6E:001 Principles of Microeconomics Summer 2001 Syllabus

Transcription

1 Professor Ted Temzelides W280 PBAB E:001 Principles of Microeconomics Summer 2001 Syllabus Office Hours MW 2-3 and by appointment Please call or me to make an appointment Course Materials Introduction to Microeconomics, (2 nd edition) by Alan Stockman Course syllabus, topics, and homework assignments, available from our web page We recommend that you have an address, which can be obtained at WEEG. Course Website A world wide web site has been established for this course which may be reached at This site will contain the syllabus and homework assignments, as well as other links of interest. Course Objectives Microeconomics is the study of the allocation of scarce resources among individual competing uses. The main purpose of this class is to develop an understanding of the theory behind microeconomics and to apply this theory to real world economic situations. Grading Policy Grades will be based on points earned during the course of the semester. There will be one final (500 points), 2 quizzes (100 points each) and 3 homework assignments (100 points each). Hence, there are 500 total points available on homework and quizzes. The following schedule will be used to determine grades: pts A; B; C; D; D-; all other plusses and minuses will be determined at the end of the class. The final will take place on the last day of classes. If you are caught cheating during an exam or quiz, you will receive a zero on that test. Switching test forms will be considered a form of cheating. You may confer with classmates on assignments, but you must turn in your own answers. A finding of duplicate answers to essay questions will constitute grounds for a zero on that assignment. Lecture Organization 1

2 Makeups I will lecture every day. Fridays will be mostly devoted to quizzes, homework, and help sessions. There will be no makeups on quizzes or homework assignments. Assignments are due before lecture on the dates indicated on the course schedule. We will not accept late homework! Emergencies will be handled on a case-by-case basis. If you are having any problems in the course, or are encountering personal problems that may affect your grade, please come to see me. If you have any special requirements that need to be accommodated in terms of seating or test-taking, please see me. Principles of Microeconomics 6E:001 Summer 2001 topic chapter syllabus-orientation 1,2 the methods of economics 2 gains from trade 3 supply and demand 4 elasticities 5 applied price theory 6 international trade 7 price controls and taxes 8 efficiency-gains from trade 9 choices and demand 10 business decisions-supply 11,12 perfect competition 13 monopoly 14 imperfect competition 15,16 game theory 17 (if time allows) review for final Quiz #1 5/18 (Fri.) Quiz #2 5/25 (Fri.) /1 (Fri.) FINAL EXAM 9:00-11:00 2

3 Homework Assignment #1: 6E:001 Principles of Microeconomics (Due Friday May 18) Remember to put your name on your assignment. Students are reminded to submit an independently written assignment. 1. Assume there are two countries, Canada and the United States; two goods, Timber and Steel; and one factor of production, Labor. The labor requirements in each country in order to make one unit of each good are as follows: Country Canada U.S. Good: Steel 2 3 Timber 1 5 Assume Canada has 40 units of labor and the U.S. has 90 units of labor. a. What is the opportunity cost of steel in terms of timber in Canada? b. What is the opportunity cost of timber in terms of steel in Canada? c. What is the opportunity cost of steel in terms of timber in the U.S.? d. What is the opportunity cost of timber in terms of steel in the U.S.? e. What country has the comparative advantage in steel? f. What country has the comparative advantage in timber? g. Graph the production possibility frontiers for each country. Now assume that Canada and the U.S. decide to trade and that the agreed upon price is one unit of steel for one unit of timber. h. What is the pattern of trade? (In other words, who trades what with whom?) i. Show graphically that both countries benefit from trade. 2. Assume the demand schedule for Chicago White Sox tickets for any given game is as follows: Price per ticket $24.00 $20.00 $16.00 $12.00 $8.00 $4.00 Tickets sold 10,000 15,000 22,000 30,000 40,000 44,000 a. Use the demand schedule above to graph a demand curve for White Sox tickets. (Be sure to label.) b. How would each of the following things affect the demand curve for tickets to Chicago White Sox current games? i. The Chicago Bulls, the professional basketball team which competes with the White Sox for the average Chicagoan's sports dollars, lowers its ticket prices. ii. Chicago goes into a recession, lowering the average Chicagoan's income. iii. The White Sox move to Omaha where there is a much smaller potential market. iv. The White Sox decide to raise the price of their tickets. v. The White Sox start winning a bunch of games. (Assume people like to watch their team win.) vi. The White Sox announce that they will be raising their ticket prices next month. c. Since Comiskey Park holds about 44,000 fans, the White Sox always make 44,000 tickets available for every game. If they charge $8.00 per ticket what is the excess supply of tickets? d. What is the price elasticity of demand at an average price of 10 dollars? At this price is the demand elastic or inelastic? e. Would you guess that the income elasticity of demand for White Sox tickets is high or low? Explain 3

4 briefly. 3. Assume that holding the price of White Sox tickets constant, the demand for beer at White Sox games follows the demand schedule on the left. Assume the quantity supplied follows the supply schedule on the right. Q(S) Price Q(D) Price , , , , , , , , , , , ,000 a. Graph the demand curve. b. Graph the supply curve. c. What will be the equilibrium price and quantity of beer sold at Comiskey Park? 4

5 Homework Assignment #2: 6E:001 Principles of Microeconomics (Due Friday May 25) 1. Assume that the demand for labor in an area is Q(d) = 300,000 - P*40,000 and the supply of labor is Q(s) = -25,000 + P*25,000 where P is the price of labor in dollars per hour and Q is measured in hours of labor. (P is greater than or equal to 1.) a. What is the equilibrium price and quantity of labor? b. List two things that could shift the demand for labor. c. List two things that could shift the supply for labor. d. What would happen to the equilibrium price and quantity if the government set a minimum of $4.75 per hour? e. What would happen to equilibrium price and quantity if the government then increased this minimum wage to $5.25 per hour? f. Forget for the moment about the minimum wage and suppose instead that the government imposes an income tax of $1.00 per hour that is to be paid by employers. How do the supply and demand curves for labor change? g. What is the new equilibrium wage and level of employment? h. How much revenue will the government collect? i. Draw two graphs illustrating the effects of the minimum wage and the effects of taxation on wages and employment. j. Now suppose that we increase the tax imposed on employers to $6.00 per hour. How do the supply and demand curves for labor change? k. What is the new equilibrium wage and level of employment? l. How much revenue will the government collect? m. Compare your answer in l. to your answer in h. Is it ever possible that cutting taxes will increase total government revenue? Explain. 2. The U.S. government has tried to help out American farmers using a variety of techniques. Using supply and demand graphs, show how each of the following policies would help farmers by increasing farm prices. a. The "set aside" program pays farmers not to plant crops in certain years. b. The "price support" program sets a minimum price at which agricultural products may be sold and guarantees that the government will purchase any surpluses. c. The "agricultural promotion" program works to open foreign markets to American agricultural products. 5

6 Homework Assignment #3: 6E:001 Principles of Microeconomics (Due Friday June 1) Remember to put your name on your assignment. 1. Assume that the utility you derive from viewing movies and attending concerts follows the following schedule: Concerts Attended: Total Utility: Movies Attended: Total Utility: a. What are the marginal utilities for the consumption of movies and concerts? Do these marginal utilities satisfy our usual assumptions about the marginal utilities of goods? b. Assume that you have $40 to split among movies and concerts. At a price of $10 for concerts and $5 for movies, what are the affordable combinations of concerts and movies? c. What combination gives you the highest total utility? d. Does this combination satisfy the condition that MU(c)/P(c)=MU(f)/P(f)? (Show your work.) e. Assume the price of concerts increases to $15. Now what is the best affordable combination? (Check that this combination also satisfies the condition that MU(c)/P(c)=MU(f)/P(f).) f. With the price of concerts back at $10, what will be your consumption of concerts and movies if your income rises to $55? 2. Assume that a firm faces costs for producing a good as follows: Output: Total Variable Cost: Assume that there is a fixed cost of 24 as well. a. For all levels of output calculate the marginal cost, average fixed cost, average variable cost, and average total cost. b. Graph the MC, AFC, AVC, and ATC. Assume that this firm is operating in a perfectly competitive economy. c. At the prices of 14, 10, and 8, what will be the firm's levels of output and total profits? 6