1) Describe graphically and algebraically with minimal (but necessary) discussion how the demand function and the inverse demand function relate to the two ways of defining a demand curve, as well as a change in demand.

2) Describe graphically and algebraically with minimal (but necessary) discussion how the supply function and the inverse supply function relate to the two ways of defining a supply curve, as well as a change in supply.

3) Suppose there is an increase in the marginal cost of production for firms in a perfectly competitive industry. Describe graphically with minimal (but necessary) discussion the impact this has on the market in terrns of change in equilibrium price and quantity. Outline the process of movement from one equilibrium to the next.

4) We define two goods as complements using the definition that "A is a complement to B if an increase in the price of A leads to a decrease in the demand for B." What is the important "ceteris paribus" assumption that is necessary for this definition to be accurate.

5) Using a graphical analysis with minimal discussion, in what sense is an increase in a binding minimum wage argued to be good for some, but not good for all minimum wage workers? In what sense does your answer to this question depend on whether the time frame under consideration is soon versus later?

6) Suppose the elasticity of demand is equal to one at each point on a demand curve. Graph this particular demand curve and explain why the elasticity of demand equals one at each point.

7) Using calculus, show how MR is related to the elasticity of demand. Summarize the implications for TR. In what sense does this imply a single price monopolist would always produce where demand is elastic?

8) Suppose the inverse demand function is P Solve for the Ed for this demand curve. How does the Ed vary as one moves along the demand curve.

9. Ceteris paribus, graphically show why government revenues from a particular per unit tax are greater if demand and supply are relatively inelastic.

10. Show why the MRSAforB is equal to the MUA/MUB.

11. With good A on the "X axis," what is the implication of a horizontal PCC in terms of the elasticity of demand for good A. Briefly and succinctly explain your answer?

12. Describe graphically with minimal (but necessary) discussion the Hicksian income/substitution decomposition that would lead to a perfectly inelastic demand curve.

13. Describe graphically with minimal (but necessary) discussion the Hicksian income/substitution decomposition that would lead to a situation with an income effect equal to zero.

14. Describe graphically with minimal (but necessary) discussion the EV, UEV, EU of the gamble, and MWP for the following gamble: P 1=30% of $500 and P2=70% of $0. Why does the answer to your question depend on whether the individual is risk averse or risk loving?

15. What is meant by the present value of utility of an event to occur in the future? What is meant by the discount rate? How does the discount rate effect the current utility of a future event.

16. Mathematically, why does the law of diminishing returns imply MC increases as output increases?

17. How are "returns to scale" related to "economies of scale"?

18. With a general profit defined as = TR-TC, what are the F.O.C. and S.O.C. for profit maximization? What is the economic relevance of these two mathematical conditions?

In what sense are these different for a firm in a perfectly competitive industry?

19. Why do we model the perfectly competitive firm as facing a perfectly elastic demand curve when the market demand curve is not perfectly elastic?

20. Describe graphically with minimal (but necessary) discussion why the MC curve above minimum AVC is the firm's supply curve.

21. Based on your discussion in last question above, why would a per-unit tax of $1 per unit shift the firm's supply curve up vertically by $1?

22. What is VMP of labor? How does this concept relate to the demand for labor by a firm in a perfectly competitive market? In what sense is this demand curve related to the condition that firm's will close down if total revenue is less than total variable costs?

23. As discussed in class, what is meant by the concept of "duality" in reference to the firm choosing the profit maximizing output versus the profit maximizing level of the variable input in the SR?

24. Suppose there is a single price profit maximizing monopolist. Using marginal and average cost curves, graphically depict the situation in which the monopolists earns zero economic profit.

25. Using calculus, show the relationship between Marginal [Revenue and elasticity of demand. Then, assuming a linear inverse demand function of the form P = A-BQ, show graphically and explain the relationship between the linear inverse demand curve and the marginal revenue curve as related to elasticity of demand.

26. Why does a perfectly price discriminating monopolist face a marginal revenue curve that is identical to the downward sloping market demand curve faced by the monopolist.

27. Assume a perfectly price discriminating monopolist in the LR. Graphically depict the optimal quantity this monopolist would produce. Using the MR and MC curves, shade in the area on the graph that depicts TR and TC.