ECON REVIEW

Exam Preparation Overview

  • Use the provided document to summarize key ideas and concepts for each chapter.

  • Approach learning bullet by bullet to assess your understanding of the material.

  • Keep in mind that the document is a summary, not a complete guide. It's essential to grasp all the concepts fully.

Exam Structure

  • The format will mirror the midterm exam structure, with five short essay questions.

  • Grading will focus on your four best answers, meaning only four responses are required for full points.

  • If you take time, answer a fifth question for possible partial credit.

  • Each essay is graded 10 points, where anything less than zero is not acceptable.

Key Topics to Focus On

Supply and Demand

  • Understand how to draw the graph demonstrating supply and demand.

  • Be prepared to represent concepts such as taxes and price ceilings on the graph.

Production Possibilities

  • You might encounter problems involving production possibilities for goods like bikes and ropes.

  • Calculate marginal returns: As more workers are added, the marginal return often diminishes. For instance:

    • Increase from 0 to 1 worker: 7 ropes produced, marginal return = 7.

    • Increase from 1 to 2 workers: 6 additional ropes (13 - 7), marginal return = 6.

  • Understand the implications of diminishing marginal returns and why it occurs—usually due to other production factors being held constant.

Drawing the TPM (Transformation Production Model)

  • Remember: The curve should be downward-sloping. For example:

    • If 1 worker makes 7 ropes and 4 workers produce bikes (24 bikes), you will plot that point correctly.

    • Always represent the maximum output of workers efficiently allocated between products.

Marginal Cost Calculations

  • Learn how to compute the marginal cost of reallocating workers from one good to another. Example:

    • Moving one worker to produce bikes from ropes, ascertain the loss of previous outputs against new outputs.

    • Calculate gains and losses accurately.

Economic Changes and International Trade

  • Understand how trade affects production and consumption in a country.

  • Be prepared to identify how production allocation changes with trade; consider what maximizes outputs.

Measurement Problems

  • Recognize the differences between GDP and sales.

    • GDP excludes imports and intermediate goods but includes exports.

    • Sales include all goods sold regardless of market definition.

Inflation and CPI

  • Know methods to calculate Nominal GDP, Real GDP, and the CPI, focusing on:

    • Setting up formulas correctly to determine outcomes.

  • Understand trade balance as an important economic indicator and its components.

Essay Writing Tips

  • Aim for conciseness: A minimum of four sentences up to a page, with bullet points as acceptable.

  • Answer multiple components of the questions clearly; make sure you provide enough detail to show your understanding.

Key Questions to Prepare For

  1. Factors that influence South Korea's economic growth compared to North Korea after their separation (focusing on institutions).

  2. Define GDP, specify what components are excluded.

  3. The impact of market policies like price ceilings or taxes on total surplus in markets.

  4. Discuss non-policy related shocks that affect equilibrium quantity and price in economic models.

  5. The role of patents in promoting technology and the trade-offs they present.