Application Assignment   This assignment will require you to do a bit of reading and research, so it may take you longer...

Application Assignment

This assignment will require you to do a bit of reading and research, so it may take you longer than the typical homework to complete. Trust me, you don’t want to start it the night before it is due! For this assignment, you will be using the Naked Economics text to understand applications of the concepts we have been learning in class and come up with some real world examples of your own. Our goal is to think critically in order to connect what might seem like abstract microeconomics to your everyday life. By the end of it, no one will feel like asking me, ‘When am I ever going to use this stuff?!’ (Right?) There are three parts to the assignment – (1) Concept, where you will summarize the relevant material, (2) Text, where you will draw on examples from the Naked Economics text, and (3) Application, where you will come up with some relevant examples of your own. There are 3 opportunities to complete this assignment (see due dates above), you only need to turn in 1 for full credit. Part 1 – Concept First, choose one of the concepts from class that interests you from the list below. The topic you choose is completely up to you. Provide a brief summary of the relevant models surrounding your topic. This does not need to be more than half a page/a few paragraphs, plus relevant graphs if applicable. Think quality, not quantity. Part 2 – Text Next, read the related portion of the Naked Economics text and discuss some examples provided by the author to illustrate the relevance of your topic. If there are many, you only need to provide one or two. Again, think quality over quantity here. Another half a page/a paragraph or two is more than enough. Side note: the book is a very interesting read, I highly recommend you read it in its entirety especially if you decide economics is an interesting topic to you (it is!). Part 3 – Application This is the most important part of the assignment. Here you will come up with two examples of your topic that you have encountered in your life. For example, if your topic is externalities, you might mention (as I would) that your neighbor provides a positive externality to you with the addition of a beautiful sounding fountain in their backyard. Make sure you explain the relevance of your example to the topic. In other words, the fountain provides excess benefits that my neighbor does not incorporate in his analysis of whether to install it or not. The excess benefits are the positive externality in the form of beautiful running water sounds that mask the sound of the freeway. If he thought about the externality provided, he would install one in my yard as well!

Topics and Reading Presenting March 8th (15 points) - Absolute/Comparative Advantage and Trade o Intro and Ch. 12 – Why does the author claim that the idea that international trade makes us collectively worse off is wrong? - Demand, Supply, and Market Prices o Intro and Ch. 1 – Why is allocating resources without a market/price system, like with a centrally planned economy, “overwhelmingly difficult” in the long run? How does the pursuit of maximum utility and/or profits lead to efficient market outcomes? What is the role of market prices as signals? - Efficiency and Deadweight Loss o Intro, Ch. 2 pgs. 46-53, Ch. 4 pgs. 87-103 - What is deadweight loss, and how does it interfere with the efficiency of our market economy? Presenting April 19th (10 points) - Monopolistic Competition o Intro, Ch. 1 pgs. 6-18, Ch. 5 pgs 117-121 – What defines a competitive market? What do consumers and producers maximize in this market? - Monopoly and Antitrust Policy o Intro and Ch. 4 – What defines a monopoly market? In what way is the government a monopoly? What effects do monopolies have on the economy and innovation? - Price Discrimination o Intro and Ch. 1 – What is the role of prices in markets? What are the benefits of price discrimination and how does it work? Presenting May 24th (10 points) - Externalities o Intro, Ch. 3 – What is an externality? Why is it a problem and how can we solve it? - Environmental Economics and Policy o Intro, Ch. 1 pgs. 6-12, Ch. 2 pgs. 34-39, Ch. 12 pgs. 289-293 – Why do markets struggle with environmental issues, and how is this related to the environment as a luxury good? How can we solve these issues? - Public Goods o Intro, Ch. 3 pgs. 69-79, Ch. 4 pgs. 80-84 – What defines a public good? Can markets provide them? - Asymmetric Information, Adverse Selection, and Lemons o Intro and Ch. 5 – What are the consequences of asymmetric information in markets? Can we fix this issue? - Behavioral Economics o Intro and Ch. 1 – What is behavioral economics? How do some of its issues affect our economic models? - Role of Government – Price Controls and Taxes o Intro, Ch. 3 pgs 58-62, 67-79, Ch. 4 pgs. 94-103 - What is the significance of government’s role in solving market failures, enforcing patents, providing market infrastructures, wealth redistribution, and economic productivity?