ECONOMICS 2306
REVIEW SHEET FOR EXAM III
The following is a thorough but not exhaustive list of the concepts you need to master for the exam. You should know definitions of terms; formulas and how to use them; graphs, what they represent, and how to read them; tables and how to work with them.
CHAPTER 11
Resource markets: the roles of households and firms
Demand and supply of resources: derived demand; movements along the resource demand curve; shifts of the resource demand curve; movements along the resource supply curve; what causes temporary and permanent resource price differences
Opportunity cost and economic rent: definitions; examples
Marginal revenue product and marginal resource cost: meaning and calculation of each; graphs; why MRP curve=D curve for a resource; why MRC curve=S curve for a resource; difference between product price taker and product price maker (searcher); meaning of resource price taker
Profit-maximizing rule for hiring resources: know the rule and how to find the profit-maximizing amount of a resource from a table and from a graph
CHAPTER 12
Uses of time; maximizing utility
Substitution effect of a wage increase; income effect of a wage increase; backward-bending labor supply curve; movements along the labor supply curve; shifts of the labor supply curve; the market supply curve of labor
Reasons for wage differences
Unions: craft and industrial unions; collective bargaining; mediation and binding arbitration; strikes; recent trends in union membership
The effect of unions on wages and employment: raising wages in an industrial union; raising wages in a craft union; raising wages by increasing the demand for union labor; know the graphs for each and the effect on employment levels for each
CHAPTER 19
Absolute and comparative advantage: definitions; calculating opportunity costs to determine comparative advantage; producing and trading based on the law of comparative advantage; determining mutually beneficial terms of trade
Reasons for international specialization
Tariffs and quotas: definitions; effects on consumers and producers
Multilateral agreements to promote freer trade: GATT; WTO; common markets
Arguments for trade restrictions (be able to explain each argument and also evaluate its validity): national defense; infant industry; antidumping; jobs and income; declining industries
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