Atlas102 Economic Analysis

… one of the core Atlas Courses

microeconomicsAtlas course syllabus

This course covers the core topics and concepts in the public management subject of Economic Analysis – the principles and techniques of microeconomic theory that are most useful in analyzing economic aspects of public policy.

Warning to readers! This is a “long” web page. Below the topic and concept tables you will find the week-by-week readings and exercises associated with the estimated 120 hours of study required by an MPP or MPA student to master the 12 core topics and below that are several hundred assessment questions. On 16 May 2016 this web page had 22,464 words, which takes 87 pages in standard Word format with Calibri 11-point font.

Learning outcomes

On successful completion of this course students will have the skills and knowledge to be able to analyze public management problems by appropriately utilizing the theories and principles included in the topics and concepts noted below.

Normed topics

The topics are normed in having a volume of content capable of being taught in one course-week of instruction – nominally 3 hours of in-class work and 7 hours of outside-class reading.

  1. The Study of Economics
  2. Supply, Demand, and Equilibrium
  3. Consumer Theory and Elasticity of Demand and Supply
  4. Commodity Taxes and Subsidies
  5. The Price System and Price Regulation
  6. Trade, Adjustment, and Protectionism
  7. Externalities
  8. Producer Theory and Competition
  9. Monopoly and Price Discrimination
  10. Labour Markets, Transfers, and Personal Taxes
  11. Public Goods and Commons Problems
  12. Asymmetric Information, Signaling, and Game Theory

Like other normed topics on the Atlas, each of these has a topic description, links to core concepts relevant to the topic, learning outcomes, a reading list drawn from available course syllabi, and a series of assessment questions.

Concepts to be learned listed under topics
The Study of Economics

Behavioural Economics

Capitalism

Economic Efficiency

Economic Liberalism

Economic Model

Economics

Economics and Ideology

Econometrics

Incentives and Introduction to Economics

International Economics

Macroeconomics

Marginal and Marginalism

Market Failure

Microeconomics

Political Economy

Public Finance

Public Choice Theory

Socialism

There Ain’t No Such Thing As A Free Lunch – TANSTAAFL

Unintended Consequences

Utility

Utility Function

Welfare Economics

Supply, Demand, and Equilibrium

Change in Demand vs. Change in Quantity Demanded

Change in Supply vs. Change in Quantity Supplied

Consumer Surplus

Demand Curve

Demand Curve Shifts

Gains from Trade

Market Equilibrium

Normal Good vs. Inferior Good

Producer Surplus

Supply Curve

Supply Curve Shifts

Consumer Theory and Elasticity of Demand and Supply

Elasticity of Demand

Elasticity of Demand and Total Revenue

Elasticity of Supply

Midpoint Formula for Elasticity

Commodity Taxes and Subsidies

Benefit of a Subsidy – Economic vs. Legal Incidence

Burden of a Tax – Economic vs. Legal Incidence

Commodity Taxes

Subsidies

Tax Revenue and Deadweight Loss

Wage Subsidies vs. Minimum Wage

The Price System and Price Regulation

Price as Signal and Incentive

Markets Link Geographically

Markets Link Different Goods

Markets Link Over Time – Speculation

Futures

Prediction Markets

Price Ceilings

Rent Control

Price Floors

Minimum Wage

Airline Regulation and Wasteful Quality

Why Do Governments Enact Price Controls?

Price Controls and Communism 

Trade, Adjustment, and Protectionism

Comparative Advantage

Trade and Differing Preferences

Trade and Specialization

Trade and Comparative Advantage

Supply and Demand Effects of Tariffs

Comparative Advantage

Trade and Differing Preferences

Trade and Specialization

Trade and Comparative Advantage

Supply and Demand Effects of Tariffs

Free Trade

Imports

Exports

Absolute Advantage

Division of Labour

Division of Knowledge

Pareto Efficiency

Protectionism

Tariff

Quota

Externalities

Externality

Command and Control Solutions vs. Taxes and Subsidies

Coase Theorem

Tradable Allowances

Private Cost

External Cost

Social Cost

Private Benefit

External Benefit

Private Benefit

Social Surplus

Bystanders Surplus

Efficient Equilibrium

Deadweight Loss

Pigouvian Tax

Pigouvian Subsidy

Transaction Costs

Producer Theory and Competition

Maximizing Profit under Competition

Entry, Exit, and Sunk Costs

Increasing Cost Industries

Constant Cost Industries

Industry Clusters and Decreasing Cost Industries

Minimization of Total Industry Costs of Production

Balance of Industries and Creative Destruction

Producer Theory

Producer Theory Calculus

Average Cost

Marginal Cost

Total Cost

Fixed Costs

Variable Costs

Total Revenue

Profit

Sunk Costs

Break-even Price

Normal Profit

Above-normal Profit

Perfect Competition

Production Possibility Frontier

Marginal Revenue

Creative Destruction

Monopoly and Price Discrimination

Maximizing Profit under Monopoly

Monopoly Pricing and Elasticity of Demand

Costs and Benefits of Monopoly

Price Discrimination

Tying

Bundling

Monopoly Markup

Barriers to Entry

Monopoly

Patents

Market Power

Economies of Scale

Innovation

Static Efficiency

Dynamic Efficiency

Arbitrage

Perfect Price Discrimination

Labour Markets, Transfers, and Personal Taxes

Marginal Product of Labour

Human Capital and Signaling

Compensating Differentials

Unions and Wages

Derived Demand

Human Capital

Sheepskin (or Credential) Effects

Marginal Revenue Product of Labour

Public Goods and Commons Problems

Public Good

Club Good

Common Resource

Free Riding

Forced Rider

Excludable Good

Non-excludable Good

Rival Good

Non-rival Good

Tragedy of the Commons

Asymmetric Information, Signaling, and Game Theory

Asymmetric Information

Asymmetric Information and Insurance

Moral Hazard

Signaling

Principal-Agent Problem

Adverse Selection

Propitious Selection

Game Theory

Prisoners’ Dilemma

Sources

The topics and concepts for this course reflect those taught in the required courses of highly regarded programs. See, for example, the detailed comparison of syllabi for the first-year required courses in quantitative methods at Harvard HKS, Michigan Ford, NYU Wagner, and Wisconsin La Follette in Comparing Course Workload – Economic Analysis.

We believe that much of the content of these courses is captured the remarkable open access videos created by Tyler Cowen and Alex Tabarrok for the Principles of Economics: Microeconomics course on the Marginal Revolution University (MRU) website (http://www.mruniversity.com/courses/principles-economics-microeconomics, accessed May 2016).

Other open access sources are:

MIT OpenCourseWare, Introduction to Microeconomics (Fall 2011, by Prof. Jon Gruber), at http://ocw.mit.edu/courses/economics/14-01sc-principles-of-microeconomics-fall-2011/index.htm, accessed 17 May 2016.

Saylor Academy, Econ101 Principles of Microeconomics, at https://learn.saylor.org/course/view.php?id=8, and Econ201 Intermediate Microeconomics, at https://learn.saylor.org/course/view.php?id=35, accessed 17 May 2016.

Many of our concept descriptions draw directly from the MRU videos. The alignment of Atlas102 with the Cowen and Tabarrok classes, the Gruber course, and the two Saylor Academy courses is shown below.

Atlas Economic Analysis MRU Principles of Economics – Microeconomics MIT Principles of Microeconomics Saylor.Org Econ101 and 201
The Study of Economics 1 – Introduction Introduction to Microeconomics 201-1.1: Definition of Economics

101-1.1: Individual Choice: The Core of Economics

101-1.2: Economic Models

101-1.3: The Circular-Flow Diagram

Supply, Demand, and Equilibrium 2 – Supply, Demand, and Equilibrium Applying Supply and Demand

Capital Supply and Markets I

Capital Supply and Markets II

201-1.2: Supply and Demand

201-4.3: Equilibrium

101-2.1: The Ceteris Paribus Assumption

101-2.2: Demand

101-2.3: Supply

101-2.4: Market Equilibrium

101-7.1: Overview of Resource Markets

101-7.3: Financial Markets

101-7.4: Land and the Market for Natural Resources

Elasticity of Demand and Supply 3 – Elasticity and Its Applications Elasticity

Preferences and Utility

Budget Constraints

Deriving Demand Curves

101-2.6: Elasticity

201-1.3: Elasticity

101-4.1: The Rational Consumer

101-4.2: Consumer Preferences and Consumer Choice

201-4.1: Consumer Theory

201-4.2: Applied Consumer Theory

Taxes and Subsidies 4 – Taxes and Subsidies 201-1.4: Government and the Market
The Price System and Price Regulation 5 – The Price System

6 – Price Ceilings and Price Floors

Competition III

Factor Markets

101-2.5: Manipulating the Market: Price Controls
Trade 7 – Trade International Trade

 

201-2.1: Trade
Externalities 8 – Externalities Principles of Welfare Economics 101-3.2: When Markets Fail

201-2.2: Externalities

Competition and Theory of the Firm 9 – Costs and Profit Maximization Under Competition

10 – Competition and the Invisible Hand

Introduction to Producer Theory

Productivity and Costs

Competition I

Competition II

101-3.1: Maximizing in the Market Place

101-5.1: The Short Run

101-5.2: The Long Run

201-3.1: Costs

201-3.2: Dynamics

201-3.3: Investment

Monopoly and Price Discrimination 11 – Monopoly

12 – Price Discrimination

Monopoly I

Monopoly II

Oligopoly I

Oligopoly II

201-5.1: Monopoly

201-5.3: Imperfect Competition

Labour Markets 13 – Labor Markets Applying Consumer Theory: Labor

Equity and Efficiency

Government Redistribution Policy

U.S. Social Insurance Programs

101-3.3: Income Inequality

101-7.2: The Labor Market

Public Goods and Commons Problems 14 – Public Goods and the Tragedy of the Commons Healthcare Economics 201-2.3: Public Goods
Asymmetric Information, Signaling, and Game Theory 15 – Asymmetric Information  Uncertainty 201-5.2: Game Theory

201-5.4: Uncertainty and Information

201-5.5: Auctions

Recommended readings

The readings include all the 79 videos by Tyler Cowen and Alex Tabbarock on the Principles of Economics: Microeconomics website at http://www.mruniversity.com/courses/principles-economics-microeconomics, accessed April and May 2016.

Week 1: The Study of Economics

Atlas pages: The Study of Economics and its associated Concepts

Tyler Cowen and Alex Tabarrok, Introduction to Economics (4-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics, accessed 18 April 2016.

Alex Tabarrok, I Rose (3-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/price-system-definition-invisible-hand, accessed 1 May 2016.

Mark Thoma (2015), Are Economists Driven by Ideology or Evidence? The Fiscal Times, at http://www.thefiscaltimes.com/Columns/2015/11/03/Are-Economists-Driven-Ideology-or-Evidence, accessed 2 May 2016.

Robert Hessen, Capitalism, The Concise Encyclopedia of Economics, at http://www.econlib.org/library/Enc/Capitalism.html, accessed 2 May 2016.

Robert Heilbroner, Socialism, The Concise Encyclopedia of Economics, at http://www.econlib.org/library/Enc/Socialism.html, accessed 2 May 2016.

Steven E. Rhoads, Marginalism, The Concise Encyclopedia of Economics, at http://www.econlib.org/library/Enc/Marginalism.html, accessed 2 May 2016.

Rob Norton, Unintended Consequences, The Concise Encyclopedia of Economics, at  http://www.econlib.org/library/Enc/UnintendedConsequences.html, accessed 2 May 2016.

Tyler Cowen, Public Goods, The Concise Encyclopedia of Economics, at http://www.econlib.org/library/Enc/PublicGoods.html, accessed 2 May 2016.

William F. Shughart II, Public Choice, The Concise Encyclopedia of Economics, at http://www.econlib.org/library/Enc/PublicChoice.html, accessed 2 May 2016.

Sam Ouliaris (2011), What Are Economic Models?, Finance and Development, June 2011, Vol. 48, No. 2, at http://www.imf.org/external/pubs/ft/fandd/2011/06/basics.htm, accessed 30 April 2016.

Arnold C. Harberger, Microeconomics, The Concise Encyclopedia of Economics, at http://www.econlib.org/library/Enc/Microeconomics.html, accessed 2 May 2016.

Leonard Read (1958), I, Pencil – My Family Tree as told to Leonard E. Read, at http://www.econlib.org/library/Essays/rdPncl1.html, accessed 1 May 2016.

Week 2: Supply, Demand, and Equilibrium

Atlas pages: Supply, Demand, and Equilibrium and its associated Concepts

Alex Tabarrok, The Demand Curve, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/demand-curve-shifts-definition, accessed 19 April 2016 (4 minutes).

Alex Tabarrok, The Supply Curve, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/supply-curve-definition-example, accessed 19 April 2016 (3 minutes).

Alex Tabarrok, The Equilibrium Price, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/equilibrium-price-supply-demand-example, accessed 19 April 2016 (5 minutes).

Tyler Cowen, A Deeper Look at the Demand Curve, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/demand-curve-consumer-surplus-definition, accessed 20 April 2016 (8 minutes).

Tyler Cowen, The Demand Curve Shifts, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/demand-curve-shifts, accessed 20 April 2016. (14 minutes).

Alex Tabarrok, A Deeper Look at the Supply Curve, Marginal Revolution University, at  http://www.mruniversity.com/courses/principles-economics-microeconomics/supply-curve-producer-surplus-definition, accessed 20 April 2016 (7 minutes).

Alex Tabarrok, The Supply Curve Shifts, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/supply-curve-shift, accessed 20 April 2016 (12 minutes).

Alex Tabarrok, Exploring Equilibrium, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/equilibrium-supply-demand, accessed 20 April 2016 (6 minutes).

Alex Tabarrok, Does the Equilibrium Model Work, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/does-equilibrium-model-work, accessed 20 April 2016(8 minutes).

Alex Tabarrok, Supply and Demand Terminology, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/supply-demand-definition, accessed 20 April 2016 (a 4 minutes).

Week 3: Elasticity of Demand and Supply

Atlas pages: Elasticity of Demand and Supply and its associated Concepts.

Alex Tabarrok, Elasticity of Demand, Principles of Economics – Microeconomics, at http://www.mruniversity.com/courses/principles-economics-microeconomics/elasticity-demand-definition at (14 minutes).

Alex Tabarrok, Calculating the Elasticity of Demand, Principles of Economics – Microeconomics, at http://www.mruniversity.com/courses/principles-economics-microeconomics/calculate-elasticity-demand-formula (16 minutes).

Alex Tabarrok, Elasticity of Supply, Principles of Economics – Microeconomics, at http://www.mruniversity.com/courses/principles-economics-microeconomics/elasticity-supply-midpoint-formula, (14 minutes).

Alex Tabarrok, Elasticity and Slave Redemption, Principles of Economics – Microeconomics, at http://www.mruniversity.com/courses/principles-economics-microeconomics/elasticity-example-slave-redemption-sudan (5 minutes).

Alex Tabarrok, The Demand Curve Shifts, Principles of Economics – Microeconomics, at http://www.mruniversity.com/courses/principles-economics-microeconomics/demand-curve-shifts (14 minutes).

Alex Tabarrok, Applications Using Elasticity, Principles of Economics – Microeconomics, at http://www.mruniversity.com/courses/principles-economics-microeconomics/elasticity-examples-applications (16 minutes).

Week 4: Commodity Taxes and Subsidies

Atlas pages: Commodity Taxes and Subsidies and associated Concepts.

Tyler Cowen, Commodity Taxes, Marginal Revolution University, 11-minute video, at http://www.mruniversity.com/courses/principles-economics-microeconomics/taxes-subsidies-definition-tax-wedge, accessed 28 April 2016.

Tyler Cowen, Who Pays the Tax?, Marginal Revolution University, 9-minute video, at http://www.mruniversity.com/courses/principles-economics-microeconomics/tax-burden-elasticity-affordable-care-act-health-insurance-mandate, accessed 29 April 2016.

Alex Tabarrok, Tax Revenue and Deadweight Loss, Marginal Revolution University, 12-minute video, at http://www.mruniversity.com/courses/principles-economics-microeconomics/deadweight-loss-definition-yacht-tax, accessed 29 April 2016.

Alex Tabarrok, Subsidies, Marginal Revolution University, 13-minute video, at http://www.mruniversity.com/courses/principles-economics-microeconomics/subsidies-definition-subsidy-wedge, accessed 29 April 2016.

Alex Tabarrok, Wage Subsidies, Marginal Revolution University, 4-minute video, at http://www.mruniversity.com/courses/principles-economics-microeconomics/wage-subsidies-minimum-wage-earned-income-tax-credit, accessed 29 April 2016.

Week 5: The Price System and Price Regulation

Atlas pages: The Price System and Price Regulation and associated Concepts

Alex Tabarrok, I Rose (3-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/price-system-definition-invisible-hand, accessed 1 May 2016.

Alex Tabarrok, Markets Link the World (5-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/markets-invisible-hand-supply-chain, accessed 1 May 2016.

Alex Tabarrok, Information and Incentives (10-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/information-problem-economics-hayek, accessed 1 May 2016.

Alex Tabarrok, A Price Is a Signal Wrapped up in an Incentive (5-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/price-system-spontaneous-order, accessed 1 May 2016.

Alex Tabarrok, The Great Economic Problem (8-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/economic-problem-central-planning-70s-oil-crisis, accessed 1 May 2016.

Tyler Cowen, Speculation (11-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/speculation-oil-futures-market, accessed 1 May 2016.

Tyler Cowen, Prediction Markets (9-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/prediction-markets-election-forecasting, accessed 1 May 2016.

Alex Tabarrok, Price Ceilings (4-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/price-controls-definition-nixon, accessed 1 May 2016.

Alex Tabarrok, Price Ceilings: Shortages and Quality Reduction (6-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/price-ceiling-shortages-reduce-quality, accessed 1 May 2016.

Alex Tabarrok, Price Ceilings: Lines and Search Costs (10-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/price-ceiling-gasoline-example-search-costs, accessed 1 May 2016.

Alex Tabarrok, Price Ceilings: Deadweight Loss (4-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/price-ceiling-deadweight-loss, accessed 1 May 2016.

Alex Tabarrok, Price Ceilings: Misallocation of Resources (12-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/price-ceiling-misallocation-of-resources, accessed 1 May 2016.

Alex Tabarrok, Price Ceilings: Rent Controls (10-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/rent-controls-economics, accessed 1 May 2016.

Alex Tabarrok, Price Floors (10-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/rent-controls-economics, accessed 1 May 2016.

Alex Tabarrok, Price Floors: Airline Fares (8-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/price-floor-effect-on-quality-airline-deregulation, accessed 1 May 2016.

Week 6: Labour Trade, Adjustment, and Protectionism

Atlas pages: Trade, Adjustment, and Protectionism and associated Concepts

Tyler Cowen, The Big Ideas of Trade (11-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/trade-specialization-economics-globalization, accessed 5 May 2016.

Don Boudreaux, Comparative Advantage (7-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/comparative-advantage-definition-tasmania, accessed 5 May 2016.

Alex Tabarrok, Another Look at Comparative Advantage (12-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/comparative-advantage-definition-opportunity-cost, accessed 5 May 2016.

Alex Tabarrok, Comparative Advantage Homework (12-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/comparative-advantage-trade-homework, accessed 5 May 2016.

Alex Tabarrok, Tariffs and Protectionism (15-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/tariffs-quotas-protectionism-definition, accessed 5 May 2016.

Alex Tabarrok, Arguments Against International Trade (14-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/arguments-against-trade, accessed 5 May 2016.

Week 7: Externalities

Atlas pages: Externalities and associated Concepts.

Alex Tabarrok, An Introduction to Externalities (12-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/externalities-definition-pigovian-tax, accessed 6 May 2016.

Alex Tabarrok, External Benefits (7-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/flu-shot-positive-externalities-pigovian-subsidy, accessed 6 May 2016.

Alex Tabarrok, Command and Control (9-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/externalities-command-and-control, accessed 6 May 2016.

Alex Tabarrok, The Coase Theorem (8-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/coase-theorem-example, accessed 6 May 2016.

Alex Tabarrok, Trading Pollution (4-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/deeper-look-tradeable-allowances, accessed 6 May 2016.

Alex Tabarrok, A Deeper Look at Tradeable Allowances (6-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/deeper-look-tradeable-allowances, accessed 6 May 2016.

Week 8: Competition and Theory of the Firm

Atlas pages: Competition and Theory of the Firm and associated Concepts.

Alex Tabarrok, Introduction to the Competitive Firm (7-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/deeper-look-tradeable-allowances, accessed 6 May 2016.

Alex Tabarrok, Maximizing Profit under Competition (13-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/deeper-look-tradeable-allowances, accessed 6 May 2016.

Alex Tabarrok, Maximizing Profit and the Average Cost Curve (12-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/profit-maximization-average-cost, accessed 6 May 2016.

Alex Tabarrok, Entry, Exit, and Supply Curves: Increasing Costs (7-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/profit-maximization-average-cost, accessed 7 May 2016.

Alex Tabarrok, Entry, Exit, and Supply Curves: Constant Costs (10-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/supply-curve-constant-cost-industry, accessed 7 May 2016.

Alex Tabarrok, Entry, Exit, and Supply Curves: Decreasing Costs (6-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/supply-curve-decreasing-cost-industry, accessed 7 May 2016.

Alex Tabarrok, Minimization of Total Industry Costs of Production (9-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/minimizing-industry-costs-production-invisible-hand, accessed 7 May 2016.

Alex Tabarrok, The Balance of Industries and Creative Destruction (8-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/creative-destruction-definition-elimination-principle, accessed 7 May 2016.

Week 9: Monopoly and Price Discrimination

Atlas pages: Monopoly and Price Discrimination and associated Concepts.

Alex Tabarrok, Maximizing Profit under Monopoly (11-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/monopoly-profit-maximization-price-aids-medication, accessed 7 May 2016.

Alex Tabarrok, The Monopoly Markup (9-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/monopoly-profit-maximization-price-aids-medication, accessed 7 May 2016.

Alex Tabarrok, The Costs and Benefits of Monopoly (9-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/costs-benefits-monopoly-pharmaceutical-companies, accessed 8 May 2016.

Tyler Cowen, Introduction to Price Discrimination (10-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/price-discrimination-examples-airlines-arbitrage, accessed 8 May 2016.

Tyler Cowen, The Social Welfare of Price Discrimination (8-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/price-discrimination-social-welfare, accessed 8 May 2016.

Tyler Cowen, Tying (7-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/tying-economics-example, accessed 8 May 2016.

Alex Tabarrok, Bundling (15-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/bundling-economics-examples, accessed 8 May 2016.

Week 10: Labour Markets, Transfers, and Personal Taxes

Atlas pages: Labour Markets, Transfers, and Personal Taxes and associated Concepts

Alex Tabarrok, The Marginal Product of Labour (10-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/labor-economics-marginal-product-labor, accessed 4 May 2016.

Tyler Cowen and Alex Tabarrok, Econ Duel: Is Education Signaling or Skill Building? (9-minute video), at http://www.mruniversity.com/courses/principles-economics-microeconomics/education-signaling-human-capital, accessed 4 May 2016.

Alex Tabarrok, Human Capital and Signaling (7-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/human-capital-wages-education-globalization, accessed 4 May 2016.

Alex Tabarrok, Human Capital and Signaling (3-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/tradeoff-wages-no-such-thing-as-free-lunch, accessed 4 May 2016.

Alex Tabarrok, Compensating Differentials (5-minute video), Principles of Economics – Microeconomics, Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/compensating-differentials-wages, accessed 4 May 2016.

Alex Tabarrok, Do Unions Raise Wages (5-minute video), Marginal Revolution University, at http://www.mruniversity.com/courses/principles-economics-microeconomics/do-labor-unions-raise-wages-workers, accessed 9 May 2016.

Week 11: Public Goods and Commons Problems

Atlas pages: Public Goods and Commons Problems and associated Concepts.

Alex Tabarrok, Public Goods and Asteroid Defense, Marginal Revolution University, 2-minute video, at http://www.mruniversity.com/courses/principles-economics-microeconomics/public-goods-example-asteroid-defense, accessed 4 May 2016.

Alex Tabarrok, A Deeper Look at Public Goods, Marginal Revolution University, 8-minute video, at http://www.mruniversity.com/courses/principles-economics-microeconomics/public-goods-definition-nonexcludable-nonrival, accessed 4 May 2016.

Alex Tabarrok, Club Goods, Marginal Revolution University, 5-minute video, at http://www.mruniversity.com/courses/principles-economics-microeconomics/club-goods-examples, accessed 4 May 2016.

Alex Tabarrok, The Tragedy of the Commons, Marginal Revolution University, 12-minute video, at http://www.mruniversity.com/courses/principles-economics-microeconomics/tragedy-of-the-commons-examples-economics, accessed 4 May 2016.

Week 12: Asymmetric Information, Signaling, and Game Theory

Atlas pages: Asymmetric Information, Signaling, and Game Theory and associated Concepts.

Alex Tabarrok, Asymmetric Information and Used Cars, Marginal Revolution University, 3-minute video, at http://www.mruniversity.com/courses/principles-economics-microeconomics/adverse-selection-asymmetric-information-definition, accessed 4 May 2016.

Tyler Cowen, Asymmetric Information and Health Insurance, Marginal Revolution University, 8-minute video, at http://www.mruniversity.com/courses/principles-economics-microeconomics/lemons-problem-asymmetric-information-health-insurance, accessed 4 May 2016.

Tyler Cowen, Moral Hazard, Marginal Revolution University, 4-minute video, at http://www.mruniversity.com/courses/principles-economics-microeconomics/moral-hazard-adverse-selection, accessed 4 May 2016.

Tyler Cowen, Solutions to Moral Hazard, Marginal Revolution University, 6-minute video, at http://www.mruniversity.com/courses/principles-economics-microeconomics/solutions-moral-hazard-example, accessed 4 May 2016.

Tyler Cowen, Signaling, Marginal Revolution University, 7-minute video, at http://www.mruniversity.com/courses/principles-economics-microeconomics/signaling-economics, accessed 4 May 2016.

Assessment questions

Most of the questions below are from MRU Principles of Economics – Microeconomics. Detailed sources can be found on the individual topic pages.

Week 1: The Study of Economics

to come

Week 2: Supply, Demand, and Equilibrium

AQ102.02.01. When the price of a good increases the quantity demanded ____.

AQ102.02.03. Your roommate just bought an iPod for $200. She would have been willing to pay $500 for a machine that could store and replay that much music. How much consumer surplus does your roommate enjoy from the iPod?

AQ102.02.03. Along a supply curve, if the price of oil falls, what will happen to the quantity of oil supplied?

AQ102.02.07. Michael is an economist. He loves being an economist so much that he would do it for a living even if he only earned $30,000 per year. Instead, he earns $80,000 per year. (Note: This is the average salary of new economists with a Ph.D. degree.) How much producer surplus does Michael enjoy?

AQ102.02.08. When supply falls, what happens to quantity demanded in equilibrium?

a. Q

AQ102.02.10. If the price in a market is above the equilibrium price, this creates ___________.

AQ102.02.14. Jules wants to purchase a Royale with cheese from Vincent. Vincent is willing to offer this tasty burger for $3. The most Jules is willing to pay for the tasty burger is $8 (after all, his girlfriend is a vegetarian, so he doesn’t get many opportunities for tasty burgers). How large are the potential gains from trade if Jules and Vincent agree to make this trade? In other words, what is the sum of producer and consumer surplus if the trade happens?

AQ102.02.17. What happened in Vernon Smith’s lab?

Week 3: Elasticity of Demand and Supply

AQ102.03.01. Which of the following two goods is more likely to be inelastically demanded?

a. D

AQ102.03.10. If the elasticity of demand for college textbooks is -0.1, and the price of textbooks increases by 20%, how much will the quantity demanded change, and in what direction?

AQ102.03.23. Which of the two goods is more likely to be elastically supplied?

AQ102.03.32. For which of the following products would you expect the largest increase in price for the same increase in demand?

AQ102.03.36. Suppose that drug addicts pay for their addiction by stealing: So the higher the total revenue of the illegal drug industry, the higher the amount of theft. If a government crackdown on drug suppliers leads to a higher price of drugs, what will happen to the amount of stealing if the demand for drugs is elastic?

Week 4: Taxes and Subsidies

AQ102.04.03 Junk food has been criticized for being unhealthy and too cheap, enticing the poor to adopt unhealthy lifestyles. Suppose that the state of Oklakansas imposes a tax on junk food. For the tax to actually deter people from eating junk food, should junk food demand be elastic or inelastic?

AQ102.04.14. Decades ago, Washington, DC, a fairly small city, wanted to raise more revenue by increasing the gas tax. Washington, DC, shares borders with Maryland and Virginia, and it’s very easy to cross the borders between these states. How elastic is the demand for gasoline sold at stations within Washington, DC? In other words, if the price of gas in DC rises, but the price in Maryland and Virginia stays the same, will gasoline sales at DC stations fall a little, or will they fall a lot?

AQ102.04.27. What effect do wage subsidies have on employment?

Week 5: The Price System and Price Regulation

AQ102.05.01. Circa 1200 BCE, a decreasing supply of tin due to wars and the breakdown of trade led to a drastic increase in the price of bronze in the Middle East and Greece (tin being necessary for its production). It is around this time that blacksmiths developed iron- and steel-making techniques (as substitutes for bronze). What does the increasing price of bronze signal?

AQ102.05.07. Let’s see if the forces of the market can be as efficient as a benevolent dictator. Since laptop computers are increasingly easy to build and since they allow people to use their computers wherever they like, an all-wise benevolent dictator would probably decree that most people buy laptops rather than desktop computers. This is especially true now that laptops are about as powerful as most desktops. Since it’s become much easier to build better laptop computers in recent years, laptop supply has increased. What does this do to the price of laptops?

AQ102.05.12. If a nation’s government made it impossible for inefficient firms to fail by giving them loans, cash grants, and other bailouts to stay in business, is that nation likely to be poorer or richer as a result of this strategy? (Hint: Steven Davis and John Haltiwanger. 1999. “Gross Job Flows.” In Handbook of Labor Economics (Amsterdam: North–Holland) found than in the United States, 60% of the increase in U.S. manufacturing efficiency was caused by people moving from weak firms to strong firms.)

AQ102.05.17. Suppose you learned that growing political instability in Chile (the largest producer of copper) will greatly reduce the productivity of its mines in two years. Ignoring all other factors, which curve (demand or supply) will shift which way in the market for copper two years from now?

AQ102.05.23. Let’s see if the forces of the market can be as efficient as a benevolent dictator. Since laptop computers are increasingly easy to build and since they allow people to use their computers wherever they like, an all-wise benevolent dictator would probably decree that most people buy laptops rather than desktop computers. This is especially true now that laptops are about as powerful as most desktops. Since it’s become much easier to build better laptop computers in recent years, laptop supply has increased. What does this do to the price of laptops?

AQ102.05.27. Sometimes speculators get it wrong. In the months before the Persian Gulf War, speculators drove up the price of oil: The average price in October 1990 was $36 per barrel, more than double its price in 1988. Oil speculators, like many people around the world, expected the Gulf War to last for months, disrupting the oil supply throughout the Gulf region. Thus, speculators either bought oil on the open market (almost always at the high speculative price) or they already owned oil and kept it in storage. Either way, their plan was the same: to sell it in the future, when prices might even be higher. As it turned out, the war was swift: After one month of massive aerial bombardment of Iraqi troops and a 100-hour ground war, then President George H. W. Bush declared a cessation of hostilities. Despite the fact that Saddam Hussein set fire to many of Kuwait’s oil fields, the price of oil plummeted to about $20 per barrel, a price at which it remained for years. How much money did speculators lose or make on each barrel?

AQ102.05.32. You manage a department store in Florida, and one winter you read in the newspaper that orange juice futures have fallen dramatically in price. Should your store stock up on more sweaters than usual, or should your store stock up on more Bermuda shorts?

AQ102.05.35. How does a free market eliminate a shortage?

AQ102.05.40. Suppose that the quantity demanded and quantity supplied in the market for milk is as follows: What is the equilibrium price and quantity of milk?

AQ102.05.45. When a price ceiling is in place keeping the price below the market price, what’s larger: quantity demanded or quantity supplied?

AQ102.05.57. The Canadian government has wage controls for medical doctors. To keep things simple, let’s assume that they set one wage for all doctors: $100,000 per year. It takes about 6 years to become a general practitioner or a pediatrician, but it takes about 8 or 9 years to become a specialist like a gynecologist, surgeon, or ophthalmologist. What kind of doctor would you want to become under this system? (Note: The actual Canadian system does allow a specialist to earn a bit more than general practitioners, but the difference isn’t big enough to matter.)

P

AQ102.05.62. A review of the jargon: Is the minimum wage a “price ceiling” or a “price floor?”

AQ102.05.66. In the 1970s, AirCal and Pacific Southwest Airlines flew only within California. As we mentioned, the federal price floors didn’t apply to flights within just one state. A major route for these airlines was flying from San Francisco to Los Angeles, a distance of 350 miles. This is about the same distance as from Chicago, Illinois, to Cleveland, Ohio. Which flight had a nicer meal?

AQ102.05.70. If a government decided to impose price controls on gasoline, what could it do to avoid the time wasted waiting in lines? Though there are several solutions to this problem, only one of the options below is correct.

Week 6: Trade

AQ102.06.01. How is international trade similar to domestic trade?

AQ102.06.03. True or False: Every country has at least one comparative advantage in something.

AQ102.06.05. What is a source of comparative advantage?

AQ102.06.09. Use the information below to answer questions AQ102.06.09 to AQ102.06.14. According to the Wall Street Journal (August 30, 2007, “In the Balance”), it takes about 30 hours to assemble a vehicle in the United States. Let’s use that fact plus a few invented numbers to sum up the global division of labor in auto manufacturing. In international economics, “North” is shorthand for the high-tech developed countries of East Asia, North America, and Western Europe, while “South” is shorthand for the rest of the world. Let’s use that shorthand here. (In the North it takes 30 hours to make one high-quality care and 20 hours to make one low-quality car. In the South it takes 60 hours to make one high-quality care and 30 hours to make one low-quality car.) Which region has an absolute advantage at producing high-quality cars?

AQ102.06.15. The Japanese people currently pay about four times the world price for rice because of trade barriers. Who is more likely to make a greater effort lobbying for or against a reduction in trade barriers?

Japanese consumers

AQ102.06.22. Some people argue for protectionism by pointing out that other countries with whom we trade engage in “unfair trade practices,” and that we should retaliate with our own protectionist measures. One such policy is the policy of some countries to subsidize exporting industries. India, for example, subsidizes its steel industry. Who is hurt by this subsidy?

Week 7: Externalities

AQ102.07.01. The price you pay for an iTunes download

AQ102.07.24. Consider a factory, located in the middle of nowhere, producing a nasty smell. As long as no one is around to experience the unpleasant odor, what type of externality is produced?

AQ102.07.29. An increase in the number of pollution allowances does which of the following:

Week 8: Competition and Theory of the Firm

AQ102.08.01. A competitive firm maximizes profit by choosing

B

AQ102.08.08. The economic definition of profit differs from the accounting definition of profit in that the economic definition includes

AQ102.08.19. For a competitive firm supplying wheat, if the world price (P) equals the firm’s min average cost (min AC), then profits will be

AQ102.08.21. What is the least common cost structure for an industry?

In the long run, constant supply curves are

AQ102.08.26. As Ngoy started hiring more Cambodian refugees to work in his donut shop, this made it more likely that

AQ102.08.27. At this point in the story, what sort of cost industry (constant, increasing, or decreasing) would you consider doughnut shops owned by Cambodians to be?

AQ102.08.30. Entrepreneurs shift capital and labor across industries in pursuit of profit. Let’s look at this a little more closely. Suppose there are two industries: a high-profit industry, Industry H, and a low-profit industry, Industry L. Answer the questions below about these two industries. If the two industries have similar costs, then what must be true about prices in the two industries?

AQ102.08.40. Let’s review the basic mechanism of the elimination principle with the following questions. When demand rises in Industry X, what happens to profits? Do they rise, fall, or remain unchanged?

Week 9: Monopoly and Price Discrimination

AQ102.09.01. In the textbook, The Applied Theory of Price, D. N. McCloskey refers to the equation MR= MC as the rule of rational life. Who follows this rule: monopolies, competitive firms, both or neither?

AQ102.09.09. What’s the rule: Monopolists charge a higher markup when demand is highly elastic or when it’s highly inelastic?

AQ102.09.14. A patent is a government-created monopoly.

AQ102.09.20. True or False? A business that price discriminates will generally charge some customers more than marginal cost, and it will generally charge other customers less than marginal cost.

AQ102.09.27. When arbitrage is easy in a market of would-be price discriminators, who is more likely to get priced out of the market: those with elastic demand or those with inelastic demand?

AQ102.09.30. Some razors, like Gillette’s Fusion and Venus razors, have disposable heads. The razor comes with an initial pack with a razor handle plus three or four heads; after that, you need to buy refills separately. Where do you think Gillette gets more revenue: By selling the initial pack or by selling the refills?

AQ102.09.32. Where are you more likely to see businesses “bundling” a lot of goods into one package: In industries with high fixed costs and low marginal costs (like computer games or moviemaking), or in industries with low fixed costs and high marginal costs (like doctor visits, where the doctor’s time is expensive)?

Week 10: Labour Markets, Transfers, and Personal Taxes

AQ102.09.01. In the textbook, The Applied Theory of Price, D. N. McCloskey refers to the equation MR= MC as the rule of rational life. Who follows this rule: monopolies, competitive firms, both or neither?

AQ102.09.09. What’s the rule: Monopolists charge a higher markup when demand is highly elastic or when it’s highly inelastic?

AQ102.09.14. A patent is a government-created monopoly.

AQ102.09.20. True or False? A business that price discriminates will generally charge some customers more than marginal cost, and it will generally charge other customers less than marginal cost.

AQ102.09.27. When arbitrage is easy in a market of would-be price discriminators, who is more likely to get priced out of the market: those with elastic demand or those with inelastic demand?

AQ102.09.30. Some razors, like Gillette’s Fusion and Venus razors, have disposable heads. The razor comes with an initial pack with a razor handle plus three or four heads; after that, you need to buy refills separately. Where do you think Gillette gets more revenue: By selling the initial pack or by selling the refills?

AQ102.09.32. Where are you more likely to see businesses “bundling” a lot of goods into one package: In industries with high fixed costs and low marginal costs (like computer games or moviemaking), or in industries with low fixed costs and high marginal costs (like doctor visits, where the doctor’s time is expensive)?

Week 11: Public Goods and Commons Problems

AQ102.11.01. What is the logic behind free riding?

AQ102.11.05. For each of the following items, decide first if the good is rival or nonrival and then whether it is excludable or non-excludable. Apples

AQ102.11.16. Some media companies (especially in music and movie industries) run ads claiming that downloading or copying media is the same thing as stealing a CD or DVD from a store. Let’s see if this is the case. Is a DVD a rival good?

AQ102.11.21. At some restaurants and grocery stores, you can buy bison burgers made from farm-raised bison. Is this good news or bad news if we want more bison around?

Week 12: Asymmetric Information, Signaling, and Game Theory

AQ102.12.01. For the following two situations, identify whether the scenario was caused by asymmetric information: Unrest in the Middle East causes oil speculators to buy up oil futures, driving gasoline prices higher.

AQ102.12.05. Which of the following concepts or policies below theoretically reduce the effects of adverse selection in the health insurance market?

AQ102.12.10. Identify which of the following situations are caused by moral hazard: Fred lives in an apartment above a restaurant, and his apartment always smells like burgers and fries. He has tried unsuccessfully to get the restaurant owner to remedy the problem.

AQ102.12.14. Identify whether the following scenario is meant to reduce moral hazard effects: Your car insurance has a high deductible (the amount that you have to pay out-of-pocket before insurance kicks in)

AQ102.12.17. True or False: If you were to drop out of college after attending for 3 years and completing 75% of all coursework, you could expect to earn about 75% of the college premium in the labor market.

Page created by: Ian Clark, last updated 17 May 2016.

Image: Triple A Learning, at http://web.sis.edu.hk/Departments/EcoBus/microeconomics_11/page_01.htm, accessed 1 April 2016.