William Rainey Harper College
ECO 211
Microeconomics: An Introduction to Economic Efficiency

Assignments

GET AHEAD!

UNIT 1

UNIT 2

UNIT 3

UNIT 4

Chapter:

1 - Introduction, 5Es, and Choice
2 - The Market System and the 5Es
3 - Demand and Supply
5 - The Public Sector (Government)

Chapter:

4 - Elasticity
6 - Consumer Choice
7 - Production Costs

Chapter:

8 and 9 - Pure Competition
10 and 18 - Monopoly
11 - Monopolistic Competition and Oligopoly

Chapter:

12 - Demand for Resources
13 - Wages
20 - Income Inequality
22 - Immigration
 

GENERIC CHAPTER OUTLINE:

For each chapter below the following will be available:

  • Reading Assignments
  • Video Lectures
  • Practice Activities
    • Study Guide
    • Worked Problems
    • Web Quizzes
    • End-of-Chapter Questions and Problems
  • Must Know

VIDEO LECTURES

Most video lectures are from the Cengage Tomlinson Universal LearningPath Videos. These are listed with their numbers (eg. 2.1-1, 2.1-2, 2.2-1, etc.). Other videos are free online. Videos are usually between 5 and 10 minutes long and there are usually between 5 and 10 per chapter. Most of the the Cengage Tomlinson videos have (1) lecture notes, (2) a written transcript, and (3) a multiple choice review quiz available.

SUGGESTION:

In order to make sure that you do not miss anything, you should print this page and use it to mark off the assignments that you have finished

Unit 1 - An Introduction to Economics, Efficiency, and the Market System

CHAPTER 1 READING ASSIGNMENTS:

Chapter 1 Video Lectures

CHAPTER 1 PRACTICE EXERCISES

Must Know / Outcomes:
  • Chapter 1 Appendix on Graphing: ALL
  • Chapter 1: ALL
  • Online Lecture: The online lecture is VERY IMPORTANT!
    http://www.harpercollege.edu/mhealy/eco211f/5es/5e.htm
  • Ch. 3: "Efficient Allocation" pp. 58-59
  • Ch. 3 and 6: "Diminishing Marginal Utility" pp. 49 and 117
  • The Necessity of Choice -- HOW? -- Benefit Cost Analysis
    • Ch. 1: p. 5, "Marginal Analysis: Benefits and Costs"
    • Ch. 1: pp. 13-14, "Optimal Allocation" (especially Fig 1.3),
    • Ch 1: p. 14, "The Economics of War" (box)
    • Ch. 7: p. 158-159, Last Word: Don't Cry over Sunk Costs - Sunk costs are irrelevant in decision making
    • Ch. 5: pp. 108-109, "Society's Optimal Amount of Externality Reduction"
  • Ch. 22: p. 467, "Optimal Immigration"
  • WHAT IS ECONOMICS: SCARCITY, THE 5Es, AND MAKING CHOICES
    • 1.1.1 Scarcity - Defining Economics
    • 1.2.1 What Economists Do
    • 1.2.2 Micro and Macroeconomics
  • OPTIONAL: SIMPLE MATH, ALGEBRA, AND GEOMETRY FOR ECONOMICS STUDENTS
  • REVIEW OF GRAPHING CONCEPTS
    • 1A.1 Using Graphs to Understand Direct Relationships
    • 1A.2 Plotting A Linear Relationship Between Two Variables
    • 1A.3 Changing the Intercept of a Linear Function
    • 1A.4 Understanding the Slope of a Linear Function
    • OPTIONAL:
  • BUDGET LINES
    • 6A-1 Constructing a Consumer's Budget Constraint
    • 6A-2 Understanding a Change in the Budget Constraint 
  • PRODUCTION POSSIBILITIES
    • 2.1-1 Understanding the Concept of Production Possibilities Frontiers
    • 2.1-2 Understanding How a Change in Technology Affects the PPF
    • 2.1-3 Deriving the Algebraic Equation for the PPF
  • MAKING CHOICES: THE ECONOMIC WAY OF THINKING -- BENEFIT-COST ANALYSIS (also called Marginal Analysis or Cost-Benefit Analysis)
  • Why it is GOOD for the people of Florida if, after a hurricane strikes, the price of plywood (or other products) increases from $10 a sheet to $30 a sheet
  • Why it was GOOD when the Coca-Cola company (or other companies lays off 6000 workers as they did in the year 2000.
  • Why the price of gasoline in the United States is TOO LOW (We may have to wait until after we finish chapter 5 to truly understand this.)
  • What is "SCARCITY" as it is defined in economics?
    (What two things cause the scarcity of goods and services?
  • What is "erskinite"? Is erskinite scarce?
  • What is the goal of economics? 
  • What are society's three options for dealing with scarcity?
  • What do the 5Es do?
  • For each of the following
    • Define
    • Explain how it affects society's satisfaction
    • Give an example
      • ECONOMIC GROWTH
      • PRODUCTIVE EFFICIENCY
      • ALLOCATIVE EFFICIENCY
      • EQUITY
      • FULL EMPLOYMENT
  • How does economic growth differ from the other Es? 
  • What are the three ways to achieve productive efficiency?
  • What is the President Obama example? Explain how it can be used to show that equity can increase society's satisfaction. Why did we use such a strange example?
  • What is the law of diminishing marginal utility? What does "marginal" mean?
  • definitions of economics
  • definition of scarcity
  • two things necessary to cause scarcity
  • what is rational choice? (purposeful behaviour?)
  • what are economic models and why do economists use them?
  • what are opportunity costs? (trade offs?; "no such thing as a free lunch"?)
  • ceteris paribus
  • positive vs. normative economics
  • macroeconomics vs. microeconomics
  • what is the consumer dilemma (economizing problem)?
  • what is a budget line (budget constraint)?
  • how does the budget line illustrate the necessity of making choices?
  • how changes in income and prices affect the budget line
  • what are the four categories of resources (or factors of production)?

PPC

  • what is the production possibilities curve (PPC) or production possibilities frontier (PPF)?; what does it show?
  • what are the 5 assumptins behind the PPC?
  • what does a point outside the PPC repesent?
  • how does the PPC show that society must make choices?
  • what two things would a point inside the PPC indicate?
  • define opportunity cost
  • calculate opportunity cost using the PPC
  • explain the shape of the PPC. why is it concave to the origin? why does it have the shape that it does?
  • what is the law of increasing costs?
  • what would cause the PPC to shift outward?
  • what causes economic growth and how is it illustrated on the PPC?
  • use the PPC to explain what is meant by present choice affect future possibilities
  • discuss the PPC and allocative efficiency (or the optimal combination of output)
  • use the PPC to illustrate the effect of internatinal trade, discrimination, unemployment,

Benefit Cost Analysis

  • define benefit cost analysis (BCA) and use it to solve problems
  • define "marginal" and give examples
  • define marginal benefits (MB) and marginal costs (MC)
  • explain why we ignore fixed, or sunk, costs
  • know what happens if MC increases. decreases.
  • know what happens if MC increases. decreases.
  • draw MB and MC on a graph and explain their shapes

Chapter 2 Reading Assignments:

Chapter 2 Video Lecture

CHAPTER 2 PRACTICE EXERCISES

Must Know / Outcomes:
  • Chapter 2: ALL
  • "The Economic Basis of Trade" and "Comparative Advantage" pp. 474-482
  • ECONOMIC SYSTEMS
  • SPECIALIZATION AND GAINS FROM TRADE
    • 2.2-1 Defining Comparative Advantage with the PPF
    • 2.2-2 Understanding Why Specialization Increases Total Output
    • 2.2-3 Analyzing International Trade Using Comparative Advantage
  • terms and concepts listed at the end of the chapter
  • Pure Laissez-faire economic system
  • Centrally Planned Economy
  • mixed economic systems
  • The Bolshevik Revolution
  • Contributing factors to the collapse of the Soviet Union
  • characteristics of the market system
  • the important role of profits and losses
  • property rights
  • how specialization increases output
  • the "invisible hand" of capitalism
  • the coordination problem
  • the incentive problem
  • the circular flow model
  •  
  • absolute advantage
  • straight line PPCs
  • The concept of comparative advantage
    • calculate comparative advantage
    • specialization and trade
    • show the gains from trade

Chapter 3 Reading Assignments:

Chapter 3 Video Lecture

CHAPTER 3 PRACTICE EXERCISES

Must Know / Outcomes:
  • DEMAND
  • SUPPLY
    • 3.2-1 Understanding the Determinants of Supply
    • 3.2-2 Deriving a Supply Curve
    • 3.2-3 Understanding a Change in Supply versus a Change in Quantity Supplied
    • 3.2-4 Analyzing Changes in Other Supply Variables
    • 3.2-5 Deriving a Market Supply Curve from Individual Supply Curves
  • PUTTING SUPPLY AND DEMAND TOGETHER
    • 3.3-1 Determining a Competitive Equilibrium
    • 3.4-1 Defining Comparative Statics
    • 3.4-1 Classifying Comparative Statics (should be 3.4-2, but the link works)
  • MARKETS AND EFFICIENCY

Demand

  • define demand
  • be able to correctly draw and label a demand graph
  • why do economists employ the ceteris paribus assumption when creating a demand curve?
  • what is the law of demand?
  • why is the demand curve downward sloping (three explanations)
  • list the non-price determinants of demand and understand how they affect the demand schedule and curve
  • explain the difference between the a "change in the quantity demanded" and a "change in demand"
  • what is an increase in demand and a decrease in demand and show how they afect the demand schedule and hte demand curve
  • what is "market demand"?

Supply

  • define suply
  • be able to correctly draw and label a supply graph
  • why do economists employ the ceteris paribus assumption when creating a supply curve?
  • what is the law of supply?
  • why is the supply curve upward sloping (three explanations)
  • list the non-price determinants of supply and understand how they affect the supply schedule and curve
  • explain the difference between the a "change in the quantity supplied" and a "change in supply"
  • what is an increase in supply and a decrease in supply and show how they affect the supply schedule and the supply curve
  • what is "market supply"?

Equilibrium

  • what are the two assumptions of a competitive equilibrium?
  • define equilibrium
  • what happens if the price is below the equilibium price? If it is above it?
  • how to find the equilibrium price and quantity on a supply and demand schedule and graph
  • define "shortage" and "surplus" and explain using a suply and demand graph
  • what is the "bidding mechanism"?
  • the three (or four) steps to finding a new equilibrium when a non-price determinant changes and how to use them
  • what happens to the equilibrium price and quantiry if (1) demand increses, (2) demand decreases, (3) supply increases, and (4) supply decreases.
  • what happens if both supply and demand changes

Markets and Efficiency

  • two models to show why competitive market economies achieve allocative efficiency
  • define consumer surplus and shade it in on a supply and demand graph
  • define marginal social benefit and explain whay it is often measured by the demand curve
  • define producer surplus and shade it in on a supply and demand graph
  • define marginal social cost and explain why it is often measured by the supply curve
  • define dead weight loss and be able to locate it on a supply and demand graph
  • explain why allocative inefficiency occurs where MSB > MSC causing an underallocation of resources; show on graph using the MSB=MSC model and show the dead weight los on the consumer and producer surplus model
  • explain why allocative inefficiency occurs where MSB < MSC causing an overallocation of resources; show on graph using the MSB=MSC model
  • be able to find WHAT WE GET and WHAT WE WANT the MSB=MSC model graph

Chapter 5 Reading Assignments:

Chapter 5 Video Lectures

CHAPTER 5 PRACTICE EXERCISES

Must Know / Outcomes:
  • Chapter 3: pp 61-64, "Application: Government Set Prices"
  • Chapter 3: pp 62-63, "Last Word: A Legal Market for Human Organs?"
  • Chapter 5: pp 99-110, "Public Goods", "Externalities" and Government's Role in the Economy

Price ceilings and floors

  • define "price control" or "price ceiling"
  • give examples of price controls / price ceilings
  • how price controls/price ceilings affect allocative efficiency and explain using the MSB=MSC model and the consumer and producer surplus (dead weight loss) model
  • what other effects price controls/ceilings have
  • define price floor and give examples
  • what happens if the government sets a minimum wage rate that is higher then the equilibrium?
  • he efficiency effects of a price floor using the MSB=MSC model and show on a graph
  • what happens if a price ceiling is set above the equilibrium? if a price floor is set below the equilibrium?

Market Failure: negative externalities (also called external costs or spillover costs)

  • know the "Terms and Concepts" listed at the end of the chapter
  • what is a market failure?
  • what is an externality?
  • define negative externalities (external costs or spillover costs)
  • give examples of negative externalities
  • use the MSB=MSC model to show the effects (overallocation) on allocative efficiency of negative externalities
  • use the consumer and producer surplus model to show the effects (dead weight loss) of negative externalities
  • what can the government do to correct the market failure caused by negative externalities (internalize) and show the effects of these policies on the MSB=MSC model
  • why is the MSC curve not the same as the supply (or MPC) curve when there are negative externalities?
  • what is an excise tax?
  • what is the Coase theorem?
  • explain how according to the Coase Theorem that under certain circumstances bargaining can solve the problems created by negative externalities without the government using an example
  • what are the necessary condition needed for the Coase Theorem to work?
  • what is the tragedy of the commons?
  • how does the tragedy of the commons affect allocative efficiency?
  • what can be done to better achieve allocative efficiency when there is a tragedy of the commons?

Market Failure: positive externalities (also called external benefits or spillover benefits)

  • know the "Terms and Concepts" listed at the end of the chapter
  • define positive externalities (external benefits or spillover benefits)
  • give examples of positive externalities
  • use the MSB=MSC model to show the effects on allocative efficiency of positive externalities
  • what can the government do to correct the market failure caused by positive externalities and show the effects (underallocation) of these policies on the MSB=MSC model
  • why is the MSB curve not the same as the D (or MPB) curve when there are negative externalities?

Market Failure: Public Goods

  • define "public goods (non-exclusive)"
  • give examples of public goods and explain why they are public goods
  • define private (exclusive) goods" and give examples
  • define "rival goods" and give examples
  • what is the "free rider problem"?
  • explain how to derive the demand curve for public goods
  • what effect do public goods have on allocative efficiency?
  • what can the government do to correct for the market failure of public goods?
 

Unit 2 - Elasticity, Consumer Decisions, and Costs of Production 

Chapter 4 Reading Assignments:

Chapter 4 Video Lectures

CHAPTER 4 FOR PRACTICE

Must Know / Outcomes:
  • Chapter 4: pp. 75-89, Elasticity
  • Chapter 4: pp 86-87, Last Word
  • Chapter 16: pp 347-354, "Tax Incidence and Efficiency Loss

Price Elasticity of Demand

  • know the "Terms and Concepts" listed at the end of the chapter
  • define price elasticity of demand
  • compare "the law of demand" with "price elasticity of demand"
  • calculate the coefficient of price elasticity of demand using the midpoint formula
  • explain why the midpoint formula is used
  • know how to interpret the coefficient (what does the number mean?)
  • price elastic demand
  • price inelastic demand
  • unit elastic demand
  • how does the price elasticity of demand change along a single demand curve?
  • perfectly price elastic demand (graph)
  • perfectly price inelastic demand (graph)
  • total revenue test (how do price changes affect total revenue with different elasticities (show graphically)
  • P x Q = TR
  • explain how the shape of the total revenue graph is explained by the price elasticity of demand
  • determinants of price elasticity of demand
  • Why might farm incomes fall if crops are good (bumper crops)?
  • how does the price elasticity of demand explain the rise in street crime after a major drug bust?
  • how does price elasticity of demand help[ explain how the minimum wage affects unemployment?
  • define price discrimination and explain the role of the price elasticity of demand
  • define "excise tax" and give examples
  • understand the connection between price elasticity of demand and the effect of excise taxes on (1) tax incidence (burden), (2) tax revenue, and (3) allocative efficiency (social welfare)
  • explain the efficiency loss of excise taxes using the (1) MSB = MSC model and (2) the consumer and producer surplus model (dead weight loss)
  • the role of excise taxes in income redistribution and reducing negative externalities

Price Elasticity of Supply

  • know the "Terms and Concepts" listed at the end of the chapter
  • define price elasticity of supply
  • calculate and interpret the coefficient of price elasticity of supply using the midpoint formula
  • determinants of price elasticity of supply
  • price elasticity of supply and the market period, the short run, and the long run

Cross Elasticity of Demand

  • define cross elasticity of demand
  • interpret the coefficient of cross elasticity of demand including both its value and the sign (substitutes, complements, and unrelated goods)

Income Elasticity of Demand

  • define income elasticity of demand
  • interpret the coefficient of income elasticity of demand including both its value and the sign (inferior goods, normal goods, luxury goods)

Chapter 6 Reading Assignments:

Chapter 6 Video Lectures

CHAPTER 6 FOR PRACTICE

Must Know / Outcomes:
  •  Chapter 6: pp. 116-125
  • 6.1-1 Understanding Utility Theory
  • 6.2-1 Optimal Consumer Choice - Finding Consumer Equilibrium
  • Professor Harmon Calculates the Utility Maximizing Bundle in 5 mins (YouTube - 02001orh 4:58)
    http://www.youtube.com/watch?v=LY1slp1dacA
  • Vocabulary
    • law of diminishing marginal utility
    • utility
    • total utility
    • marginal utility
    • rational behavior
    • budget constraint
    • utility-maximizing rule
    • consumer equilibrium
    • util
  • Define and explain the relationship between total utility, marginal utility, and the law of diminishing marginal utility.
  • Describe how rational consumers maximize utility by comparing the marginal utility-to-price ratios of all the products they could possibly purchase.
  • Explain how a demand curve can be derived by observing the outcomes of price changes in the utility-maximization model
  • Discuss how the utility-maximization model helps highlight the income and substitution effects of a price change.

Chapter 7 Reading Assignments:

Chapter 7 Video Lectures

CHAPTER 7 FOR PRACTICE

Must Know / Outcomes:
  • Chapter 7: ALL
  • AN ECONOMIST'S VIEW OF COSTS AND PROFIT
    • 7.1-1 Finding Economic Profit
  • PRODUCTION IN THE SHORT RUN
    • 7.2-1 Understanding Output, Inputs, and the Short Run
    • 7.2-2 Explaining the Total Product Curve
    • 7.2-3 Drawing Marginal Product Curves
    • 7.2-4 Understanding Average Product
  • SHORT RUN COSTS
    • 7.3-1 Defining Variable Costs
    • 7.3-2 Graphing Variable Costs
    • 7.3-3 Defining Marginal Costs
    • 7.3-4 Deriving the Marginal Cost Curve
    • 7.3-5 Understanding the Mathematical Relationship between Marginal Cost and Marginal Product
    • 7.3-6 Defining Average Variable Costs
    • 7.3-7 Understanding the Relationship between Marginal Cost and Average Variable Cost
    • 7.3-8 Defining and Graphing Average Fixed Cost and Average Total Cost
    • 7.3-9 Calculating Average Total Cost
    • 7.3-10 Putting the Cost Curves Together
    • 7.3-11 Shifts in the Cost Curves
  • PRODUCTION AND COSTS IN THE LONG RUN
    • 7,4-1 Defining the Long Run
    • 7.4-2 Determining the Firm's Return to Scale
    • 7.4-3 Understanding the Short Run and Long Run Average Cost Curves

Econ Profits and Short Run Production

  • Define and understand the terms and concepts listed at the end of the chapter.
  • Distinguish between explicit and implicit costs, and between normal and economic profits
  • Explain why normal profit is an economic cost, but economic profit is not
  • Why is a zero economic profit OK?
  • What are sunk costs and why are they ignored?
  • Explain the law of diminishing returns
  • Differentiate between the short run and the long run.
  • Compute and graph marginal and average product when given total product data
  • Explain the relationship between total, marginal, and average product
  • Explain the shape of the total, marginal, and average product graphs (specialization and teamwork, congestion, and overcrowded)
  • differentiate between production, productivity, and productive efficiency

Short Run Costs

  • Define and understand the terms and concepts listed at the end of the chapter.
  • Distinguish between fixed, variable and total costs
  • Explain the difference between average and marginal costs
  • Compute and graph AFC, AVC, ATC, and marginal cost when given total cost data
  • Explain how TC, TVC, and TFC relate to one another
    • do TC and TVC get closer together?
  • Explain how AVC, ATC, and MC relate to one another
    • do ATC and AVC get closer together?
    • why does MC cros ATC and AVC at their lowest points?
  • Explain the shapes of the total, average, and marginal cost curves (TC, TVC, TFC, ATC, AVC, AFC, and MC)
  • Relate average product to average variable cost, and marginal product to marginal cost
  • Explain what happens to the cost curves if there is a change in fixed costs; variable costs (what can cause cost curves to rise or fall?)

Long Run Costs

  • Define and understand the terms and concepts listed at the end of the chapter.
  • Explain the difference between short run and long run costs
  • State why the long run average cost is expected to be U shaped
  • List causes of economies and diseconomies of scale
  • Indicate relationship between economies of scale and number of firms in an industry and their sizes

Unit 3 - Product Markets: Decision Making and Efficiency

Chapters 8 and 9 Reading Assignments

Chapters 8 and 9 Video Lectures

CHAPTERS 8 AND 9 FOR PRACTICE

Must Know / Outcomes:
  • Chapters 8: ALL
  • Chapter 9: ALL

PURE COMPETITION

  • MARKET STRUCTURE
    • 10.1-1 Understanding Market Structure
  • WHAT IS A PERFECTLY COMPETITIVE MARKET?
    • 8.1-1 Understanding the Role of Price
    • 8.2-1 Calculating Total Revenue
  • SHORT RUN PROFIT MAXIMIZATION
    • 8.3-1 Finding the Firm's Profit Maximizing Output Level
    • 8.3-2 Proving the Profit Maximizing Rule
    • 8.3-3 Calculating Profit
    • 8.3-4 Calculating Loss
    • 8.4-1 Finding the Firm's Shut-Down Point
  • SHORT AND LONG RUN MARKET SUPPLY
    • 8.5-1 Deriving the Short-Run Market Supply
    • 8.7-1 Deriving the Long-Run Market Supply Curve
  • LONG RUN EQUILIBRIUM AND EFFICIENCY

Short Run

  • Define and understand the terms and concepts listed at the end of the chapter
  • List the four basic market models and characteristics of each.
  • Describe characteristics of a purely competitive firm and industry.
  • Explain how a purely competitive firm views demand for its product and marginal revenue from each additional unit sale.
  • Compute and graph average, total, and marginal revenue when given a demand schedule for a purely competitive firm.
  • Use both total revenue minus total-cost and marginal revenue = marginal cost approaches to determine short run price and output that maximizes profits (or minimizes losses) for a competitive firm.
    • with a table of data
    • on a graph with numbers
    • on a graph using geometry (graph with letters)
  • Find the short run supply curve when given short run cost schedules for a competitive firm.
  • Explain how to construct an industry short run supply curve from information on single competitive firms in the industry.

Long Run

  • Distinguish between the short run and the long run in pure competition.
  • Explain the long run equilibrium position for a competitive firm using entry and exit of firms to explain adjustments from nonequilibrium positions.
  • Describe the role of profits and losses in achieving the long run equilibrium
  • Explain the shape of long run industry supply curves in constant cost and increasing cost industries.
  • Differentiate between productive and allocative efficiency.
  • Explain why allocative efficiency and productive efficiency are achieved where P = minimum ATC = MC.
  • Explain why allocative efficiency and productive efficiency are consistent with maximizing consumer and producer surplus and an efficient use of resources.
  • Evaluate the impact of creative destruction on purely competitive industries.

Chapter 10 and 18 Reading Assignments:

Chapters 10 and 18 Video Lectures

CHAPTERS 10 AND 18 FOR PRACTICE

Must Know / Outcomes:
  • Chapter 10: ALL
  • Chapter 18:
    • pp. 376-382 Antittrust Policy: Issues and Impacts
    • pp. 381-383 Industrial Regulation
    • pp. 383-384 Deregulation

MONOPOLY

Short Run

  • Define and understand the terms and concepts listed at the end of the chapter
  • List the five characteristics of pure monopoly.
  • Explain the difference between a "pure" monopoly and a "near" monopoly.
  • List and give examples of the four barriers to entry.
  • Describe the demand curve facing a pure monopoly and how it differs from that facing a firm in a purely competitive market.
  • Compute marginal revenue when given a monopoly demand schedule.
  • Explain why the marginal revenue is equal to the price in pure competition but not in monopoly.
  • Determine the price and output level the monopoly will choose given demand and cost information in both table and graphic form

Long Run

  • Define and understand the terms and concepts listed at the end of the chapter
  • Discuss the economic effects of pure monopoly on price, quantity of product produced, allocation of resources, distribution of income, and technological progress.
  • Give examples of how new technology has lessened monopoly power.
  • List three conditions necessary for price discrimination.
  • Explain why profits and output will be higher for a discriminating monopoly as compared to non-discriminating monopoly.

Antitrust Policy and Regulation

  • Identify two pricing strategies of monopoly regulation and explain the dilemma the regulators face in utilizing these strategies
  • Define price fixing, price discrimination, and tying contracts, and explain which are strictly prohibited, which are permitted, and why.
  • Identify the options that government might use when a natural monopoly exists.
  • Explain why a regulated monopoly does not have an incentive to reduce costs.
  • Explain two major problems encountered in regulating natural monopolies
  • Terms: price fixing, antitrust policy, industrial regulation, tying contracts, horizontal merger, vertical merger, conglomerate merger, public interest theory of regulation, legal cartel theory of regulation

Chapter 11 Reading Assignments:

Chapter 11 Video Lectures

CHAPTER 11 FOR PRACTICE

Must Know / Outcomes:

Monopolistic Competition

  • Define and understand the terms and concepts listed at the end of the chapter
  • List the characteristics of monopolistic competition.
  • Explain how product differentiation occurs in similar products.
  • Determine the profit maximizing price and output level for a monopolistic competitor in the short run when given cost and demand data.
  • Explain why a monopolistic competitor will realize only normal profit in the long run.
  • Identify the reasons for excess capacity in monopolistic competition.
  • Explain how product differentiation may offset these inefficiencies.

Oligopoly

  • Define and understand the terms and concepts listed at the end of the chapter
  • Describe the characteristics of an oligopolistic industry.
  • Differentiate between homogeneous and differentiated oligopolies.
  • Identify and explain the most important causes of oligopoly.
  • Describe and compare the concentration ratio and the Herfindahl index as ways to measure market dominance in an industry.
  • Distinguish between three types of mergers. (Ch. 18)
  • Explain how the Herfindahl index is used as a guideline by the government in deciding whether to permit horizontal mergers. (Ch. 18)
  • Use a profit-payoffs matrix (game theory) to explain the mutual interdependence of two rival firms and why oligopolists might tempt to cheat on a collusive agreement.
  • Identify three possible models of oligopolistic price-output behavior.
  • Use the kinked demand curve theory to explain why prices tend to be inflexible.
  • Explain the major advantages of collusion for oligopolistic producers.
  • List the obstacles to collusion behavior.
  • Explain price leadership as a form of tacit collusion.
  • Explain why oligopolies may prefer nonprice competition over price competition.
  • List the positive and negative effects of advertising.
  • Explain why some economists assert that oligopoly is less desirable than pure monopoly.
  • Explain the three ways that the power of oligopolists may be diminished.

Unit 4 - Resource Markets: Decision Making, Efficiency, and Equity

Chapter 12 Reading Assignments:

Chapter 12 Video Lectures

CHAPTER 12 FOR PRACTICE

Must Know / Outcomes:
  • Chapter 12:
    • pp. 248-257
    • pp. 260-261
    • DO NOT STUDY: "Optimal Combination of Resources", pp. 257-260
  • Present four major reasons for studying resource pricing.
  • Explain the concept of derived demand as it applies to resource demand.
  • Determine the marginal-revenue-product schedule for an input when given appropriate data.
  • State the principle employed by a profit maximizing firm in determining how much of a resource it will employ.
  • Apply the MRP = MRC principle to find the quantity of a resource a firm will employ when given the necessary data.
  • Explain why the MRP schedule of a resource is the firm's demand schedule for the resource in a purely competitive product market.
  • Explain why the resource demand curve is downward sloping when a firm is selling output in a purely competitive product market; an imperfectly competitive product market.
  • List the three determinants of demand for a resource and explain how a change in each of the determinants would affect the demand for the resource.
  • Explain what demand factors have influenced the growth and decline of the occupations listed in Tables 12.5 and 12.6.
  • List three determinants of the price elasticity of demand for a resource, and state how changes in each would affect the elasticity of demand for a resource.
  • Explain the marginal productivity theory of income distribution and present two criticisms of it.
  • Define and identify terms and concepts listed at the end of the chapter

Chapter 13 Reading Assignments:

Chapter 13 Video Lectures

CHAPTER 13 FOR PRACTICE

Must Know / Outcomes:
  • List those factors that have led to an increasing level of real wages in the U.S. historically.
  • Determine the equilibrium wage rate and employment level when given appropriate data for a firm operating in a:
    • purely competitive product and labor market;
    • a firm operating in a monopolistically competitive product market and a purely competitive labor market;
    • and a firm operating in a purely competitive product market and a monopsonistic labor market.
  • Illustrate graphically how wage rates are determined in purely competitive and monopsonistic labor markets.
  • List the methods used by labor organizations (labor unions) to increase wages and the impact each has on employment. Give specific examples.
  • Illustrate graphically how an inclusive (industrial) union and an exclusive (craft) union would affect wages and employment in a previously competitive labor market.
  • Explain and illustrate graphically wage determination in the bilateral monopoly model.
  • Present the major points in the cases for and against the minimum wage.
  • Explain the demand factors that create wage differentials.
  • Explain the supply factors that create wage differentials.
  • Describe briefly salary systems in which pay is linked to performance rather than to time.
  • Define and identify terms and concepts listed at the end of the chapter.

Chapter 20 Reading Assignments:

Chapter 20 Video Lectures

CHAPTER 20 FOR PRACTICE

Must Know / Outcomes:
  • Chapter 20:
    • pp. 410-419
    • pp.426-427 "Occupational Segregation: The Crowding Model"
  • 13.1-1 Income Distribution in the U.S. and the Poverty Level

Incomes and Inequality

  • Describe the distribution of income in the United States by personal income categories by households and quintile distribution by households.
  • Explain how a Lorenz curve is used to describe income inequality.
  • Explain how a Gini ratio measures income inequality and is related to the Lorenz curve.
  • Discuss the impact of income mobility on income distribution data.
  • Explain the broadened concept of income, which includes the effects of taxes and transfer payments, and how this affects the extent of inequality of income and poverty in the U.S.
  • List seven causes of an unequal income distribution.
  • Describe changes and causes for the changes in inequality since 1970.
  • State and evaluate the cases for and against income inequality, using the equality vs. efficiency argument ["The Case for Equality: Maximizing Total Utility = The President Obama Example (fig. 20.3)]
  • Occupational Discrimination - The Crowding Model - The Model (figure 20.7)

Chapter 22 Reading Assignments:

Chapter 22 Video Lectures

CHAPTER 22 FOR PRACTICE

Must Know / Outcomes:

OPTIONAL:

Immigration

  • Understand the historical pattern of legal and illegal immigration the United States.
  • Understand what motivates an individual to migrate.
  • List the factors influencing the decision to migrate.
  • Understand the potential impact immigration can have on wage rates, efficiency, and output. "Impact on Wage Rates, Efficiency, and Output" (Figure 22.3).
  • Understand how immigration can affect income shares.
  • Identify potential complications with the traditional model of immigration: Remittances, Full-Employment or Unemployment, and Complements and Substitutes.
  • Understand the effect immigration to the United States has on Federal, State, and Local governments' fiscal position.
  • Understand the illegal immigration debate in the context of job "crowding-out. ["Impact of Illegal Workers in a Low Wage Labor Market"]
  • Explain the potential price effects that illegal immigration can have on an economy.
  • Understand the concept of 'optimal' immigration.