Principles of Microeconomics
(Stone's text)

Review Guideline for Exam 2

Chapter 6. consumer Choice and Demand

1. Budget line. How changes in prices and income affect the budget line.

2. Total utility and marginal utility. The law of diminishing utility.

3. Rule of maximizing utility and the demand curve.

Chapter 7. Production and Cost

1. Economic cost, explicit cost, implicit cost, accounting profit, economic profit and sunk cost.

2. Production: total product, marginal product, fixed input, variable input, short run and long run.

3. Cost: fixed cost, variable cost, total cost, average fixed cost, average variable cost, average total cost, and marginal cost.

4. Long run: long run average total cost, economies of scale, constant returns to scale, and diseconomies of scale.

Chapter 8. Competition

1. Market structure: competition, monopolistic competition, oligopoly, and monopoly

2. Total revenue and marginal revenue

3. Profit maximizing condition: MR=MC

4. Calculation: profitable, breakeven and loss

5. Shut down condition in the short run and exit condition in the long run

6. Short run supply curve

7. In the long run, economic profit (loss) is zero.