Utilitus Maximus (mascot)

Economics 278
Dickinson College
Bill Bellinger
Fall 1999

PREREQUISITES: Introductory Microeconomics and basic calculus (161 or 152 or the equivalent). Warning: calculus is used very often in this course, and at reasonably high levels of sophistication. The second prerequisite should be taken very seriously. Review the packet reading on mathematics for a guide to what we will be doing quantitatively.

TEXTS:

Frank, Microeconomics and Behavior, 3rd Ed., (NY: McGraw-Hill, 1997). This is an unusually well-written text by an author who is particularly well known for his books based on behavioral economic thought. It tends to emphasize graphical and conceptual approaches, but includes useful references to calculus based analysis, sometimes in the footnotes or in appendices.

Readings Packet: this packet includes brief readings from other microeconomics texts and additional sources. Its purpose is to provide examples of analysis from various economic topics, and to provide additional text material in areas where Frank is not strong. This packet may be augmented with handouts from time to time in order to consider current events or other topics of interest.
 

GOALS OF THE COURSE:

Intermediate microeconomics will expand your knowledge of microeconomic theory and its use in applied analysis considerably beyond that attained in your introductory course. While introductory micro generally identifies basic economic concepts and applies them to various topics through verbal and graphical analysis (with occasional algebra), this course will often involve drawing the connection between graphical analysis and the numerical analysis of algebra and calculus. This additional sophistication is useful in understanding more fully the underlying mathematical meaning of the graphical models, and allows us to bring real world issues into our analysis in a more sophisticated way. I also hope to use various applied examples to introduce you to the various fields of applied economics, such as public finance, environmental economics, international trade, labor economics, industrial economics, etc.
 

EVALUATION CRITERIA:

This course will be evaluated primarily on the basis of examinations and regular homework assignments. There will be three hourly examinations given on October 1, October 29, November 17, plus a final examination during the scheduled final exam period. The hourly exams will be worth a maximum of 100 points while the final will be worth 100 to 135 points. Homework is a very large component of the course. There will be between 15 and 20 homework assignments during the semester, which generally will be individually graded. We may also experiment with in-class and out of class brain teasers which may be done in pairs. Homework cannot be assigned a precise total point value at this time but, cumulatively, homework will be worth at least 100 points and probably more.
 

PROVISIONAL COURSE OUTLINE AND READING ASSIGNMENTS:
 

I. INTRODUCTION AND REVIEW
 

9/1 Course Introduction
 

9/3 Markets: A review
Read: Frank, Ch. 2.
 

9/6 Math Review
Read: Bellinger, "A Primer on the Use of Calculus in Economics"
 

II. THEORY OF THE CONSUMER
 

9/8 Math Review II; Budget Constraints
Read: Frank, pp. 63-72.

9/10 Preferences and Utility
Read: Frank, pp. 73-78, 653-656.

9/13 Maximizing Utility
Read: Frank, p. 79-92, 656-661.

9/15 Comparative Statics (changing prices, incomes, tastes)
Read: Frank, pp. 99-113.

9/17 Some policy examples:
Read: everything old, but nothing new.

9/20 The Consumer Price Index Controversy
Read: Frank, pp. 151-154, Michael J. Boskin; "Prisoners of Faulty Statistics", Wall St. Journal, 12/5/96; Paul Krugman, "New Math, Same Story" New York Times Magazine, 1/5/97; David Rosenbaum, "Analysis: Fixing Scales for Measuring Inflation Won't Be Easy", New York Times, 12/4/96.

9/22 Advanced Analysis of CPI bias.
Read: Frank, pp. 669-675,
 

9/24 Market Demand and Elasticity I
Read: Frank, pp. 113-120.

9/27 More on elasticity
Read: Frank, pp. 120-134, pp. 663-666 (top).

9/29 Catch-up and review

10/1 Hour Exam I

10/4 Risk, Uncertainty, and Rational Choice
Read: Frank, read 178-187, 191-201.

10/6 More on risk and Insurance
Read: Frank, pp. 201-209.

III. THEORY OF THE FIRM

10/8 Production Concepts in the Short Run
Read: Frank, pp. 273-287, 338-343; 689-692.

10/11 Production in the Long Run
Read: Frank, pp. 287-296; 693-697.

10/13 Short Run Costs
Read: Frank, pp. 300-316.

Fall Pause

10/18 Long Run Costs and Cost Minimization
Read: Frank, pp. 316-328, 700-704.

10/20 Cost Minimization II
Read Frank, pp. 328-332; 704-705.

10/22 Profit Maximization
Read: Frank, pp. 337-341; Nicholson, Microeconomic Theory, 3^rd ed., pp. 325-334.

10/25 Supply in Competitive Markets
Read: Frank, pp. 343-348, pp. 363-367.

10/27 Catch up and review

10/29 Exam II

11/1 Profit Maximization for monopolists. Read: Frank, pp. 380-402.

11/3 Introduction to Game Theory
Read: Mansfield, Microeconomics, pp. 376-384; Stokey and Zeckhauser, A Primer for Policy Analysis, pp. 201-211.

11/5 Natural Monopoly, Potential Competition, and Predatory Pricing: Theory and cases:
Read: Andrew Schotter, pp. 325-335, 338-340; Lawrence Zuckerman, "How the Antitrust Wars Wax and Wane", New York Times, 4/11/98.

11/8 Cases: To be Assigned

11/10 Capital I: The Price of Capital and tax subsidies.
Read: Nicholson, Intermediate Microeconomics, p. 585-591.

11/12 Capital II: Present Value and Investment
Read: Bellinger, "Benefits over Time and Present Value"

11/15 applications of present value .

11/17 HOUR EXAM III

V. WELFARE ECONOMICS AND POLICY APPLICATIONS

11/19 Gains from Trade in a Single Market (Consumer and Producer Surplus)
Read: Frank, pp. 145-148, 351-355; Zerbe and Dively, Benefit-Cost Analysis, pp. 121-127.
 

11/22 Some Applications of Surplus Measures
Read: Zerbe and Dively, pp. 127-135 (top)

Thanksgiving Break

11/29 General Equilibrium I: Exchange
Read: Frank, pp. 555-565.

12/1 General Equilibrium II: Production and Trade
Read: Salvatore, International Economics, 5^th ed., pp. 54-68.

12/3 General Equilibrium III: More on Efficiency
Read: Frank, pp. 573-578.

12/6 Externalities
Read: Frank, pp. 582-591, 595-598.

12/8 Economics and Distributive Justice
Read: R. Frank, Choosing the Right Pond, pp. 100-103; J. Stiglitz, Economics of the Public Sector, pp. 62-72.

12/10 Conclusion and Final Case

12/15 (2 P.M.) Final Exam.