Changes

:The Lorenz curve shows the actual distribution of income among people in society, compared with what an equal distribution of income in society. Thus the Lorenz curve illustrates inequality in wealth distribution.  But if government tries to make wealth distribution equal, then it reduces opportunity and discourages people from working to making more money.  The result is an overall loss in total wealth in society, as occurs in communist systems.

:The Lorenz curve shows the actual distribution of income among people in society, compared with what an equal distribution of income in society. Thus the Lorenz curve illustrates inequality in wealth distribution.  But if government tries to make wealth distribution equal, then it reduces opportunity and discourages people from working to making more money.  The result is an overall loss in total wealth in society, as occurs in communist systems.

5. Look again at Figure A (on p.3).  What is the opportunity cost of shifting production from B to C?  

5. Look again at Figure A (on p. 3).  What is the opportunity cost of shifting production from B to C?  

:350 cars.

:350 cars.

:AFC is average fixed costs, which are the total fixed costs divided by number of units produced. AVC is average variable costs, which are the total variable costs divided by number of units produced. AFC+AVC=ATC.  Stated another way, ATC is average total costs, which is FC+VC/Q. If AVC>P, then a firm should shut down in the short run.

:AFC is average fixed costs, which are the total fixed costs divided by number of units produced. AVC is average variable costs, which are the total variable costs divided by number of units produced. AFC+AVC=ATC.  Stated another way, ATC is average total costs, which is FC+VC/Q. If AVC>P, then a firm should shut down in the short run.

7. What is needed to reach point D in Figure A (on p.3)?  (In other words, what causes a production possibilities curve to shift outward?)

7. What is needed to reach point D in Figure A (on p. 3)?  (In other words, what causes a production possibilities curve to shift outward?)

:There would need to be a shift in the production possibility frontier of the goods outward, due to an increase in the production and efficiency, in order for point D to be reached. This increase in overall output of goods could occur due to advances in technology, a reduction in taxation or regulation, an increase in the workforce, or better equipment available for businesses.

:There would need to be a shift in the production possibility frontier of the goods outward, due to an increase in the production and efficiency, in order for point D to be reached. This increase in overall output of goods could occur due to advances in technology, a reduction in taxation or regulation, an increase in the workforce, or better equipment available for businesses.

===Honors:===

==Honors==

8.  Look again at Figure C (on p.1) in the lecture (the first graph in this Lecture).  At what point is total revenue maximized?

8.  Look again at Figure C (on p. 1) in the lecture (the first graph in this Lecture).  At what point is total revenue maximized?

:Total revenue is ''maximized'' when marginal revenue equals 0 (crosses the x-axis).  This is the quantity at Point E, and the price on the demand curve corresponding to that quantity.

:Total revenue is ''maximized'' when marginal revenue equals 0 (crosses the x-axis).  This is the quantity at Point E, and the price on the demand curve corresponding to that quantity.