OK here goes. the final will cover only chapters 10 and 11, about costs. It will be set for about an hour, like the midterms; you may have the whole 2 hours for it. You may have your one sheet 8.5 in by 11 in no larger, both sides, of notes, but no book.
Chapter 10
Variable, Fixed and Total Costs– what are they. How do they show up on a graph of cost vs quantity for example. Graph a total cost curve by plugging in numbers like Example 10.1. what are Average Fixed Cost, Average Variable Cost, and Average total Cost, and how do they look on a graph? What are marginal cost? YOu should know how to interpret the cost curves in Figure 10.5 for instance. Note Example 10.2, and Example 10.3.
How should production be allocated between two processes, and why is that the proper choice? Figure 10.8 and Example 10.4 are relevant.
what is the relation between MP, AP, MC, and AVC from Figure 10.9– you should be able to explain the relationship. Why do the lines cross when they do? why do they peak when they do?
choosing optimal input: this section is similar in math to the theory of consumer choice. the isoquants are equal quantity produced; the straight line is the total cost, and its slope is determined by the cost per unit of the two inputs L and K (in the figure 10.11). Remember cost is rK+wL, a straight line. the major result to remember is that at the optimal combination of inputs, MP(L)/MP(K) = w/r. From page 341 on the chapter uses examples of this to explain different situations. See figure 10.14 for the evvect of a minimum wage on employment of skilled and unskilled labor. It is a question of substitution like it was in the consumer theory case.
finally there is the long run expansion path in figure 10.15 and the long run total, average, and marginal costs in figure 10.16. You should know how you get the LMC and LAC graphs from the LTC graph.
Appendix 10 is not covered on the exam!
Chapter 11
Chapter 11 deals with perfect competition. Economic profit vs accounting profit– what is the difference? What are the conditions for perfect competition? PP 370-371 that we went over in class in detail– the relationship of the TC, TR, Profit line (fig 11.2) and the graphs of P, MC, and AVC (fig 11.3) and the relations. The conditions for the firm choosing the profit-maximizing amount of output, namely P = MC. The slopes of theTC and TR curve are equal at the profit max.
The short run supply curve is the MC curve of the firm, as long as it is above the minimum of the AVC curve. (that last condition is the shutdown condition).
How to get industry supply curve from the individual firm supply curves. (Horizontal addition). Some problems with calculating the industry supply curve from multiple firms who have the same individual supply curve. (example 11.2, exercise 11.3).
Short run competitive equilibrium: Determining output, total revenue, total cost, and profit looking at a graph such as fig 11.6. A short run equilibrium at a price which is above the shutdown conditin but too low to earn positive economic profits. (Figure 11.7, calculating the profit and the revenue and cost from the graph).
Finally, calculating producer surplus in the case of perfect competition. Why is producer surplus equal to profit plus fixed cost? Interpret it on a graph (fig 11.9). Two ways of calculating producer surplus.
This is plenty. I posted a few problems in an assignment 3 on WebCT with the answers. I will also put the answers to all chapter 10 and 11 problems on WebCT under Answers. Hope this helps.
Supply Chain and Logistics 