# Exam 2

# Exam Information

**You may not have anything with you** for the exam (no notes, etc) **except a calculator.** I write questions such that you can get a perfect score *without* a calculator, and answers should typically be simple whole numbers. However, I understand that if nothing else, calculators are moral support and you can use them. I will provide simple calculators if you need to borrow one, as well as extra paper.

I write the exam so that most students can complete it in less than the required time, but you will have the whole class period, plus a few minutes between classes. Questions draw from concepts in the slides and whatever we discuss in class, **no other outside knowledge is needed.**

You may need to draw graphs — I will grade you based on labeling important points, not on drawing ability or perfect accuracy.

**You must show your work for all problems.** On all exam questions, **I give points for partial credit.** The more of your thought process you show (if you are unsure), the more points I am able to give. **Both correct answers with no work shown, or blank answers will not receive full points.**

Please plan to come in and leave a seat between you and your neighbor.

If you have any approved testing accommodations, or know in advance you must be absent, please confirm with me ASAP and we will make arrangements.

# Concepts Study Guide

# “Practice” Exam

Above, you have a previous semester’s actual exam. Use it to get a sense of what questions are asked, the format, and how many. **The exact number and type of questions on our exam may be different.**

Questions draw from topics in Unit 2 and just because topics or questions were not in the practice exam does NOT mean they may not show up on your exam.**^{1} Aside from minor extensions, no mathematical problem on any exam should be something you have not seen in some form before.

Look at the practice exam *before* our Review day. I will post the answer key during the weekend. I am happy to discuss other individual answers and strategies during Office Hours.

# My Advice

Make sure you do all of the homework problems and learn from the answer keys to the homeworks, as well as the in-class practice problems. All of the math problems are largely in the same style as the in-class & homework questions. While some of the questions should be novel applications, conceptual questions on homeworks will get you in the right headspace to think about answering a question on an exam.^{2}

The number one cause of problems for students is overthinking the question. **I am almost never trying to trick you!** I am usually looking for a straightforward answer that can be explained in a simple sentence.

I also suggest *not* trying to memorize relationships (i.e. whether cross-price elasticity of demand is positive or negative for complements; price and revenue move together when demand is inelastic, etc.)! You have an equal chance of remembering it correctly or incorrectly. I would rather recommend you use your intuition and think through a real life example that makes sense, which will then match the math.

## Things that are worth memorizing:

*the optimum input combination is when the slopes (of isoquant [“output”] curve and isocost [“cost”] line) are equal; marginal benefit = marginal cost; firms’s & market’s exchange rate are equal*(they all say the same thing, choose whatever resonates with you)

\[\frac{MP_l}{MP_k}=\frac{w}{r}\]

*elasticity means “responsiveness” between variables*- what marginal rate of technical substitution, slopes of isoquant curves & isoocost lines, marginal product, and average product
*mean, in English* - What the different types of costs
*mean*, and*how to find them*from a total cost function:- variable cost
- fixed cost
- average fixed cost
- average variable cost
- average (total) cost
- marginal cost (I will give you this function)

- The rules for optimal production for firms:
- Set \(q^*\) where \(MR(q)=MC(q)\)
- Profit \(\pi = [p-AC(q)]q\)
- Shut down in the
*short-run*if \(p<AVC(q)\) - Exit in the
*long run*if \(p<AC(q)\)

- The characteristics of a competitive market
- Economic vs. accounting costs & profits
- How economic profits go to zero in the long run, and the role of economic rents