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TEST 2 SECTIONS and Review Questions

Test 2 will cover the Theory of Consumer Behavior and the Theory of Production and Cost, focusing on consumer preferences, utility concepts, and production functions. Key topics include cardinal and ordinal utility theories, stages of production, and cost calculations in the short run. Review questions are provided for each section to reinforce understanding of the material.

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18 views3 pages

TEST 2 SECTIONS and Review Questions

Test 2 will cover the Theory of Consumer Behavior and the Theory of Production and Cost, focusing on consumer preferences, utility concepts, and production functions. Key topics include cardinal and ordinal utility theories, stages of production, and cost calculations in the short run. Review questions are provided for each section to reinforce understanding of the material.

Uploaded by

khwanyamnqobi
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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BASED ON OUR COURSE GUIDE TEST 2 WILL BE BASED ON THE FOLLOWING SECTIONS

Section 3: Theory of Consumer Behavior

3.1 Consumer pref erences

3.2 The concept of utility

3.3 Approaches of measuring utility

3.3.1 The cardinal utility theory

3.3.2 The ordinal utility theory

Section 4: The Theory of Production and Cost

4.1 Theory of production in the short run

4.1.1 Def inition of production

4.1.2 Production f unction

4.1.3 Total, average, and marginal product

4.1.4 The law of variable proportions

4.1.5 Stages of production

4.2 Theory of costs in the short run

4.2.1 Def inition and types of costs

4.2.2 Total, average and marginal costs in the short run

4.2.3 The relationship between short run production and cost curves

REVIEW QUESTIONS

Section 3: Theory of Consumer Behavior

1. How do assumptions of completeness and transitivity apply to consumer


preferences?

2. How can indifference curves be used to represent consumer preferences?

3. Why do indifference curves never intersect?

4. What is utility in the context of consumer behavior?

5. What is the difference between total utility and marginal utility?

6. Why is the concept of diminishing marginal utility important in consumer theory?

7. What are the key assumptions of the cardinal utility theory?


8. How is utility measured under the cardinal approach?

9. What role does the concept of "utils" play in cardinal utility?

10. How does a rational consumer maximize utility under cardinal utility theory?

11. How does ordinal utility differ from cardinal utility?

12. What are the advantages of the ordinal utility approach?

13. What is the marginal rate of substitution (MRS)?

14. How is consumer equilibrium achieved under the ordinal utility theory?

Section 4: The Theory of Production and Cost

1. How does the short-run production function differ from the long-run production
function?
2. Define total product, average product, and marginal product.
3. How do total, average, and marginal products relate to each other?
4. How does marginal product relate to average product?
5. What are the three stages of production and how are they characterized?
6. What are the different types of costs in the short run (e.g., fixed, variable, total,
etc.)?
7. How are total, average, and marginal costs calculated and related in the short run?
Question 7. Use the table below to calculate the missing values

Fixe Tota Averag Average


Variabl Averag Margina Total
Outpu d l e Fixed Variabl Pric Profi
e Cost e Cost l Cost Revenu
t (Q) Cost Cost Cost e Cost e (P) t (π)
(VC) (AC) (MC) e (TR)
(FC) (TC) (AFC) (AVC)

0 100 0 - - - - 50

1 100 50 50

2 100 90 50

3 100 120 50

4 100 140 50

5 100 155 50

6 100 165 50

7 100 175 50

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