Download Syllabus for EC311 - Widener University

WIDENER UNIVERSITY
SCHOOL OF BUSINESS ADMINISTRATION
Microeconomic Theory (EC 311)
Syllabus – Spring 2017
E-mail: [email protected]
Professor Karen Leppel
Web Page: http://muse.widener.edu/~kleppel/index.html
Office: 221 Quick Center
Office hours: MTWThF 11:00 a.m. - 12:00 noon
Office Phone: 610- 499-1170
---------------------------------------------------------------------------------------------------------------------PREREQUISITES: EC202 and MATH118 or equivalent.
CLASSROOM RULES: The School of Business Administration of Widener University seeks
to prepare students for successful careers. In your career, you will be judged both on your
competence and on your professionalism, which includes showing respect for others and taking
responsibility for your actions. This course is a training ground for analytical thinking and
professionalism. Consequently, you are expected to act according to the following rules.
Do:
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Attend class regularly and punctually.
Remain in the classroom for the duration of the class.
Remain awake and attentive throughout the class.
Bring to class appropriate materials and tools, such as notes and writing utensils.
Come to class prepared, having completed readings and other assignments.
During class meetings, do NOT:
 engage in extraneous and distracting conversation.
 talk on cell phones or send text messages.
 do work pertaining to other courses.
 Send/read e-mail, surf the internet, play computer games, etc.
Students who behave inappropriately will be asked to promptly discontinue the behavior or leave
the classroom. Habitual violators will be required to meet with the Assistant Dean of the School
of Business Administration to discuss the situation. If no acceptable resolution is achieved, the
matter will be forwarded to the campus judicial system.
SBA LEARNING GOALS AND OBJECTIVES:
The SBA faculty has outlined goals and objectives for the Bachelor of Science in Business
Administration. This course supports the following goals and objectives:
 Goal 1: SBA students will demonstrate the knowledge, skills and scholarship that are
appropriate to the business discipline.
 Goal 2: SBA students will apply leadership skills in the development of business
decisions.
o Collaboration: Through teamwork, students will demonstrate the ability to
collaborate with others to accomplish tasks that lead to decisions.
 Goal 3: SBA students will be competent in the application of core business concepts and
technologies.
o Critical Thinking: Through course assignments, students will demonstrate the
ability to effectively incorporate both qualitative and quantitative methods in the
development of business solutions.
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COURSE OBJECTIVE: This course is devoted to furthering student understanding of
decision-making processes, and the economic behavior of households and business firms under
various market conditions. Special emphasis is placed on developing advanced tools of
economic analysis and quantitative problem solving.
LEARNING OBJECTIVES: At the completion of this course, the student should be able to:
1. Determine equilibrium price and quantity using a graph or supply and demand equations.
2. Use differential calculus to determine utility-maximizing consumption levels.
3. Explain income and substitution effects.
4. Interpret the coefficients of a regression demand equation and determine elasticity of demand
with respect to price or income.
5. Determine and interpret marginal product and average product for a specified production
function.
6. Determine the profit-maximizing output level subject to a given cost level.
7. Given the demand function and cost function, use differential calculus to determine the firm’s
profit-maximizing price and output levels.
8. Using the perfectly competitive model, show the effects on consumer and producer surplus of
policies such as price ceilings and floors, sales taxes, and trade tariffs and quotas.
9. Given revenue and cost information, determine the welfare loss of monopoly relative to
perfect competition.
10. Determine optimal output levels for a multiplant firm.
11. Determine and interpret the Lerner index.
12. Use game theory to determine an oligopolistic firm’s optimal strategy.
13. Examine a market and determine which of the four market structures (perfect competition,
monopolistic competition, oligopoly, monopoly) it best fits.
14. Determine appropriate prices using strategies including price discrimination, two-part tariff
pricing, and peak-load pricing.
15. Show how a minimum wage or a union-bargained wage affects the employment level in a
monopsonistic labor market.
16. Analyze decision-making under uncertainty and under alternative criteria.
17. Determine the optimal level of a public good.
TEXTBOOK:
Microeconomics: Theory & Applications, 12th ed., by E. K. Browning & M.A. Zupan. John
Wiley & Sons, Inc. ISBN: 978-1-118-75887-8 (paperback) or 978-1-118-92007-7 (e-text).
The e-text can be purchased online at: http://www.wiley.com/WileyCDA/WileyTitle/productCdEHEP003217.html . [Alternatively, you may use the 11th edition of this textbook, the ISBN for
which is 978-1-1180-6554-9 (hard cover) or 978-1-1181-2937-1 (binder-ready).]
Why read the textbook? We learn better if we see/hear material multiple times in multiple
ways. Reading the textbook helps to reinforce and clarify what is presented in the lecture.
LECTURE NOTES:
Notes are provided at my website: http://muse.widener.edu/~kleppel/index.html . In order to
perform activities, students are required to bring the notes to class in either printed form (sixslides to a page is recommended) or in digital form on an electronic device.
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LEARNING TECHNIQUES:
(1) Lectures
(2) Group problem-solving
(3) Group paper
COURSE GRADE DETERMINATION (Pluses & minuses are not used for course grades):
3 exams each worth 20%
60%
final exam
30%
group paper
10%
100%
Exams: There will be three exams plus a final exam. The three exams will follow sections III,
VI, and IX on the syllabus. Dates for exams will be announced in advance. The final exam
covers the material from the entire course. Depending on the performance of the class, exam
grades may be curved. Adjusted grades will be determined based on the relative position in the
appropriate grade ranges. (For example, a middle B will be adjusted to equal an 85.) Make up
exams will not be given without a written excuse from a physician or other appropriate authority.
Group Paper: Student groups prepare a paper in which they answer questions requiring
application of course concepts. An individual student’s project grade will be adjusted for the
contribution of that student to the group. The project counts for 10% of the course grade.
SKILLS OUTCOMES:
Skills in:
(1) Knowledge of Microeconomic Principles and Differential Calculus.
(2) Basic communication skills.
Skills out:
(1) Ability to work both alone and in a group to solve economic problems at an intermediate level.
(2) Ability to present and explain an economic problem and its solution at an intermediate level,
using words and graphs.
ACADEMIC ASSISTANCE:
Students who could use assistance with study skills or time management are encouraged to
contact the office of Academic Support Services at the Pineapple House, 522 E. 14th Street
(610-499-1267).
LEARNING ACCOMMODATIONS:
In accordance with the Americans with Disabilities Act, any student has the right to request
reasonable accommodation of a disability. Accommodations can be requested at Disabilities
Services (520 E. 14th Street, 610-499-1266). Disabilities Services is the office that authorizes all
accommodations on campus. Please note that you will need to present documentation of your
disability to Disabilities Services. It is important to make this request as soon as possible so that
we will have time to make any necessary arrangements.
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COURSE OUTLINE:
I. Introduction and Review of Supply and Demand
Topics: markets; circular flow; demand versus quantity demanded; supply versus quantity
supplied; equilibrium
Practice Problems: Supply and Demand
Determining equilibrium price and quantity from supply and demand equations
Reading: Chapters 1 and 2
II. Demand and Utility
Topics: cardinal versus ordinal utility; total utility; marginal utility; indifference curves; income
consumption curve; Engel curve; price consumption curve; income and substitution
effects; Giffen good; market demand curve; total, average, and marginal revenue; arc
elasticity versus point elasticity; price elasticity of demand; income elasticity of demand;
cross elasticity of demand; price elasticity of supply
Practice Problems: Utility Maximization
Substitution and Income Effects
Regression Interpretation
Reading: Chapters 3 and 4
III. Production
Topics: production function; discrete and continuous marginal products; average product;
isoquant; marginal rate of technical substitution (MRTS); constant, increasing, and
decreasing returns to scale
Practice Problems: Cobb-Douglas Production Function Problem
Reading: Chapter 7
EXAM 1 – covering syllabus sections I through III.
IV. Cost of Production
Topics: isocost; total cost, total variable cost, and total fixed cost; average total cost, average
variable cost, and average fixed cost; discrete and continuous marginal cost; maximizing
profit using differential calculus; economies of scale and diseconomies of scale;
expansion path; economies of scope; maximizing profit in a two-product firm; firm goals
other than profit maximization
Practice Problems: Maximizing Output Subject to a Given Cost Level
Profit Maximization
Reading: Chapter 8
V. Perfect Competition
Topics: assumptions of perfect competition; graph of five profit situations relative to the ATC
and AVC curves; firm and industry short run supply curves; constant cost, increasing
cost, and decreasing cost industries
Practice Problems: Breakeven and Shutdown Points Problem
Reading: Chapter 9
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VI. Policy and the Perfectly Competitive Model: Consumer & Producer Surplus
Topics: consumer surplus and producer surplus; total consumer and producer surplus is
maximized at the perfectly competitive equilibrium; deadweight loss; effects on
consumer and producer surplus of price ceilings and floors (including agricultural price
supports), sales taxes, tariffs and quotas
Practice Problems: Sales Tax Problem
Reading: Chapter 10
EXAM 2 – covering syllabus sections IV through VI.
VII. Monopoly
Topics: definition of monopoly; reasons for monopoly; Lerner index; multi-plant profit
maximization; welfare loss of monopoly compared to perfect competition; using differential
calculus to maximize monopoly profit; average cost pricing regulation of monopoly
Practice Problems: Welfare Loss from Monopoly
Profit Maximization – Downward-Sloping Demand
Multiplant Firm
Lerner Index Problem
Reading: Chapter 11
VIII. Monopolistic Competition and Oligopoly
Topics: assumptions of monopolistic competition; advertising, prices, and profits; characteristics
of oligopoly; kinked demand curve model; dominant firm and barometric price
leadership models; game theory and dominant strategies
Practice Problems: Game Theory Problem
Market Structure Case - restaurant
Market Structure Game
Reading: Chapter 13
IX. Pricing Strategies
Topics: price discrimination; two-part tariff pricing; bundling; advertising; cost-plus markup
pricing; product lines; peak-load pricing; transfer pricing
Practice Problems: Price Discrimination (first, second, and third degree)
Two-Part Tariff
Bundling
Transfer Pricing
Reading: Chapter 12
EXAM 3 – covering syllabus sections VII through IX.
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X. Resource Markets
Topics: monopsony, oligopsony, monopsonistic competition, and perfect competition in input
markets; derived demand; total resource cost, average resource cost, and marginal
resource cost; marginal physical product, marginal revenue product, value of the
marginal product; profit-maximizing condition for input usage: MRP=MRC; substitution
and output effects of a wage change; determinants of elasticity of demand for labor;
market demand for labor; monopsony employment and wage level; minimum wage
effects in perfectly competitive labor markets and monopsonistic labor markets; union
effects in monopsonistic labor markets; income and substitution effects of wage change
on labor supply; present value and rate of return on capital investment; marginal
productivity of capital
Practice Problems: Monopsony Problem
Reading: Chapters 16 and 17
XI. Information
Topics: risk averse, risk loving, and risk neutral; optimal search; moral hazard; adverse
selection; diversification
Practice Problems: Decision-Making under Uncertainty
Decision-making under Alternative Criteria
Reading: Chapter 14
XII. Public Goods and Externalities
Topics: public goods properties; free rider problem; efficient provision of public goods; external
benefits and costs; social benefits and costs; Coase theorem; subsidizing goods with
external benefits; taxing goods with external costs; per unit pollution taxes versus fixed
pollution level policies
Practice Problems: Public Goods
Reading: Chapter 20
FINAL EXAM – includes all syllabus sections covered during the semester.