The document provides a review of key microeconomics concepts for an exam: 1) Externalities which are benefits or costs to third parties from economic activities that can be addressed through government subsidies or taxes/regulation. 2) Asymmetric information where parties in a transaction have unequal access to information which can lead to moral hazard if one party acts differently knowing someone else will pay the costs. 3) Price discrimination where sellers charge different prices to different customers for the same product to increase profits. 4) Monopolies which reduce quantity and increase price to maximize profits unlike perfect competition which has flat demand curves.

1. Microeconomics
Exam 3
Review

2. Externality
Benefits or Coststo
someone else- Third
Party-Positive or
Negative

3. Government
Intervention
Subsidize Positives
Tax and Regulate
Negatives

4. Asymmetric Information
Not Equal

5. Moral Hazard
Act different because
someone else will
pay the costs

6. Price Discrimination
Charging different
people a different price
for the same product

7. Monopoly
Increase profits by
reducing quantity and
increasing price

8. Demand Curves
Perfect Competition -
Flat
Monopoly - Downward
Oligopoly - Unknown

9. Types of Monopoly
One Price
Two Price - Coupons
Multi-Price -
discrimination

10. Prisoner’s Dilemma
Best Choice
is the second choice
Greedy will end up
worst off

11. Tragedy of the
Commons
When everybody shares,
the resource is over-used

12. Maximize Profits
MR = MC
Perfect Competition
Price = MR
Monopoly
Price > MR

13. TR MR Profit
Q P MC TC
P x Q ∆TR TR-TC
1 50 50 50 28 28 22
2 45 90 40 28 56 34
3 40 120 30 28 84 36
4 35 140 20 28 112 28
5 30 150 10 28 140 10
6 25 150 0 28 168 -18
7 20 140 -10 28 196 -56