surplus graph of a competitive market to understand why a perfectly competitive market is welfare maximizing?
What is a monopoly, and what leads to one existing.
Why is the monopolist not a price taker.
What is the bisection rule, and what does it define?
What are the conditions for choosing a profit maximizing price quantity pair for a monopolist, and what is the shut down rule here?
Identify the deadweight loss of a monopoly when compared to a perfectly competitive market.
Be able to calculate areas of CS, PS, DWL.
What can we do if we have a monopoly to regulate it?
Why is MC pricing a bad idea for a natural monopoly?