1. Define cost. Explain the difference between explicit and implicit costs. Give some examples of each. What are economic costs?

2. Explain the difference between the short run and the long run. What kinds of changes can the firm make in each?

3. State the principle of diminishing returns. Explain why this happens. When does this principle apply?

4. Define total fixed cost. Why are some costs fixed? What are variable costs? Which costs are likely to be variable in the short run? Which are likely to be fixed?

5. Define marginal cost and explain how to calculate it. Explain its shape. How do marginal costs change as output increases? Sketch a graph of the MC curve. What explains its shape? .

6.  Define and be able to calculate average total cost. Graph a typical short-run ATC curve and explain why it has a U shape. Explain the relationship of the marginal cost and average total cost curves.

7. Explain the main reasons why there may be economies of scale in the long run. What effect do economies of scale have on the long-run average costs? Do the same for diseconomies of scale. Explain the difference between diseconomies of scale and diminishing returns.

8. What are the characteristics of perfect competition? Give some examples of perfectly competitive markets.

9. Explain the difference between economic and accounting costs and between economic and accounting profit. Explain what it means to have economic profit greater than 0.

10. Define total revenue and marginal revenue and explain how to calculate each. Explain why MR = price for a perfectly competitive firm.

11. What rules should a firm follow to determine the profit-maximizing output?

12. Under what conditions should a perfectly competitive firm produce at a loss in the short run? Why would it continue to operate? Under what conditions would it shut down?

13. Describe the long-run equilibrium of a perfectly competitive firm. Graph it. Explain how this equilibrium is achieved. Do this for the cases of short-run profits and short-run losses.

14. How can the firm continue to operate when profit = 0?

15. Describe the short-run and long-run effects of an increase in demand for the product of a perfectly competitive industry.

16. What is the difference between increasing and constant cost industries. Draw the long run supply curve for each and explain its shape.

17. Explain how a perfectly competitive market guarantees that goods will be produced at minimum cost.

18. Define monopoly. List its features.

19. What causes monopoly?

20. What is a patent? Why does the government grant them? What are the benefits to society from patents? What are the costs? When are patents likely to be of net benefit?

21. What does the unregulated, non-discriminating monopolist's demand curve look like? Why is it like this? What does the marginal revenue curve look like? How is marginal revenue calculated? Why is marginal revenue less than price?

22. State the profit-maximizing rule for the monopolist. How is the price the monopolist charges determined? Does a monopolist always earn an economic profit?

23. What are the barriers to entry of other firms? Explain how each acts as a barrier. What happens in the long run under monopoly as a result? Why?

24. Compare a non-discriminating monopolist's price and output to that of a perfectly competitive industry with the same costs and demand. Show this graphically. Compare the efficiency of the market under perfect competition and monopoly.

25. What is price discrimination? When will the monopolist be able to engage in price discrimination and when not? If the monopolist does engage in price discrimination, how should prices vary? How will the outcomes (output, efficincy, etc) be different with price discrimination compare to without it?