Learning Objectives for Final Exam
&
Course Challenge Exam

There are four units in this Principles of Microeconomics course. Each unit has an exam tied to it. Each of these exams in turn has 40 detailed learning objectives listed for it corresponding to each question on the exam.
In the table that follows the learning objectives associated with each question on the Final Exam and on the Course Challenge Exam are listed.

Question
UNIT/Chapter
Learning Objectives
1
I/1
  • Define economics and understand the importance of the fact that there are unlimited wants but only limited resources available to satisfy them.
  • List and discuss the three basic economic questions every society must answer and the two antithetical answers to these questions of which existing societies are a mixture.
    		•
    2
    I/1
  • Demonstrate the importance of rationality in economic analysis.
  • Explain what economics means by self interest and the important role it plays in economic models.
    • 3
    I/1
  • Explain the importance of models and understand the role of assumptions in economic models.
    • 4
    I/2
  • Define what is meant by scarcity in economic theory.
    • 5
    I/2
  • Differentiate between wants and needs and discuss how they relate to the concept of economic goods.
  • Explain the idea of opportunity cost.
    		•
    6
    I/2
  • Draw a graph a production possibilities curve.
  • Discuss the idea of efficiency and inefficiency in the context of the production possibilities curve.
    • 7
    I/2
  • Explain the idea of increasing opportunity cost.
  • Discuss economic growth and the trade-off between consumption and capital goods.
  • Contrast absolute advantage against comparative advantage.
    		•
    8
    I/3
  • Define the law of demand.
    		•
    9
    I/3
  • Explain the difference between changes in the quantity demanded and changes in demand.
    		•
    10
    I/3
  • Illustrate the process of determining market equilibrium quantity and equilibrium price.
    		•
    11
    I/4
  • Discuss the essential features of the price system.
    		•
    12
    I/4
  • Evaluate the effects of changes in demand and supply on the market equilibrium price and quantity.
    		•
    13
    I/4
  • Discuss the economics of rent control.
    • 14
    II/5
  • Discuss what economists mean by market failure.
    		•
    15
    II/5
  • Explain the concept of external benefits and negative externalities.
    		•
    16
    II/5
  • Distinguish between public goods and private goods.
  • Describe the free rider problem.
    		•
    17
    II/19
  • Define and calculate price elasticity of demand.
  • Classify price elasticities of demand.
    		•
    18
    II/19
  • Show how total revenue depends on price elasticity of demand.
  • Discuss the factors that determine price elasticity of demand.
  • Describe cross elasticity of demand and how is can be used to indicate whether two goods are substitutes or complements.
  • Define income elasticity of demand.
    		•
    19
    II/19
  • Classify price elasticities of supply.
  • Discuss how the time element affects price elasticity of supply.
    		•
    20
    II/20
  • Distinguish between total utility and marginal utility.
  • Discuss the concept of diminishing marginal utility.
  • Explain how a consumer optimizes utility by equalizing the marginal utility per dollar spent across all goods and services.
    		•
    21
    II/20
  • Describe the substitution effect of a price change on the quantity demanded.
  • Describe how the real income effect of a price change affects the quantity demanded.
    		•
    22
    II/20
  • Explain the diamond-water paradox and its solution.
    • 23
    II/21
  • Explain the difference between Accounting Profit and Economic Profit and discuss why the difference is important to economic theory.
    		•
    24
    II/21
  • Explain what interest is and what the interest rate is, and explain the role it plays in business decision making.
    		•
    25
    II/21
  • Define and explain the concept of efficient markets.
    		•
    26
    III/22
  • Explain what is meant by a production function and construct a table illustrating this concept.
  • Define what is meant by diminishing marginal product and illustrate the concept in a table.
    		•
    27
    III/22
  • Define what is meant by marginal cost, explain how it is related to diminishing marginal product and the other cost curves, and sketch a graph of it in relationship to the other cost curves.
  • Describe the relationship between Total Cost, Average Fixed Cost, Average Variable Cost, Average Total Cost, and Marginal Cost.
    		•
    28
    III/22
  • Describe the impact of the law of diminishing returns on the average cost curves and the marginal cost curve.
    		•
    29
    III/22
  • Define what is meant by economies of scale/diseconomies of scale and sketch a graph that illustrates these concepts.
    		•
    30
    III/23
  • List and discuss the characteristics of perfectly competitive market structure
    		•
    31
    III/23
  • Write down the formula for calculating Profitsand the rule for profit maximization for a perfectly competitive firm and explain how MR, MC, P are related to them.
  • Explain the Pricing and Output decisions for perfectly competitive firms based on the desire to maximize profits.
    		•
    32
    III/23
  • Calculate short-run profits/losses given price and cost information or by using a graph.
  • Identify the short-run break-even and shut-down points for a firm on a graph or with the use of price and cost information.
  • Describe the supply curve for a perfectly competitive firm and to identify it using a graph of such a firm's cost curves.
    		•
    33
    III/24
  • Define what it means for a firm to have a monopoly and identify situations that could give rise to a monopoly.
  • Identify what a natural monopoly is, list all the ways that government action can create a monopoly, and explain what a cartel is.
    		•
    34
    III/24
  • Define the profit maximizing rule for a monopolist, explain how it differs from a perfectly competitive firm, and identify the price and output levels of a monopolistic firm on a graph. calculate a monopolist's profits from a graph or from price and cost data.
    		•
    35
    III/24
  • Explain the efficiency characteristics of Monopolistic markets compared to Competitive markets.
  • Explain further the inefficiencies of Monopolistic markets and the misallocation of resource that result from them.
    		•
    36
    III/25
  • Define what is meant by a monopolistically competitive market structure and explain its characteristics relative to competitive and monopolistic market structures.
  • Explain the role that product differentiation plays in monopolistically competitive markets.
  • Discuss the characteristics of monopolistically competitive firms and implications these characteristics have on the demand and marginal revenue curves faced by such firms.
    		•
    37
    III/25
  • Compare the equilibrium conditions (and their implied results) between monopolistically competitive and perfectly competitive firms.
  • Discuss the short-run, profit maximizing, equilibrium position of monopolistically competitive firms using graphs or price, revenue, and cost data.
    		•
    38
    III/25
  • Differentiate the short-run AND LONG RUN equilibrium situations of monopolistically competitive firms from perfectly competitive firms.
    		•
    39
    IV/26
  • List and explain the characteristics of oligopoly.
  • Explain why oligopolies exist.
  • Explain alternative methods of measuring industry concentration.
    		•
    40
    II/26
  • Explain what Game Theory is and define all the basic concepts and terms used in Game Theory.
  • escribe the Prisoners' Dilemma with the use of Game Theory and a Game Theory payoff matrix.
    		•
    41
    IV/26
  • Explain, with the aid of graphs,
    a) the temptation of oligopolistic firms to collude with one another in a cartel;
    b) what conditions must exist for a cartel to work effectively; and
    c) why the temptation to cheat on the cartel agreement is ever present.
    		•
    42
    IV/28
  • Define and calculate the Marginal Product of Labor (also know as the Marginal Physical Product of Labor) and the Marginal Revenue Product of Labor.
  • Define and calculate the Marginal Factor Cost of Labor and state its relatiion to the wage rate under conditions of perfect competition in the labor market.
  • State and explain the General Rule for hiring labor by a firm wanting to maximize profits.
    		•
    43
    IV/28
  • Explain what is meant by the term "Derived Demand" and explain the relationship between the Marginal Revenue Product of Labor and the firm's demand curve for labor.
  • Explain the relationship between the price of the product labor produces and the firm's demand for labor and explain why the total market demand for labor is not simply the horizontal summation of each firm's demand for labor.
    		•
    44
    IV/28
  • Explain wage determination in a perfectly competitive labor market and what might cause shifts in the Demand and the Supply of Labor.
  • Explain how the demand for labor and for other inputs by a Monoplist differs from that of a Perfectly Competitive Firm and explain what effect this has on the utlilization of labor and other inputs.
    		•
    45
    IV/32
  • Define comparative advantage and explain how it differs from absolute advantage and discuss the importance of international trade for the U.S. relative to its importance to other countries.
  • Calculate opportunity cost and recognize a mutually beneficial exchange rate when given production figures for two goods from two countries.
  • Determine comparative advantage and the direction of trade.
    		•
    46
    IV/32
  • State how comparative advantage leads to specialization and what the gains from trade are.
  • Explain how imports are really paid for and argue whether or not the U.S. is losing its competitive edge in world trade.
    		•
    47
    IV/32
  • Explain the reasoning behind the infant industry and foreign subsidies arguments for protectionism, as well as the weaknesses of these arguments.
  • Compare the tariffs to quotas and specifiy who gains or loses from each respectively they have influenced international trade.
    		•
    48
    IV/33
  • Teach someone else the difference between the Balance of Trade and the Balance of Payment while being able to explain the role accounting identities play in them and how surplus and deficit items in these accounts help balance these identies.
  • Explain what kinds of transactions are contained in the Current and Financial accounts.
    		•
    49
    IV/33
  • Explain to someone how a foreign exchange market functions and what is meant by the exchange rate, appreciation and depreciation.
  • Do exchange rate math, converting one currency into another or determining what the exchange rate is.
  • Write down a list of the determinants of supply and demand and their slopes in foreign exchange markets while explaining what factors will cause the curves to shift.
  • Put it all together and explain how changes in equilibrium in the foreign exchange markets occur.
    		•
    50
    IV/33
  • Carry on a discussion about two historical fixed exchange rate systems:
    a) the gold standard, and
    b) the Bretton Woods Monetary System and IMF.
    		•