MicroNotes

Basic Economic Concepts 8%–14%

• Scarcity, choice, and opportunity cost
• Production possibilities curve
• Comparative advantage, specialization, and trade
• Economic systems
• Property rights and the role of incentives
• Marginal analysis

The Nature and Functions of Product Markets 55%–70%

Supply and demand 15%–20%

• Market equilibrium
• Determinants of supply and demand
• Price and quantity controls
• Elasticity
• Price, income, and cross-price elasticities of demand
• Price elasticity of supply
• Consumer surplus, producer surplus, and market efficiency
• Tax incidence and deadweight loss

Theory of consumer choice 5%–10%

• Total utility and marginal utility
• Utility maximization: equalizing marginal utility per dollar
• Individual and market demand curves
• Income and substitution effects

Production and costs 10%–15%

• Production functions: short and long run
• Marginal product and diminishing returns
• Short-run costs
• Long-run costs and economies of scale
• Cost minimizing input combination

Firm behavior and market structure 25%–35%

• Profit
• Accounting versus economic profits
• Normal profit
• Profit maximization: MR=MC rule
• Perfect competition
• Profit maximization
• Short-run supply and shut-down decision
• Firm and market behaviors in short-run and long-run equilibria
• Efficiency and perfect competition
• Monopoly
• Sources of market power
• Profit maximization
• Inefficiency of monopoly
• Price discrimination
• Oligopoly
• Interdependence, collusion, and cartels
• Game theory and strategic behavior
• Monopolistic competition
• Product differentiation and role of advertising
• Profit maximization
• Short-run and long-run equilibrium
• Excess capacity and inefficiency

Factor Markets 10%–18%

• Derived factor demand
• Marginal revenue product
• Labor market and firms' hiring of labor
• Market distribution of income

Market Failure and the Role of Government 12%–18%

Externalities

• Marginal social benefit and marginal social cost
• Positive externalities
• Negative externalities
• Remedies

Public goods

• Public versus private goods
• Provision of public goods

Public policy to promote competition

• Antitrust policy
• Regulation

Income distribution

• Equity
• Sources of income inequality