C718 Pathway to Success (Updated) PDF

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C718 Pathway to Success - Microeconomics

Module

Step 1: Recordings Most recent cohort recordings can be found here: Marathon Cohort Recordings.

Unit 2, Module 1 The Economic Way of Thinking

Comprehensive Videos: Live-Event Cohort Recording Module 1 video Slides - The Economic Way of Thinking

Step 2: Study Guide Questions (Use this link to print -

Step 3: Multiple Choice Practice

Notes

Study Guide Questions)

What is the definition of economics? The study of how individuals, governments, firms, and nations make choices on allocating scarce resources to satisfy their unlimited wants. Explain how scarcity leads to tradeoffs. Due to scarce resources we have to make a choice with our income and what we want to purchase, since we can’t have it all tradeoffs have to be made.

Targeted Videos

What is the definition of opportunity cost? What a person sacrifices when they choose one option over another.

WGU Video: Economic Graphs

What are three broad economic questions that all economies must answer? What goods and services will be produced and consumed, how will they be produced? And to whom will they be for. What is meant by making choices at the margin? Considering the total benefits and total costs and then look at the incremental side of it. Marginal always means one more. Marginal costs are the extra costs associated with one more unit of consumption. The marginal benefits are the extra benefits associated with one more unit of consumption. Give an example of the difference between microeconomics and macroeconomics. Microeconomics focuses on the actions of individual agents within the economy, like households, workers, and businesses. Macroeconomics looks at the economy as a whole. Macroeconomics focuses on broad issues such as growth of production, the number of unemployed people, the inflationary increase in prices, government deficits, and levels of exports and imports. What is an example of a positive statement and a normative statement? Positive statements are a statement of fact or a hypothesis and can be proven as accurate or false. “It is raining outside” is a positive statement. A normative statement is a statement that makes a value judgment. “People in the USA should save more” is a normative statement. Identify and describe the four factors of production, Labor: human contribution to production, Land: natural resources used in production. Capital: man made inputs used in production. Entrepreneurship: Risk taking and responsibility for combining productive resources. Identify two differences between a traditional and a market economy. In a traditional economy they organize their economic affairs the way they have always done.

End of Module Quiz in the e-text Module 1 Sarah’s Quiz-The Economic Way of Thinking

Labor - wages Land - rent Capital - interest Entrepreneurship - profit

Occupations stay in the family. In a market economy sellers may be individuals or businesses and the decision making is decentralized. Describe the flow of money in a simple circular flow diagram. It pictures the economy as consisting of two groups—households and firms—that interact in two markets: the goods and services market in which firms sell and households buy, and the factor market in which households sell factors of production to business firms or other employees. Unit 2, Module 2 Economic Problem

Comprehensive Videos: Live-Event Cohort Recording Module 2 video Slides - Economic Problem

Targeted Videos:

Illustrate the concept of a tradeoff using the PPF. The PPF is based on the assumption that an economy can only produce two goods at the same time. The PPF illustrates that with limited resources there is a tradeoff that needs to happen when we choose to produce more of one good. This means we have to reduce production of the second good. On your graph, show a market combination that is inefficient, one that is efficient, and one that is unattainable.

WGU Video: Scarcity,Tradeoffs, and Opportunity Cost WGU Video: The Production Possibilities Frontier

End of Module Quiz in the e-text

Opportunity Cost and the PPF Comparative Advantage Module 2 Sarah’s Quiz-The Economic Problem

Opportunity cost item A = number of item B/number of item A gained. Opportunity cost of a cell phones = 1 million divds given up/1 million cell phones gained. = 1 dvd per cell phone. Absolute advantage can only be stated if both parties producing have the exact same inputs (same amount of labor or resources) Comparative advantage is used when you do not know or the parties do not have the same exact inputs.

WGU Video: Comparative Advantage WGU video: Module 2 Example Problems Video: Increasing Opportunity Cost Video: Comparative Advantage, Specialization, and Gains from Trade Video: Comparative Advantage and Absolute Advantage Point X is unattainable, Point D is efficient, and Point A is inefficient. Using your graph, show how opportunity cost can be calculated between two points on the PPF?

to get from point A to point B you would have to give up health care services to gain more military this shows the opportunity cost for more military it means less health care services. The opportunity cost would be how much health care services given up to produce one more military service.

What is the difference in opportunity cost between a straight line PPF/PPC and a bowed out PPF/PPC? In a bowed out PPF movement along the curve results in opportunity costs that increase as we trade off production of one good for more of the other. In a straight line PPF, the opportunity cost is constant. What factors cause economic growth? A change in: Natural resources, physical capital or infrastructure, population or labor, human capital, technology, and law. How is growth illustrated using the PPF/PPC? It is illustrated by a shift out of the PPF/PPC

Explain the difference between “Comparative Advantage” and “Absolute Advantage” Absolute advantage is when one party can produce more of one product with fewer or the same amount of resources, comparative advantage shows who can produce more products without taking the resources or inputs into consideration. In the table below, who has absolute advantage in the production of wheat? Who has the absolute advantage in cloth? If given the same inputs The United states has the absolute advantage in wheat production because their opportunity cost is lower, England has the absolute advantage in cloth because their opportunity cost to produce more cloth is lower. Use the table below to calculate the opportunity cost of one bushel of wheat in England. 1.33 yards of cloth for 1 bushel of wheat. Using the table below, who has the comparative advantage in cloth? Why? England has the comparative advantage for cloth because their opportunity cost is lower.

Wheat

Cloth

United States

12 bushels

8 yards

England

8 bushels

6 yards

What are the benefits of specialization and trade? When workers specialize in a particular field, the result is a far greater quantity of goods and services than would be available without this specialization.

What is the “Law of Demand”? The higher the price, the less we want to buy, the lower the price, the more we want to buy. The higher the price, the lower the quantity demanded, the lower the price, the higher the quantity demanded.

Comprehensive Videos: Live-Event Cohort Recording Supply and Demand: Module 3 video Slides - Supply/Demand

Targeted Videos: WGU Video: Economic Graphs

What one factor causes a change in quantity demanded? Illustrate this using a graph Price causes a change in quantity demand. What are the factors that change demand? Illustrate this using a graph. Income, Tastes/preferences, population, expectations about the future, prices of other goods. The price of books increases. What happens to the demand for books? What happens to the quantity demanded? The demand for books will stay the same, however the quantity demanded will go down causing movement along the quantity demand line on the graph.

WGU Video:Supply and Demand WGU Video:Example Problems Video: Law of Demand Unit 3, Module 3 Supply and Demand

Video: Price of Related Products and Demand Video: Normal and Inferior Goods Video: Change in Expected Future Prices and Demands Video: Changes in Income, Populations, or Preferences

What is the “Law of Supply”? The higher the price the more they want to sell, the lower the prices the less they want to sell. The higher the price the higher the quantity supplied, the lower the price the lower the quantity supplied. What one factor causes a change in quantity supplied? Illustrate this using a graph. Price causes a change in quantity supplied. What are the factors that change supply? Illustrate this using a graph. Prices in inputs, technology, number of sellers, expectations of the future, prices of other goods I can make with my resources.

End of Module Quiz in the e-text Module 3 Sarah’s Quiz-Demand and Supply

What happens to the supply of ice cream when the price of milk (a resource used to make ice cream) increases? What happens to the quantity supplied? Illustrate using a graph. We will not be able to produce as much so the supply will shift and quantity supplied will go down.

Video: Law of Supply Video: Factors Affecting Supply Video: Market Equilibrium Video: Changes in Market Equilibrium Video: Simultaneous Change in Demand and Supply

Unit 3, Module 4 Elasticity

Comprehensive Videos: Live-Event Cohort Recording

Use a graph to show what happens to the equilibrium price and quantity of cars when there is a decrease in demand. During Valentine’s Day, the demand for candy increases and the cost of producing candy also increases because of special packaging for the holiday. What is the net effect on the equilibrium price and quantity of candy due to these changes? Show this in a graph and explain briefly. How does a market eliminate shortages and surpluses?

What is the price elasticity of demand? How is it calculated? - Responsiveness to a change in price.

End of Module Quiz in the e-text Module 4 Sarah’s Quiz-Elasticity

- Responsiveness to a change in price, elastic demand: lots of substitutes, luxury, large portion of income.

Elasticity: Module 4 video

Inelastic demand; quantity demanded does not respond strongly to price changes. Few substitutes, necessity,small portion of income. Unit elastic: quantity demanded changes by the same percent as price changes.

Slides - Elasticity

Targeted Videos: WGU Video: Elasticity WGU Video: Price Elasticity of Demand and Total Revenue WGU Video: Special Cases in Elasticity of Demand

What are two determinants of the price elasticity of demand? Explain what it means when we say that demand is elastic? Inelastic? Draw a perfectly inelastic demand curve. What happens to equilibrium price and quantity if supply increases? Draw a perfectly elastic demand curve. What happens to equilibrium price and quantity if supply increases? What does the price elasticity of demand tell us about the relationship between price and total revenue?

What is income elasticity of demand? How do we know if a product is a normal good or an inferior good? What is cross-elasticity of demand? How do we know if the products are substitutes or complements? What is the price elasticity of supply? Unit 4, Module 5 Market Efficiency and Government Intervention

Comprehensive Videos: Live-Event Cohort Recording Market Evaluation: Module 5 video Slides - Market Evaluation

Targeted Videos: WGU Video: Marginal Benefit and Demand WGU Video: Supply and Marginal Cost WGU Video: Consumer Surplus WGU Video: Producer Surplus

What are marginal benefit and marginal cost? How do they relate to demand and supply? Explain market efficiency using marginal benefit and marginal cost. Describe consumer and producer surplus. Draw a graph and use it to identify consumer and producer surplus What is a social (total) surplus? Give an example of a price ceiling. Explain its effect on consumer surplus, producer surplus, and quantity using a graph. Give an example of a price floor. Explain its effect on consumer surplus, producer surplus, and quantity using a graph. Identify and explain the deadweight loss in the case of underproduction. Use a graph in your answer.

End of Module Quiz in the e-text Module 5 Sarah’s Quiz- Market Efficiency and Government Intervention

Why are price controls inefficient?

Comprehensive Videos: Live-Event Cohort Recording Market Failure and Government Intervention: Module 6 video Market Failure Slides Unit 4, Module 6 Market Failure & Government Intervention

Targeted Videos: WGU Video: Externalities Video: Negative Externalities Video: Taxes for factoring in negative externalities Video: Positive externalities

What are externalities? Give an example of a negative externality and a positive externality. What is the difference between social supply and private supply?

How is market efficiency impacted by a negative externality? What is the difference between social demand and private demand?

End of Module Quiz in the e-text

How do positive externalities lead to underinvestment? Explain.

Module 6 Sarah’s Quiz

Identify and explain a government policy that can be used to manage (a) negative externalities and (b) positive externalities. What is the effect of imperfect information on the market outcome? How do markets adjust to imperfect information? Explain moral hazard and adverse selection and give an example for each. Define the concepts of Marginal and Total Utility and give an example. What is the principle of diminishing marginal utility? Explain this concept using your own example.

Comprehensive Videos: Live-Event Cohort Recording Consumer Choice: Module 7 video Consumer choice slides

Using the graph below, answer the following --What is an indifference curve? --Explain why Bob is equally happy at points B and E. --Of the following points, A, C, or K, which one would represent the highest level of utility?

Targeted Videos: WGU Video: Indifference Curves Unit 5, Module 7 Consumer Choice

End of Module Quiz in the e-text

Video: Marginal utility and total utility

Module 7 Sarah’s Quiz-Consumer Choice

Video: Deriving demand curve from tweaking marginal utility per dollar Video: Budget line Video: Indifference curves and marginal rate of substitution Video: Optimal point on budget line

What is a budget constraint? What role does a consumer’s budget constraint play in

their utility maximization decision? What is a marginal decision rule? If Joe currently has a marginal utility of t-shirts of 20 and a marginal utility of soda of 15, and the price of t-shirts is $10 each and the price of soda is $1.50 each, is Joe maximizing his utility? If not, how should he adjust his spending? Use the substitution and income effects to explain consumers’ response to a price change. What are economic and accounting profits? What is the difference between implicit and explicit costs? Give an example of each. What is the difference between the short-run and long-run? What are total product, marginal product, and average product? How are they calculated?

Comprehensive Videos: Live-Event Cohort Recording Cost: Module 8 video Production and Cost Slides

Targeted Videos:

What are marginal costs, average costs, average variable costs, average fixed costs? How are they calculated? The table below provides information about the daily short run costs for a company that produces television. Fill in the blank spaces. OUTPUT (Q)

Fixed Cost (FC)

Variable Cost (VC)

Total Cost (TC)

Avg Fixed Cost (AFC)

Avg Variable Cost (AVC)

Avg Total Cost (ATC)

Marginal Cost (MC)

WGU Video: Maximizing Firm Efficiency

0

$100

$0

$100

***

***

***

***

WGU Video: Fixed Cost, Variable Cost, and Total Cost

1

$40

WGU Video: Marginal and Average Costs

2

$60

Video: Diminishing marginal returns

3

$100

Video: Economies of scale

4

$240

5

$330

WGU Video: Accounting Profit vs. Economic Profit Unit 5, Module 8 Cost of Production

What are increasing and diminishing marginal returns?

WGU Video: Short Run vs. Long Run

End of Module Quiz in the e-text Module 8 Sarah’s Quiz-Costs of Production

How does a firm determine the efficient mix of factors? If MPL = 12, PL = 3. MPK = 144, PK = 12, is the firm using the efficient mix of factors? If not, how should the firm reallocate its factors? Draw a graph showing a typical long-run average cost curve. Identify and explain the regions of the curve exhibiting (1) economies of scale, (2) diseconomies of scale, and (3) constant returns to scale.

What are the characteristics or assumptions of the perfect competition model? How do firms set prices under perfect competition? Define marginal revenue and average revenue. Explain their relationship to price in perfect competition

Comprehensive Videos: Live-Event Cohort Recording Market Structure I: Module 9 and 10 video

Perfect competition is nothing but competition. The most basic form of competition, all firms sell identical products, free entry and exits, no barriers to enter or exit, no price setting power.

How would a perfectly competitive firm use the marginal decision rule to determine the profit-maximizing quantity of output?

Slides - Perfect Competition and Monopoly End of Module Quiz in the e-text Unit 6, Module 9 Competitive Market or Perfect Competition

Targeted Videos:

Module 9 Sarah’s Quiz-Perfect Competition

WGU Video: Market Structure Overview WGU Video: Perfect Competition

Two ways to maximise profits: The total method and the marginal method. Total method: choose the q where the difference between the total revenue and total cost is the greatest (explicit cost and implicit cost) The marginal method: choose the q where the marginal revenue is equal to marginal cost

WGU Video: Profit Maximization Video: The Shutdown Rule Video: Perfect Competition in the Long Run Using the graph above, answer the following and show on the graph: ● What is the profit-maximizing quantity of output if the price is $30? ● What is the average total cost of that quantity? ● What is the firm’s profit per unit? ● What is their total profit?. Under what conditions would a perfectly competitive firm choose to shut down in the short run? A perfectly competitive firm is making positive economic profits. How does the market reach long-run equilibrium?

Monopoly - 1 firm in monopoly, no competition.

Using the graph below, identify the long-run equilibrium price and quantity (p*, q*). (Hint: What are the firm’s profits in the long-run?) Explain.

What are the characteristics or assumptions of the monopoly model?

Comprehensive Videos: Live-Event Cohort Recording Market Structure I: Module 9 and 10 video Unit 6, Module 10 Monopoly

End of Module Quiz in the e-text

Slides - Perfect Competition and Monopoly

Module 10 Sarah’s Quiz- Monopoly