Download ECON 3070-003 Intermediate Microeconomic Theory

INTERMEDIATE MICROECONOMICS
Spring 1996
Room: Econ 205
Econ 3070-3
Sec. 1
Professor de Bartolome
Office Hours:
Office: Econ 202.
Textbook:
Schotter, A., (1994), Microeconomics: A Modern Approach. Harper Collins.
Study Guide: Nyarko, Y., (1994), Study Guide for Microeconomics, a Modern Approach. Harper
Collins ..
Course description: Microeconomics is about what goods get produced and bought, and at what prices.
The course builds on the Principles of Microeconomics (Econ 2010-4), doing the material at a more
advanced level and stressing strategic issues. Game theory is introduced and the characteristics which
determine industrial structure are explored.
The presentation of the course is at the intermediate level. It is required that the student has
passed Principles of Microeconomics (Econ 2010-4) and MATH 1050, 1060, 1070, 1080, 1090 and
1100.
Difference with other sections: This section covers fewer topics and puts more emphasis on analysis
than other sections.
Problem sets: Problem sets are given out on a regular basis, and the answers are placed on reserve in
the Norlin Library. The problem sets are an integral part of the course. They are designed to help you
use the material, and a significant part of the exam will be based on them.
Grading: there are two experiments, two midterms and a final exam. The grade of the student will be
determined as: 10% experiments, 30% First Midterm, 30% Second Midterm and 30% Final. There
may be some data collection exercises; if these are assigned , they will be graded Pass/Fail.
Exams: because this is an intermediate class, the exams will not just repeat material covered in class.
Some questions will repeat material covered in class , but some will ask you to apply the material in a
different environment.
The exams will be given in the evening as:
FIRST MIDTERM:
Monday, 19 Febuary, 7-9pm, in Geo! 114
SECOND MIDTERM : Thursday , 21 March, 7-9pm, in Geo! 114
Attendance at class: it is assumed that you are professional and attend class. If you must miss a class,
professional courtesy requires that you notify me beforehand. If you consistenly miss class, you will be
warned. If you continue not to attend after the warning , you fail the course.
Course outline: attached is a list of topics to be covered and likely dates.
Course outline:
Date
Topic
Chapter
Jan 17, 19
INTRODUCTION
Normative and positive economics .
Property rights: the problem of the commons .
Jan 22, 24, 26
CONSUMER PREFERENCES
Sets.
Utility:
- diminshing marginal utility .
Indifference curves.
New Welfare Econmics .
Marginal Rate of Substitution.
Maximizing utility:
- "Marginal rate of substitution = price" rule.
2
omit pp. 23-25 , 30-31
Jan 29, 3 1, Feb 2
EXCHANGE
Feasible trades : Edgeworth Box.
Gains from trade.
Blocking trades .
Pareto-efficiency:
- "equal marginal rate of substitution" rule.
- contract curve.
Competitive behavior.
Competitive equilibrium.
4
omit pp . 120-126
Feb 5, 7, 9
CONSUMER DEMAND
3
Individual consumer choice.
omit Sections 3.12, 3. 15
3. 18 and pp . 93, 103-108
Income expansion path.
- inferior and normal (superior) goods.
Demand curves .
Income and substitution effects:
- normal goods and downward sloping demand curves.
Market demand.
Consumer surplus.
Feb 12, 14, 16
PRODUCTION
Production process and technology.
Production function :
- diminshing marginal returns.
- marginal product.
Isoquants .
Marginal rate of technical substitution.
Returns to scale.
Short-run and long-run production functions .
Feb 19.
FIRST MIDTYERM EXAM: 7-9pm in Geo! 114
5
-·
Feb 21,23 , 26, 28
COST FUNCTIONS
Cost functions.
Isocost curves.
Minimizing the cost of production:
- "marginal rate of technical substitution
= factor price ratio" rule.
Input substitution.
Short-run and long-run.
Marginal cost functions.
Average cost functions.
Mar 1, 4, 6, 8.
STRATEGIC ANALYSIS
Extensive Form.
Information sets.
Strategy.
Normal Form.
Nash equilibrium.
Dominant strategies.
Prisoner's Dilemma.
Credible threats.
Subgame perfect equilibria.
Backward induction.
Mar 11, 13 , 15
LABOR CONTRACTS
Moral hazard .
Efficiency wage.
Revenue-sharing.
Forcing contracts.
8
omit pp.261-263
Mar 18, 20.
MONOPOLY
Marginal revenue curve.
Maximizing profit:
- "Marginal revenue = marginal cost" rule.
Social inefficiency: deadweight loss.
Socially optimal single price
9
omit Section 9 .4
Mar 21
SECOND MIDTERM EXAM: 7-9 pm in Geo! 114
6
7
omit p. 219-224, and
Appendices A and B.
10
omit Section 10.4,
and Appendices A,B .
Apr 1, 3, 5 , 8
REGULATION.
Natural monopoly.
Sustainable monopoly.
Rate of return regulation.
Price-cap.
Apr 10, 12, 15 , 17
OLIGOPOLY
Cournot Model
Welfare properties of duopolistic markets.
Bertrand model.
Collusive duopoly.
Kinked demand curve.
Apr 19, 22
MARKET ENTRY
Perfect competition as a sequence of successful entries.
Apr 24, 26, 29
May l
PERFECTLY COMPETITIVE MARKETS
Short-run supply of individual firm.
Market supply.
Equilibrium.
Long-run equilibrium.
Dynamic changes.
Why are long-run competitive equilibria so good?
May 3, 6.
FREE MARKET AND INTERVENTIONIST IDEOLOGIES
First Fundamental Welfare Theorem.
Second Fundamental Welfare Theorem.
Income redistribution:
- Bentham's and Rawl 's argument.
- Nozick's rebuttal.
15
If time permits
INPUT MARKETS
19
11
omit Sections 11.3, 11.8.
12.5
13
omit Section 13.2