class: center, middle, inverse, title-slide # Final Review ## EC 201: Principles of Microeconomics ### Kyle Raze ### Winter 2020 --- class: inverse, middle # Prologue --- # Today ## Grades - What do they mean? - How does the curve work? -- ## Final Exam Review - Topics, structure, protocol, preparation, *etc.* -- ## Q & A - Ask me anything! --- # Finals Week ## Office Hours - Monday 10:00-12:00 in 412 PLC. - Tuesday 14:00-16:00 in 412 PLC. -- ## Final Exam - .pink[Wednesday 10:15-12:15] in Pacific 123. -- - If you show up after 10:30, I won't let you take the exam! --- class: inverse, middle # Grades --- class: clear-slide .center[**Pre-Final Grades**] <img src="17-Final_Review_files/figure-html/unnamed-chunk-1-1.svg" style="display: block; margin: auto;" /> --- # Grades I will re-curve the class after the final. <table class="table" style="margin-left: auto; margin-right: auto;"> <thead> <tr> <th style="text-align:left;"> Assignment Group </th> <th style="text-align:center;"> Weight </th> </tr> </thead> <tbody> <tr> <td style="text-align:left;line-height: 110%;"> Midterm Exam 1 </td> <td style="text-align:center;line-height: 110%;"> 25% </td> </tr> <tr> <td style="text-align:left;line-height: 110%;"> Midterm Exam 2 </td> <td style="text-align:center;line-height: 110%;"> 25% </td> </tr> <tr> <td style="text-align:left;line-height: 110%;"> Final Exam </td> <td style="text-align:center;line-height: 110%;"> 40% </td> </tr> <tr> <td style="text-align:left;line-height: 110%;"> Participation </td> <td style="text-align:center;line-height: 110%;"> 10% </td> </tr> <tr> <td style="text-align:left;line-height: 110%;"> Optional Short Essays </td> <td style="text-align:center;line-height: 110%;"> up to 4% extra credit </td> </tr> </tbody> </table> -- **Note.sub[1]:** I have dropped your lowest three paricipation scores. -- **Note.sub[2]:** The "Total" percentage you see in Canvas is misleading until everything is graded. --- class: inverse, middle # Final Exam --- # Exam Topics **Cumulative:** Anything we've covered is fair game. - Midterm 1 material: weeks 1-4 - Midterm 2 material: weeks 5-7. - New material: weeks 8-10. --- # Exam Topics ## 1. What is Economics? **A:** The study of how humans coordinate their wants. - Why do we need to coordinate? .pink[Scarcity!] -- What role should economists play? - Positive *vs.* normative statements. -- People respond to incentives. --- # Exam Topics ## 2. Motivating the Economic Problem Problem? .pink[Scarcity.] -- Organizing an economy - **Our focus:** Capitalism. - **Consequences:** Improved living standards .mono[+] higher inequality. -- What is a price? - Know the punchline! -- Opportunity cost --- # Exam Topics ## 3. Consumer Theory I Total *vs.* marginal value - *e.g.,* Diamond-Water Paradox. -- Diminishing marginal value .mono[-->] downward-sloping demand. -- Optimal purchase rule - Maximizes an individual consumer's surplus. -- Demand *vs.* quantity demanded --- # Exam Topics ## 4. Consumer Theory II Individual responsiveness .mono[=] price elasticity of demand. - Relationship with revenue. -- Determinants of demand .mono[=] demand shifters. - Prices of other goods (substitutes *vs.* complements). - Income (normal *vs.* inferior goods). - Changes in tastes, expectations, *etc.* -- Relative prices .mono[-->] relative demand. - *e.g.,* shipping the good apples out. --- # Exam Topics ## 5. The Market Mechanism Pit market activity! - Number on card .mono[=] marginal value. - Basis of trade? Differences in marginal values. -- Shortage and surplus *vs.* equilibrium -- **Q:** Why do we like markets as a means to distribute goods? - **A:** They can maximize mutual gains .mono[=] efficiency! --- # Exam Topics ## 6. Demand and Supply Determinants of (market) demand .mono[=] demand shifters. - Prices of other goods, income, tastes, expectations, number of buyers. -- Determinants of supply .mono[=] supply shifters. - Input prices, production technology, expectations, number of sellers, supply disruptions. -- Simultaneous shifts .mono[-->] ambiguity. - Know direction of change in price or quantity, but not both. -- Market spillovers --- # Exam Topics ## 7. Policy Levers: Taxes & Subsidies Tax/subsidy wedge between consumer price and producer price. - Government gets/pays the difference. -- Tax incidence .mono[!=] statutory incidence. - Inelastic side of the market bears more of the burden. -- Elasticity .mono[-->] tax revenue .mono[+] deadweight loss -- Per-unit *vs.* lump-sum -- Equity: progressive *vs.* regressive taxes. -- Equity-efficiency tradeoff --- # Exam Topics ## 8. Policy Levers: Price Controls Binding price floor .mono[-->] surplus of goods .mono[-->] deadweight loss. - *e.g.,* agricultural price supports. -- Binding price ceiling .mono[-->] shortage of goods .mono[-->] deadweight loss. - *e.g.,* rent control. -- What causes price controls to become binding? - *e.g.,* how do price-gouging laws work? --- # Exam Topics ## 9. How Economists Learn from Data I **Q:** Why correlation .mono[!=] causation? - **A:** Selection bias. -- Structured thinking about causal *vs.* contaminated comparisons - Ideal/hypothetical data on potential outcomes -- How do randomized control trials help us make *internally valid* comparisons? -- What does .pink[treatment] .mono[-] .purple[control] tell us? -- When is a study *externally valid*? --- # Exam Topics ## 10. How Economists Learn from Data II Regressions! - Interpret slope of regression line. - Omitted variables bias. -- Natural experiments - Accidental randomized control trials (*e.g.,* Oregon Medicaid Experiment) - Difference-in-differences (*e.g.,* Card and Krueger's minimum wage study) -- Statistical significance --- # Exam Topics ## 11. Externalities Market failure .mono[-->] deadweight loss. -- Negative externality .mono[-->] overproduction. -- Positive externality .mono[-->] underproduction. -- Solutions? 1. Pigouvian taxes/subsidies 2. Coase theorem --- # Exam Topics ## 12. Game Theory Game .mono[=] players .mono[+] strategies .mono[+] payoffs. - *e.g.,* Prisoner's dilemma, chicken, matching pennies, *etc.* -- Dominant strategy is always a best response, but a best response isn't always a dominant strategy. -- Nash equilibrium .mono[=] mutual best responses. -- Make sure that you are comfortable solving a 2 .mono[&times;] 2 game! - Don't worry about the brinkmanship material. --- # Exam Topics ## 13. Public Goods Types of goods - Rival *vs.* non-rival, excludable *vs.* non-excludable. - Private, public, club, and common-resource. -- Markets fail with non-private goods. Why? - Club goods .mono[-->] market power. - Public goods and common resources .mono[-->] collective action problems. -- Collective action problems 1. Free-rider problem 2. Tragedy of the commons --- # Exam Topics ## 14. Producer Theory I Accounting *vs.* economic profit -- Production technology -- Profit-maximizing hiring decisions -- Fixed *vs.* variable costs - ATC .mono[=] AVC .mono[+] AFC -- Short-run *vs.* long-run costs -- Returns to scale --- # Exam Topics ## 15. Producer Theory II Competitive markets -- Profit maximization: pick Q where MR .mono[=] MC. - Short-run: make decision to shut down or keep producing. - Long-run: make entry/exit decisions. -- Firm-level response to a change in demand and short *vs.* long-run market adjustment. - Horizontal long-run supply curve at minimum ATC. - Upward-sloping short-run supply curve. --- # Exam Topics ## 16. Monopoly & Antitrust Sources of monopoly power -- Profit maximization: two steps! -- Social consequences -- Antitrust law .mono[+] regulation --- # Exam Structure ## Multiple Choice - 80 questions - 1 point per question - Multiple groups of sequential questions (*e.g.,* about graphs or tables) --- # Exam Protocol ## Materials - Writing utensil - 3-inch-by-5-inch note card - Basic or scientific calculator (no graphing or programming capabilities) - UO ID card - .hi[Nothing else] --- # Exam Protocol ## Procedure - **Randomized** seating chart - 120 minutes from *"you may begin"* to *"pencils down"* - First 30 minutes: .hi[quiet period] (no questions, no getting up) - Last 90 minutes: ask lots of questions - Show your UO ID card as you turn-in your exam --- # Exam Preparation ## Materials 1. Lecture slides 2. Discussion worksheets 3. Midterm exams 4. Practice questions for the midterms and the final 5. Practice problems from the book --- # Exam Preparation ## Strategies 1. .pink[**Review**] concepts .pink[.mono[<--] slides .mono[+] book] 2. .pink[**Dissect**] midterm performance .pink[.mono[<--] keys .mono[+] emails] 3. .pink[**Practice**] .pink[.mono[<--] worksheets .mono[+] book problems] 4. .pink[**Simulate**] the final .pink[.mono[<--] 25 .mono[+] 25 .mono[+] 25 .mono[=] 75 practice questions!] - Set a timer! 5. .purple[**Visit**] office hours - M 10:00-12:00 and T 14:00-16:00 in 412 PLC 6. .purple[**Prepare**] your note card --- class: inverse, middle # Q & A