<p> Economics 100 – The Economic Way of Thinking Study Guide for Final Exam Chapters 7, 8, 9, 10, and 12 Final: Friday November 21st 5:00 pm - 7:30 pm ITV Room C</p><p>1. Compare and contrast what is meant by a middleman and a speculator.</p><p>2. Comment on how a middleman can lower search and transaction costs.</p><p>3. Discuss the different types of speculators.</p><p>4. Discuss the importance of comparing Marginal Benefits and Marginal Costs (graphically and verbally) in determining the amount of information to seek.</p><p>5. Discuss the difference between caveat emptor and caveat Venditor. Why is it important to make the distinction between the two?</p><p>6. Discuss the similarities and differences between Economic and Accounting Profit.</p><p>7. What is meant by the term interest?</p><p>8. Johnny asks to borrow $50 on November 1st. He will repay the loan on November 5th. If Johnny and I agree that he will pay $65 back, what is the rate of interest Johnny is paying?</p><p>9. Why do people agree to pay interest when there is really no “price” of money?</p><p>10. If the nominal rate of interest is 9% and the expected rate of inflation is 2% what is the real rate of interest?</p><p>11. Explain why Economic Profit is “usually” less than Accounting Profit.</p><p>12. Bill used to be a janitor earning $35,000 a year. He rented out his garage $6,000 per year, and had a $20,000 in a savings account earning 4% per year. He quits his job to open a car repair shop in his garage, empties his savings account, and borrows an additional $20,000 (at 10% interest) for labor, equipment, and supplies for the first year. After one year his total revenue is $85,000. Did Bill make a good decision?</p><p>13. Explain what is meant by the term entrepreneur.</p><p>14. How is an entrepreneur a residual claimant?</p><p>15. Why are you more likely to stand in line at the post office rather than the grocery store?</p><p>16. State and discuss the three things entrepreneurs engage in when becoming involved in market exchanges. 17. Why do we need to convert future dollars into present value terms?</p><p>18. You have just won a drawing at your local mall. You have two options. Option 1 is to get $15,000 in four years. Option 2 is to get $3,000 now, $4,000 next year, $5,000 in year three, and $3,000 in year four. If the discount rate is 10% which option do you take?</p><p>19. What are the three assumptions an industry must comply with to be considered a monopoly?</p><p>20. Discuss the relationship between monopoly and the elasticity of consumer demand.</p><p>21. Draw and explain the market and firm demand curves in a perfectly competitive market.</p><p>22. Discuss the difference between a price taker and a price searcher. </p><p>23. Is a price searcher able to continually increase the price of their product if their goal is to maximize profits?</p><p>24. Discuss the five assumptions an industry must comply with to be considered perfectly competitive.</p><p>25. Which of the previous assumptions for perfectly competitive markets assures that there will be zero economic profits in the long run?</p><p>26. Why doesn’t the cost-plus-mark-up theory not seem to explain how prices are set in the market?</p><p>27. Imakkashirt, Inc. Is confronted with the following demand schedule and cost schedules where TC = TVC + TFC (Total Cost = Total Variable Cost + Total Fixed Cost)</p><p>Output Price TR MR Q TVC TFC TC MC 4 6.00 1 2.50 2.00 5 5.50 2 4.00 2.00 6 5.00 3 6.50 2.00 7 4.50 4 9.50 2.00 8 4.00 5 13.00 2.00 9 3.50 6 17.00 2.00 10 3.00 7 21.50 2.00 11 2.50 8 26.50 2.00</p><p>How many shirts will the firm produce at maximum profit?</p><p>28. Describe and discuss the three levels of price discrimination. 29. Given the following information from Isellaufeet, Inc who has five main feet buying customers. Julie is the owner of Isellaufeet, Inc and she knows with certainty how much each customer is willing and able to purchase feet for. The following describes Julie’s customer’s reservation price (highest price they will buy feet for).</p><p>Customer Reservation Quantity Total Marginal Marginal Price Demanded Revenue Revenue Cost Sandy 11 Stinky 9 Dirty 7 Tired 5 Sweaty 3</p><p>If the Marginal Cost of each foot is $7, how many feet will Julie sell? Explain your answer.</p><p>30. Discuss and describe the three things that must happen for successful price discrimination to take place.</p><p>31. Develop the poverty threshold for a family of five who needs $1.29 each per meal to achieve an acceptable standard of living. </p><p>32. Discuss three things that the poverty threshold is adjusted for.</p><p>33. Discuss three problems with the poverty threshold calculation.</p><p>34. Given the following information draw the Lorenz Curve.</p><p>Cumulative Cumulative Family Group Percentage of Income Share Percentage of Families Income Lowest fifth 10 Second fifth 15 Third fifth 20 Fourth fifth 25 Highest fifth 30</p><p>35. What relationship (or line) can is used to represent perfect equality on the Lorenz Curve? </p><p>36. Discuss two economic reasons that poverty exists.</p><p>37. What is Marginal Revenue Product? How is it useful in determining whether or not to take a job? 38. Discuss both the supply and demand reasoning for increases in income inequality over the last decade.</p><p>39. Explain why the government utilizes income support as the primary way to raise household incomes above the poverty threshold. </p><p>40. Discuss three reasons justifiable reasons people get paid different wages, i.e. society cannot claim that it is discriminatory.</p>