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Midterm

ECN 306 Notes Exam 1.docx

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Department
Economics
Course
ECN 306
Professor
Jose Mendez
Semester
Fall

Description
ECN 306 1 Key concepts a Producer surplus area a i Remaining area above Supply curve at given price minus area below ii RevenueCOGSincome above normal profit b Real cost of domestic resources used to produce given quantity of domestic goods c Consumer surplusProducer SurplusSupply Curvefactors of production and technology must be constantArea under the supply curve minimum amount producers require to produce first unit profitablyIncludes cost of all materials and normal profitArea per unit is cost of each additional unitTotal cost is total areaAlso value of resources in alternative use cost to society lost value opportunity costArea is the value society gives up by using resourcesConsumer Surplus Demand CurveIncome and price of other goods held constantArea under the demand curve max price willing to pay for first unitTotal value of benefit from that unitNet benefits under the curve above the price level benefits received not paid for Economic efficiency standard of livingEffects of trade on individual groupsImport demand Export supply 1 Why do countries tradea Price differences i Demand tastespreferences income HomeDomesticUS ii Supply tech cost of inputs conditions of competition d us iii Government policies taxes subsidies ForeignRest of World 2 What determines patterncomposition of trade f RoW 3 Effects of trade on economic structure production consumptiona Positive effects HomeImporting nation Autarky absence of i Price decreases trade between nations ii Qd increases iii Qs decreases iv Difference in Q is supplied by imports b Positive effects ForeignExporting nation i Price increases ii Qs increases iii Qd decreases iv QsQdexports
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