Upload
others
View
2
Download
0
Embed Size (px)
Citation preview
LECTURE 27 The Lessons and Tools of Economics
May 3, 2016
Economics 2 Christina Romer Spring 2016 David Romer
Final Exam Logistics
• Friday, May 13th, 7–10 p.m.
• In Wheeler Auditorium
• Please sit every other seat.
• You will be getting out late, so make plans now for getting home safely.
Final Exam Format and Content
• Roughly the length of two midterms.
• Cumulative, but with one section specifically on material since the second midterm.
• Mixture of T/F/U questions, problems, and multiple choice questions.
Some Advice on Taking the Final Exam
• Read questions carefully.
• Figure out what tool is appropriate.
• Watch your time.
• Think of trying to convince the person grading the exam that you understand the material.
Some Advice on Studying
• Focus on the posted slides and your lecture notes.
• Also the suggested answers to the problem sets.
• Study actively; don’t just keep reading over your notes.
• Redraw diagrams; think of different cases and examples and then work them out.
• Focus on really understanding the tools.
Places to Get Help before the Final
• Review session:
• May 5, 3:30–5:00 in 2050 VLSB.
• Professor office hours this week and next:
• Wednesday, 1–3 in 683 Evans.
• GSI office hours:
• Your GSI will let you know their office hours during RRR and finals week.
Production Possibilities Curve
PPC with specialization
Good y
Good x
PPC without specialization
Gains from specialization
Profit Maximization for a Competitive Firm
q Q
Market
D
S
P1
P P
Typical Firm
MR
MC
q1
A typical firm wants to produce where MR=MC.
Diagram for a Competitive Industry
q Q
Market
D
S
P1
P P
Typical Firm
MR
MC
q1
ATC
Positive profits are the signal to enter; negative profits are the signal to exit.
Lesson 7
• Market failures are important, and government interventions can often improve market outcomes.
Negative Externality
D1,PMB1,SMB1
Q
P S1,PMC1
Q1
SMC1
Q*
External MC
Deadweight Loss
At Q1, SMB < SMC.
Lesson 2
• Improvements in average labor productivity are the key source of economic growth, and technological progress is the key source of improvements in average labor productivity.
Lesson 4
• Monetary and fiscal policy affect planned spending, and so can cause or mitigate short-run fluctuations.
Lesson 5
• Inflation responds gradually to the deviation of output from potential, and this behavior of inflation (working through the Fed’s reaction function) brings the economy back to Y*.