Course Description: Objectives: Grading:

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1 Boise State University Principals of Microeconomics ECON 202, Section 001, Liberal Arts Building, Room LA 106, Spring Semester 2011 Instructor: John Church Textbook: Exploring Microeconomics BSU Phone: Robert L. Sexton, 5th Edition, Home Phone: South-Western Publishers Office Hours: MWF 9:40 a.m. 11:00 a.m. Location & Time: Liberal Arts Building, Room LA112 MWF -- 12:40 p.m. to 1:30 p.m. Course Description: Principles of Microeconomics (ECON 202) is one of the two-course sequence of introductory economics courses. In ECON 202 we will define economics, explore the underlying fundamentals that are common to all economic systems, and develop and examine a basic framework for analysis of the overall economic interactions that take place in our economy. During the first weeks of the course we will examine the problems caused by scarcity, how prices in our economy act effectively to allocate scare resources between all participants in our economy. Building on these fundamentals, we will then explore the economic decision making by the smallest of economic units, the individual, household, or firm. We will discover how these small economic units make "good" or rational economic decisions are made. Study will then focus on the differing market structures that operate in our economy. Having developed these fundamental theoretical tools, we will then focus upon some of the areas of applied economics; regulation and antitrust, supply and demand for the factors of production, wage determination, international trade, and the economic problems faced by our agricultural industries. Objectives: It is the objective of this course to provide a understanding of how the interactions of varied economic units (the individual, household, or firm) weave together to influence the overall economic system. It is expected that the student will come away from ECON 202 with a new appreciation of the economic interactions that they observe and are participants in each day. But most importantly, it is hoped that the student will acquire the skills to critically analyze economic phenomena or economic policy decisions. Grading: There will be four exams. The first through the third exams will be each worth 100 points. The final exam will be worth 150 points. The final examination will be comprehensive covering materials that have been presented throughout the semester. In addition, there will be a number of "exercises" throughout the semester that will, in total, be worth 100 points. The overall semester grade will be based upon the sum of the grades received in the four exams and the "exercises" compared to the maximum of 550 points that are possible during the semester. Letter grades will be based upon the "traditional" 90+% of the total points equals an "A"; 80-89% equals a "B"; 70-79% equals a "C", etc. The plus/minus grading system will be used to adjust grades that are between the cutoff points of the above determined letter grades. 1

2 Learning Goals for Principles of Microeconomics Critical Thinking/ Problem Solving Skills Overall Goal A student who has completed the economics principles sequence should be able to think critically and be able to apply economic reasoning in making personal and business decisions and in analyzing public policies. A student should be able to identify and discuss major U. S. and international economic institutions, central concepts in a core body of economic literature, and the major economic issues facing the U. S. and the world Ethical Issues in Microeconomics The student should be able to identify the ethical issues that arise when evaluating market outcomes and public policies relating to markets. Opportunity Cost The student should be able to identify the real costs associated with the resource allocation choices we make and explain how such costs affect the choices made by individuals, organizations, and governments Marginalism and Benefit and Cost Analysis The student should be able to use the cost/benefit framework to make decisions, especially decisions at the margin. Ethical Issues in Microeconomics The student should be able to identify the ethical issues that arise when evaluating market outcomes and public policies relating to markets. Communication Skills Skill in Using Diagrams to Express Relationships The student will be able to use supply and demand diagrams, cost and revenue curves, time series graphs, and other diagrams to express economic relationships and to predict the consequences of changes in relevant variables. Breadth of Knowledge and Intellectual Perspective Scarcity The student should be able to state the implications of the fact that the resources, from which the goods and services we want are produced, are limited. Among these implications is the fact that individuals and societies are forced to make choices. 2

3 ECON 202: Principles of Microeconomics Section: 001 Spring 2011 Class Time & Place: MWF, 12:30 p.m. to 1:30 p.m., Liberal Arts Building, Room LA106 Textbook: Exploring Microeconomics, by Robert L. Sexton, 5th Edition, South-Western Instructor: John Church, Room B311L, , or (hm), or Week/Date Topic Important Dates Week 1: January Chapter 1: The Role and Method of Economics Economics, Macroeconomics, Microeconomics Macroeconomic Ideas: Self Interest, Rational Economic Behavior & Choice, The Ceteris Paribus Assumption, Positive & Normative Economic Statements Chapter 2: The Economic Way of Thinking Scarcity, Scarcity and Resources Choices, Costs, and Trade-Offs Opportunity Costs, Marginal Thinking, Incentives Matter Week 2: Jan Chapter 3: Scarcity, Trade-Offs, and Production Possibilities The three economic questions every society faces: What, How, and for Whom? The Production Possibilities Curve, The assumptions underlying the curve. Fully utilized resources and Economic efficiciency: The best allocation of the factors of production, and utilizing the best methods of production. Economic Growth and the Production Possibilities Curve: Growth does not eliminate scarcity. The effects of technological change. Week 3: Chapter 4. Supply and Demand Markets. Defining a Market. Jan The Law of Demand, The Determinants of Demand, Changes in Demand, Feb. 4 Changes in the Quantity Demanded, The Law of Supply, The Determinants of Supply Changes in Supply, Changes in the Quantity Supplied Week 4: Chapter 5. Bringing Supply and Demand Together Flexible Prices, Feb Market Equilibrium Price and Quantity, Surpluses, Shortages, Scarcity and Shortages Changes in Equilbrium Price and Quantity: Changes in Demand, Changes in Supply Regulated Prices: Price Ceilings, Price Floors, & Unintended Consequences Price Ceilings: Modeling a Price Ceiling, Why a Price Ceiling Causes Inefficiency Price Floors: Modeling a Price Floor, Why a Price Floor Causes Inefficiency Week 5: Chapter 6. Elasticities The Price Elasticity of Demand Feb. 18: 1st Exam: Feb Types of Demand Curves, Calculating the Price Elasticity of Demand, The Chapters 1-6 Determination of the Price Elasticity of Demand. Why do we want to know the Price Elasticity: How the Price Elasticity Impacts Total Revenue. Other Types of Demand Elasticities: Cross-Price Elasticities & Income Elasticities Price Elasticity of Supply, Elasticities and Taxes Week 6: Feb Chapter 7: Market Efficiency and Welfare Consumer Surplus & the Demand Curve: Willingness to pay, the demand curve, and consumer surplus. Producer Surplus and the Supply Curve: Cost, the supply curve, and producer surplus. Using Consumer and Producer Surplus to find the effects of a tax or a subsidy. Week 7: Chapter 8: Market Failure Negative Externalities: Example --- Pollution. Feb Negative Externalities, Costs, Production & Consumption. Solving the market failure Mar. 4. of a negative externality. Economic solutions, the Command and Control Approach Positive Externalities: Example --- Disneyland/Disney World. Positive Externalities, Costs, Production & Consumption. Solving the market failure of a positive externality. Public Goods: A Definition, Public Goods and the free-rider problem. Asymmetric Information: Moral Hazard Chapter 10: Consumer Choice Theory Other Functions of Government: Property Rights and the Legal System Protect Competition in the Marketplace, Income Redistribution Government Spending and Taxation: Growth in Government, Generating Government revenues, Financing State & Local Government Activities. 3

4 ECON 202: Principles of Microeconomics Section: 001 Spring 2011 Class Time & Place: MWF, 12:30 p.m. to 1:30 p.m., Liberal Arts Building, Room LA106 Textbook: Exploring Microeconomics, by Robert L. Sexton, 5th Edition, South-Western Instructor: John Church, Room B311L, , or (hm), or Week/Date Topic Important Dates Week 8: Mar Chapter 11: The Firm: Production and Costs Firms and Profits: Total revenues Minus Total costs Explicit Costs, Implicit Costs, Profts: Accounting profits and Economic Profits Are accounting profits the same as Economic Profits? Zero Economic Profit is a Normal Rate of Return. Sunk Costs Marginal Cost Production in the Short Run: The Short Run versus the Long Run Costs in the Short Run: Fixed Costs, Variable Costs, and Total Costs Avg. Fixed Costs, Avg. Variable Costs, Avg. Total Costs, and Marginal Costs Cost Curves: Short Run Cost Curves versus Long Run Cost Curves Week 9: Chapter 12: Firms in Perfectly Competitive Markets Mar. 14: 2nd Exam: Mar A Perfectly Competitive Market: Characteristics, the Perfectly Competive Firm's Chapters 7, 8, 10, 11 Demand Curve, its Marginal Revenue Curve, and it's Cost Curves Profit Maximization: How do Firms Maximize Profits? Short Run Profits and Losses, Long Run Equilibrium Week 10: Chapter 13: Monpoly and Antitrust Mar The Monopoly Market Structure: Characteristics, Curves, and it's Demand and Marginal Revenue Curves, Types of Barriers to Entry Monopoly and Welfare Loss, Price Discrimination Monopoly Policy: Antitrust Laws, Problems with Regulation & Average Cost Pricing Week 11: Spring Break Spring Break Mar Apr. 1 Mar Apr. 1 Week 12: Apr. 4-8 Chapter 14: Monopolistic Competition and Product Differentiation Monopolistic Competition: Characteristics, the Monopolistically Competitive Firm's Demand Curve, its Marginal Revenue Curve, and it's Cost Curves Monopolistic Competition versus Perfect Competition: Advertising: Why do Firms Advertise? Week 13: Chapter 15: Oligopoly and Strategic Behavior Apr. 15: 3rd Exam: Apr The Oligopoly Market Structure: Characteristics, Industry Concentration Chapters Collusion and Cartels: OPEC Game Theory and Strategic Behavior Other Oligopoly Markets: Mergers, Types of Mergers, Antitrust and Mergers Week 14: Apr Chapter 16: The Markets for Labor, Capital, and Land Input Markets, Supply and Demand in the Labor Market How a Firm Hires Labor: Marginal Revenue Product versus Marginal Factor Cost Labor Unions: Union Impact on Labor Supply and Wages Week 15: Chapter 18: The Environment Apr Negative Externalities: Example --- Pollution. What are social costs? Dec. 3 Negative Externalities, Costs, Production & Consumption. Solving the market failure of a negative externality. Economic solutions, the Command and Control Approach Week 16: Chapter 20: International Trade May 2-6 Comparative Advantage and International Trade The Gains from International Trade, Sources of Comparative Advantage Supply, Demand, and International Trade The Effects of Imports, of Exports, International Trade and Factor Markets Effects of Trade Protection: Effects of a Tariff, of an Import Quota Arguments for Trade Protection, The Politics of Trade Protection Final Exam: Final Exam -- Monday, May 9, 2011: 1:00 p.m. - 3:00 p.m. May 9 : Final Exam Final Exam: Chapters 16, 18, and 20 + Comprehensive 4

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