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© 2011 Strayer University, All Rights Reserved. This document contains Strayer University Confidential and Proprietary information and may not be copied, further distributed, or otherwise disclosed in whole or in part, without the expressed written permission of Strayer University. ECO301 Student Version 201104 [1094/1002 –02/22/11] Page 1 of 25

Intermediate Microeconomics – ECO 301

Student Course Guide Prerequisite: ECO101

INSTRUCTIONAL MATERIAL – Required Nicholson, W., & Snyder, C. (2010). Intermediate microeconomics and its application (11th ed.).

Mason, OH: South-Western, Cengage Learning. INSTRUCTIONAL MATERIAL – Supporting The following resources provide additional background and supporting information for this course. There is no need to purchase these items for the course. • Equilibrium, an undergraduate journal of economics produced by undergraduate and

graduate students at the University of Wisconsin, Madison found at http://www.esa.rso.wisc.edu/ESAJournal.shtml

• Nobel Prize in Economic Sciences found at http://nobelprize.org/nobel_prizes/economics/

• The American Economic Association found at http://www.aeaweb.org COURSE DESCRIPTION

Examines economic theory of consumer behavior, production and costs, the firm, price, distribution, general equilibrium, and welfare. Deals with more advanced microeconomic theories and concepts. COURSE OUTCOMES Upon the successful completion of this course, the student will be able to:

1. Explain the concept of and fundamental microeconomic principles associated with the production possibility frontier, the basic supply-demand model, and utility.

2. Interpret shifts in the market demand curve and apply the concepts of the price elasticity of demand to anticipate changes in demand as prices change.

3. Explain the concept and application of game theory and the Nash equilibrium to address complex economic issues.

4. Interpret the factors affecting costs and production in a firm and explain how firms can use this information to make supply decisions.

5. Explain how market equilibrium is established in a market with perfect competition and the impact of demand and supply changes in the short-run and long-run.

6. Explain the concepts of economic efficiency and equity and apply the Edgeworth Box diagram.

7. Describe the characteristics and operating concepts of monopolies and firms operating in markets with imperfect competition.

8. Explain the concepts of how input prices are determined and describe the factors affecting the demand for capital and labor.

9. Describe and recommend actions to deal with the economic issues created by asymmetric information and the provision of public goods.

10. Explain one of the major areas of active research in economics – behavioral economics. 11. Use technology and information resources to research issues in microeconomics.

COURSE EXPECTATIONS To obtain the most benefit from this class:

• Follow Strayer University’s policies and procedures as well as those specific to this class.

o Class specific information can be found within the “Class Information” section within the Student Center.

WEEKLY COURSE SCHEDULE The weekly schedule describes the learning activities that will help you achieve the course outcomes and the assignments that will be used to measure your mastery of the outcomes. Each week is divided into sections consisting of readings, lectures, discussions, and assignments. For selected assignments, a grading rubric is included in this Course Guide and will be used to evaluate your performance.

Week Assignments Date 1 Homework 2 Homework; Quiz 3 Homework; Quiz 4 Homework; Quiz; Assignment 1: “The Battle of the Sexes” 5 Homework; Quiz 6 Homework; Quiz 7 Homework; Quiz 8 Homework; Quiz; Assignment 3: “Imperfect Competition: Tacit

Collusion”

9 Homework; Quiz 10 Homework; Quiz 11 Quiz

WEEK 1 Course outcome in focus:

• Explain the concept of and fundamental microeconomic principles associated with the production possibility frontier, the basic supply-demand model, and utility.

Activities: Readings:

• Read Chapter 1: “Economic Models.” • Read Chapter 2: “Utility and Choice.”

Supporting Topics: Lecture 1 Topics: • The production possibility frontier • Opportunity costs • The basic supply-demand model • Market equilibrium • How economists verify theoretical models

Lecture 2 Topics: • Utility • Basic properties of preferences • Indifference curves • Marginal rate of substitution • Utility maximization model • Model of choice • Generalizations

Lectures/Discussions:

• Faculty introduction, course overview, and expectations • Review course philosophy, expectations, assignments, late policy, grading, academic

integrity, APA use if appropriate, and attendance policy.

• Student introductions

• Lecture on the production possibility frontier, opportunity costs, the basic supply-demand model, market equilibrium, and how economists verify theoretical models.

o Discussion 1: “Supply and Demand.” Students will respond to the following:

o Explain the law of demand and describe how it relates to one of your recent purchases.

o Provide a detailed example of where you have experienced either a surplus or shortage of a product or service you purchase regularly. Given this surplus or shortage, explain how this will affect the price of the product or service.

• Lecture on utility, basic properties of preferences, indifference curves, marginal rate of

substitution, utility maximization model, model of choice, and generalizations.

o Discussion 2: “Utility.” Students will respond to the following:

o Provide an example of a time when you were consuming a good. Were you

attempting to maximize your marginal or total utility? Support your rationale.

o Explain whether or not a consumer who clips coupons and sticks to a tight budget is maximizing her economic utility. Provide at least two (2) reasons for your answer.

• Homework Problems: o Chapter 1: 1.2(a-i), 1.3(a-c), 1.5(a-c), 1.8(a-d) 1.10(a-f) o Chapter 2: 2.1(a-e), 2.2(a-f), 2.5(a-e), 2.7(a-d), 2.10(a-e)

Note: Homework problems are worth 2 points for each part of the problem. WEEK 2 Course outcomes in focus: • Interpret shifts in the market demand curve and apply the concepts of the price elasticity of

demand to anticipate changes in demand as prices change. Activities: Readings:

• Read Chapter 3: “Demand Curves.” • Read Chapter 4: “Uncertainty and Strategy.”

Supporting Topics: Lecture 1 Topics: • Individual demand function • Changes in income • The income and substitution effects • Individual demand curves • Market demand curves • Elasticity and price elasticity of demand • Demand curves and price elasticity • Income elasticity of demand • Cross-price elasticity of demand

Lecture 2 Topics: • Probability and expected value • Risk avoidance • Methods for reducing risk and uncertainty • Pricing of risk in financial assets • The role of information in economic

decisions

Lectures/Discussions:

• Lecture on individual demand function, changes in income, the income and substitution effects, individual demand curves, market demand curves, elasticity and price elasticity of demand, demand curves and price elasticity, income elasticity of demand, and cross- price elasticity of demand.

• Discussion 1: “Elasticity.” Students will respond to the following:

o Provide an example of a product you have recently purchased in which the price

changed. Determine whether the good was an elastic or inelastic good and explain

how you know.

o If you were to be a retailer, would you want to sell elastic or inelastic goods? State your reasons in your answer.

• Lecture on probability and expected value, risk avoidance, methods for reducing risk and

uncertainty, pricing of risk in financial assets, and the role of information in economic decisions.

• Discussion 2: “Reducing Risk and Uncertainty.” Students will respond to the following:

o Retailers such as Neiman Marcus and REI have generous return policies. Other retailers provide price-match guarantees so if the consumer finds a lower price at another retailer, the lower price will be matched.

§ Explain why some consumers are attracted to these retailers and why some consumers are not.

§ Speculate what might happen to supply and demand if a significant number of retailers decided to implement the price-match guarantee.

o Determine how much, if any, the Internet has managed consumer uncertainty and risk.

• Homework Problems: o Chapter 3: 3.2(a-e), 3.4(a-f), 3.6(a-d), 3.8(a-d), 3.10(a-f) o Chapter 4: 4.1(a-c), 4.4(a-d), 4.7(a-c), 4.9(a-d), 4.10(a-b)

Note: Homework problems are worth 2 points for each part of the problem.

• Week 2 Quiz Students are to take the Week 2 quiz that covers the material in Chapters 1 and 2. The quiz is located in the course shell under the Week 2 tab. This is an open-book, timed quiz that can only be taken once with a time limit of two (2) hours. The quiz consists of 20 multiple-choice questions with each question worth 5 point for a total of 100 points for the quiz. Online students are to complete the quiz by Sunday Midnight of Week 2. On-ground students are to complete this quiz before the Week 2 class meeting.

WEEK 3 Course outcomes in focus: • Explain the concept and application of game theory and the Nash equilibrium to address

complex economic issues. • Interpret the factors affecting costs and production in a firm and explain how firms can use

this information to make supply decisions.

Activities: Readings:

• Read Chapter 5: “Game Theory.” • Read Chapter 6: “Production.”

e-Activity:

• Play the “Prisoner’s Dilemma Applet” to learn more about this economic phenomenon found at http://www.gametheory.net/Mike/applets/PDilemma/

Supporting Topics: Lecture 1 Topics: • Basic concepts of game theory • Equilibrium • Illustrating basic concepts of game theory • Multiple equilibria • Sequential games • Continuous actions • N-player games • Games of incomplete information

Lecture 2 Topics: • Production functions • Marginal product • Isoquant maps • Marginal rate of technical substitution • Returns to scale • Input substitution • Technology changes

Lectures/Discussions:

• Lecture on basic concepts of game theory, equilibrium, illustrating basic concepts of game theory, multiple equilibria, sequential games, continuous actions, n-player games, and games of incomplete information.

• Discussion 1: “Game Theory.” Students will respond to the following:

o Give two (2) examples not provided in the textbook of how the Prisoner’s Dilemma is linked to game theory.

o Discuss why each player was concerned about the other player in your examples.

• Lecture on production functions, marginal product, isoquant maps, marginal rate of technical substitution, returns to scale, input substitution, and technology changes.

• Discussion 2: “The Production Function.” Students will respond to the following:

o Describe how capital and labor affect the production function for both a toy manufacturer and a retailer during the Christmas retail season.

o An owner of a local movie theater is having difficulty maximizing labor. Sometimes there are too many employees on duty and sometimes there are not enough employees working. Discuss how you would advise the owner using the production function.

• Homework Problems:

o Chapter 5: 5.1(a-b), 5.2(a-c), 5.3(a-c), 5.5(a-c), 5.10(a-c) o Chapter 6: 6.2(a-e), 6.4(a-e), 6.6(a-d), 6.7(a-e), 6.9 (a-d)

Note: Homework problems are worth 2 points for each part of the problem

• Week 3 Quiz Students are to take the Week 3 quiz that covers the material in Chapters 3 and 4. The quiz is located in the course shell under the Week 3 tab. This is an open-book, timed quiz that can only be taken once with a time limit of two (2) hours. The quiz consists of 20 multiple-choice questions with each question worth 5 points for a total of 100 points for the quiz. Online students are to complete the quiz by Sunday Midnight of Week 3. On-ground students are to complete this quiz before the Week 3 class meeting.

WEEK 4 Course outcome in focus: • Interpret the factors affecting costs and production in a firm and explain how firms can use this

information to make supply decisions. Activities: Readings:

• Read Chapter 7: “Costs.” Supporting Topics: Lecture Topics: • Basic concepts of costs • Economic profits • Cost-minimization principle • Average and marginal cost curves • Distinction between the patterns of costs in the short-run and the long-run • Per-unit short-run cost curves

Lectures/Discussions:

• Lecture on basic concepts of costs, economic profits, cost-minimization principle, average and marginal cost curves, distinction between the patterns of costs in the short- run and the long-run, and per-unit short-run cost curves.

• Discussion 1: “The Cost of Going Green.” Students will respond to the following:

o Describe the opportunity and accounting costs of “Going Green.” Use a specific example to illustrate your point. For example, purchasing a Chevy Volt.

o Imagine you are a restaurant owner and you want to make your restaurant

operation and building more eco-friendly. Discuss what changes you can make in the short-run and long-run to improve your restaurant. Make sure to use the correct terminology in your answer.

• Discussion 2: “Fixed and Variable Costs.” Students will respond to the following:

o Pick an industry and identify at least five (5) fixed costs and five (5) variable

costs. If the business or economy slows down, discuss how the industry can control its costs based on the ten (10) costs you identified.

• Homework Problems:

o Chapter 7: 7.2(a-e), 7.4(a-c), 7.5(a-d), 7.7(a-d), 7.10(a-d) Note: Homework problems are worth 2 points for each part of the problem

• Week 4 Quiz

Students are to take the Week 4 quiz that covers the material in Chapters 5 and 6. The quiz is located in the course shell under the Week 4 tab. This is an open-book, timed quiz that can only be taken once with a time limit of two (2) hours. The quiz consists of 20 multiple-choice questions with each question worth 5 points for a total of 100 points for the quiz. Online students are to complete the quiz by Sunday Midnight of Week 4. On-ground students are to complete this quiz before the Week 4 class meeting.

Assignment 1: The Battle of the Sexes

Consider the Battle of the Sexes game. In this scenario, the husband and wife want to go to the movies together. The wife wants to see a romance film and the husband wants to see an action movie. Solve for the Nash equilibria to determine the outcome of the game using different strategies.

Write a three to five (3-5) page paper that includes the following:

1. Analyze the pure-strategy Nash equilibria, including any issues that arise from the solution, and illustrate graphically.

2. Compute the mixed-strategy Nash equilbria, including any issues that arise from the solution, and illustrate graphically.

3. Examine the solution if the game was played sequentially, including any issues that arise from the solution, and illustrate graphically.

4. Determine the best solution and justify your selection.

The format of the paper is to be as follows:

o Typed, double-spaced, Times New Roman font (size 12), one-inch margins on all sides, APA format.

o Use headers for each of the subjects being covered, followed by your response. o In addition to the three to five (3-5) pages required, a title page and reference

page is to be included. The title page is to contain the title of the assignment, your name, the instructor’s name, the course title, and the date.

Note: You will be graded on the quality of your answers, the logic/organization of the report, your language skills, and your writing skills.

The assignment will be graded using the following rubric:

Outcomes Assessed • Explain the concept and application of game theory and the Nash equilibrium to

address complex economic issues. • Use technology and information resources to research issues in microeconomics.

Grading Rubric for Assignment 1 – The Battle of the Sexes

Criteria 0

Unacceptable 20

Developing 30

Competent 40

Exemplary 1. Analyze the

pure-strategy Nash equilibria, including any issues that arise from the solution, and illustrate graphically.

Did not complete the assignment or did not analyze the pure-strategy Nash equilibria and/or illustrate graphically; omitted information and/or included irrelevant information. Completed with less than 60% accuracy, thoroughness, and logic.

Partially analyzed the pure-strategy Nash equilibria and illustrated graphically; omitted some key information. Completed with 60- 79% accuracy, thoroughness, and logic.

Sufficiently analyzed the pure- strategy Nash equilibria and illustrated graphically. Completed with 80- 89% accuracy, thoroughness, and logic.

Fully analyzed the pure-strategy Nash equilibria and illustrated graphically. Completed with 90- 100% accuracy, thoroughness, and logic.

2. Compute the mixed-strategy Nash equilbria, including any issues that arise from the solution, and illustrate graphically.

Did not complete the assignment or did not compute the mixed-strategy Nash equilbria and/or illustrate graphically; omitted information and/or included irrelevant information. Completed with less than 60% accuracy, thoroughness, and logic.

Partially computed the mixed-strategy Nash equilbria and illustrated graphically; omitted some key information. Completed with 60- 79% accuracy, thoroughness, and logic.

Sufficiently computed the mixed-strategy Nash equilbria and illustrated graphically. Completed with 80- 89% accuracy, thoroughness, and logic.

Fully computed the mixed-strategy Nash equilbria and illustrated graphically. Completed with 90- 100% accuracy, thoroughness, and logic.

3. Examine the Did not complete Partially examined Sufficiently Fully examined the

solution if the game was played sequentially, including any issues that arise from the solution, and illustrate graphically.

the assignment or did not examine the solution if the game was played sequentially and/or illustrate graphically; omitted information and/or included irrelevant information. Completed with less than 60% accuracy, thoroughness, and logic.

the solution if the game was played sequentially and illustrated graphically; omitted some key information. Completed with 60- 79% accuracy, thoroughness, and logic.

examined the solution if the game was played sequentially and illustrated graphically. Completed with 80- 89% accuracy, thoroughness, and logic.

solution if the game was played sequentially and illustrated graphically. Completed with 90- 100% accuracy, thoroughness, and logic.

4. Determine the best solution and justify your selection.

Did not complete the assignment or did not determine the best solution and/or justify your selection; omitted information and/or included irrelevant information. Completed with less than 60% accuracy, thoroughness, and logic.

Partially determined the best solution and justified your selection; omitted some key information. Completed with 60- 79% accuracy, thoroughness, and logic.

Sufficiently determined the best solution and justified your selection. Completed with 80- 89% accuracy, thoroughness, and logic.

Fully determined the best solution and justified your selection. Completed with 90- 100% accuracy, thoroughness, and logic.

5. Clarity

Did not complete the assignment or explanations are unclear and not organized. (Major issues)

Explanations generally unclear and not well organized. (Many issues)

Explanations generally clear and/or organized. (Minor issues)

Explanations very clear and well organized. (Added helpful details)

6. Writing – Grammar, sentence structure, paragraph structure, spelling, punctuation, APA usage.

Did not complete the assignment or had 8 or more different errors in grammar, sentence structure, paragraph structure, spelling, punctuation, or APA usage. (Major issues)

Had 6–7 different errors in grammar, sentence structure, paragraph structure, spelling, punctuation, or APA usage. (Many issues)

Had 4–5 different errors in grammar, sentence structure, paragraph structure, spelling, punctuation, or APA usage. (Minor issues)

Had 0–3 different errors in grammar, sentence structure, paragraph structure, spelling, punctuation, or APA usage.

WEEK 5 Course outcome in focus: • Interpret the factors affecting costs and production in a firm and explain how firms can use this

information to make supply decisions. Activities: Readings:

• Read Chapter 8: “Profit Maximization and Supply.” e-Activity:

• Explore what happens to short-run profit maximization with this graphing exercise at http://www.mhhe.com/economics/interactive_graphs/mcconnell_brue/9_1/profit_auth.html

Supporting Topics: Lecture Topics: • The goal of profit maximization for firms • Marginal revenue/marginal cost rule • Marginal revenue for a downward-sloping demand curve • Marginal revenue and price elasticity • Supply decisions of a price-taking firm • How price-taking firms use short-run cost curves to maximize profits and determine when

to shut down production Lectures/Discussions:

• Lecture on the goal of profit maximization for firms, marginal revenue/marginal cost rule, marginal revenue for a downward-sloping demand curve, marginal revenue and price elasticity, supply decisions of a price-taking firm, and how price-taking firms use short- run cost curves to maximize profits and determine when to shut down production.

• Discussion 1: “Profit Maximization.” Students will respond to the following:

o Many businesses are solely focused on maximizing profits. Discuss the ethical implications of this perspective.

o Pick a position to the following question: Is it better to maximize sales, volume, or profit? Support your answer with at least two (2) reasons.

• Discussion 2: “Profit Maximization Risks.” Students will respond to the following:

o Identify and then describe at least two (2) risks involved when firms attempt to

maximize profits.

o Offer at least two (2) recommendations for mitigating the risks you identified.

• Homework Problems: o Chapter 8: 8.1(a-c), 8.2(a-d), 8.5(a-e), 8.7(a-d), 8.9(a-d)

Note: Homework problems are worth 2 points for each part of the problem • Week 5 Quiz

Students are to take the Week 5 quiz that covers the material in Chapter 7. The quiz is located in the course shell under the Week 5 tab. This is an open-book, timed quiz that can

only be taken once with a time limit of one (1) hour. The quiz consists of 10 multiple- choice questions with each question worth 5 points for a total of 50 points for the quiz. Online students are to complete the quiz by Sunday Midnight of Week 5. On-ground students are to complete this quiz before the Week 5 class meeting.

WEEK 6 Course outcomes in focus:

• Explain how market equilibrium is established in a market with perfect competition and the impact of demand and supply changes in the short-run and long-run.

• Explain the concepts of economic efficiency and equity and apply the Edgeworth Box diagram.

Activities: Readings:

• Read Chapter 9: “Perfect Competition in a Single Market.” • Read Chapter 10: “General Equilibrium and Welfare.”

e-Activity:

• Read more about monopolies, oligopolies, and perfect competition in lay terms at http://investopedia.com/university/economics/economics6.asp

• Explore the gains of exchange with the Edgeworth Box applet found at http://www.sscnet.ucla.edu/ssc/labs/cameron/e1f98/imapedge.html

Supporting Topics: Lecture 1 Topics: • Supply response in the very short run,

short run, and long run • Shifts in demand and supply curves • Patterns and factors affecting market

supply in the long-run • Consumer and producer surplus • Application of the supply-demand

analysis

Lecture 2 Topics: • General equilibrium model of a system of

markets • First theorem of welfare economics • Efficiency of a perfectly competitive price

system • Conditions that interfere with markets

operating efficiently • Economic equity • Edgeworth Box diagram • The role of money in an economy

Lectures/Discussions:

• Lecture on supply response in the very short run, short run, and long run; shifts in demand and supply curves; patterns and factors affecting market supply in the long-run; consumer and producer surplus; and application of the supply-demand analysis.

• Discussion 1: “Consumer and Producer Surplus.” Students will respond to the following:

o Provide an example of a product or service in which you would pay above the

market price. Discuss how it relates to consumer surplus.

o Discuss some clues that a consumer could identify to know whether a producer has a surplus.

• Lecture on general equilibrium model of a system of markets, first theorem of welfare economics, efficiency of a perfectly competitive price system, conditions that interfere with markets operating efficiently, economic equity, Edgeworth Box diagram, and the role of money in an economy.

• Discussion 2: “Equilibrium.” Students will respond to the following:

o Examine the first theorem of welfare economics and its importance. If this theorem did not hold true, how would this impact the study of economics?

o Analyze how taxes can make markets fail to achieve economic efficiency and illustrate with your own examples. Discuss why the government must force market equilibrium.

• Homework Problems:

o Chapter 9: 9.1(a-g), 9.3(a-d), 9.5(a-d), 9.7(a-e), 9.10(a-d) o Chapter 10: 10.1(a-c), 10.2(a-h), 10.6(a-d), 10.7(a-d), 10.10(a-f)

Note: Homework problems are worth 2 points for each part of the problem

• Week 6 Quiz Students are to take the Week 6 quiz that covers the material in Chapters 8. The quiz is located in the course shell under the Week 6 tab. This is an open-book, timed quiz that can only be taken once with a time limit of one (2) hour. The quiz consists of 10 multiple-choice questions with each question worth 5 points for a total of 50 points for the quiz. Online students are to complete the quiz by Sunday Midnight of Week 6. On-ground students are to complete this quiz before the Week 6 class meeting.

WEEK 7 Course outcome in focus:

• Describe the characteristics and operating concepts of monopolies and firms operating in markets with imperfect competition.

Activities: Readings:

• Read Chapter 11: “Monopoly.”

• Read Chapter 12: “Imperfect Competition.” Supporting Topics: Lecture 1 Topics: • Causes of a monopoly • Profit maximization for a monopoly • Adverse economic impacts of monopolies • Price discrimination • Natural monopolies to operate

Lecture 2 Topics: • Imperfect competition • Pricing of homogeneous goods • Pricing of a homogeneous product in an

oligopoly using the perfect cartel • The Cournot model • The Bertrand model • Product differentiation • Tacit collusion • Market entry and exit • Other models of imperfect competition • Barriers to entry

Lectures/Discussions:

• Lecture on causes of a monopoly, profit maximization for a monopoly, adverse economic impacts of monopolies, price discrimination, and natural monopolies to operate.

• Discussion 1: “Monopoly.” Students will respond to the following:

o Compare and contrast your local utility company with a local farmer (corn, soy

bean, cotton, etc.). Why does your utility company always operate with price is greater than marginal cost whereby the farmer attempts to produce where price equals marginal cost?

o Discuss the implications on the dead weight loss on these two (2) markets.

• Lecture on imperfect competition, pricing of homogeneous goods, pricing of a homogeneous product in an oligopoly using the perfect cartel, the Cournot model, the Bertrand model, product differentiation, tacit collusion, market entry and exit, other models of imperfect competition, and barriers to entry.

• Discussion 2: “Oligopoly Models.” Students will respond to the following:

o Compare and contrast the following models: Cournot model and Bertrand model. Explain which model you feel is best for producers to operate under.

o Discuss what the airlines which operate in an oligopoly would have to do to justify a higher ticket price. Use price leadership, barriers to entry and exit, strategic interdependence, and the characteristics of the firm in your answer.

• Homework Problems:

o Chapter 11: 11.2(a-d), 11.4(a-c), 11.7(a-c), 11.9(a-c), 11.10(a-c)

o Chapter 12: 12.1(a-b), 12.2(a-d), 12.4(a-c), 12.6(a-c), 12.8(a-c), 12.10(a-c) Note: Homework problems are worth 2 points for each part of the problem

• Week 7 Quiz

Students are to take the Week 7 quiz that covers the material in Chapters 9 and 10. The quiz is located in the course shell under the Week 7 tab. This is an open-book, timed quiz that can only be taken once with a time limit of two (2) hours. The quiz consists of 20 multiple-choice questions with each question worth 5 points for a total of 100 points for the quiz. Online students are to complete the quiz by Sunday Midnight of Week 7. On-ground students are to complete this quiz before the Week 7 class meeting.

WEEK 8 Course outcome in focus:

• Explain the concepts of how input prices are determined and describe the factors affecting the demand for capital and labor.

Activities: Readings:

• Read Chapter 13: “Pricing in Input Markets.” • Read Chapter 14: “Capital and Time.

e-Activity:

• Review the following Web sites to collect information to determine the cost of capital to purchase a $4,000 TV. Be prepared to discuss in class.

o Rent-A-Center (or a similar national rental chain) o Best Buy credit card o Pay Day Cash Advance loan (or a similar national loan chain)

Supporting Topics: Lecture 1 Topics: • Profit-maximizing decisions for a firm

that is a price-taker for inputs • Marginal revenue product • Substitution effect in input demand • Shifts in the input demand and supply

curves • Monopsony

Lecture 2 Topics: • Time periods • Determining the real interest rate for loans • Present value of future transactions • Present value computations for making

economic decisions

Lectures/Discussions:

• Lecture on profit-maximizing decisions for a firm that is a price-taker for inputs, marginal revenue product, substitution effect in input demand, shifts in the input demand

and supply curves, and monopsony. • Discussion 1: “Changes in Input Prices.” Students will respond to the following:

o Imagine you are a consultant hired to give advice to a fast food restaurant which

is faced with employees asking for a 25% increase in pay. In order to give good advice, you need more information. Create three to four (3-4) questions that you would ask this restaurant owner in order to give good advice and give your rationale for asking them.

• Lecture on time periods, determining the real interest rate for loans, present value of

future transactions, and present value computations for making economic decisions.

• Discussion 2: “Rental and Interest Rates.” Students will respond to the following:

o You want to purchase a $4,000 TV with the latest bells and whistles. Investigate which is the best deal to obtain the TV. Calculate the cost of capital for any three (3) of the six (6) methods below.

§ Rent-A-Centers (or a similar national rental chain) § Best Buy credit card § Pay Day Cash Advance (or any similar national cash advance chain) § Personal loan from your bank or credit union § Pay cash after saving for 24 months § A home equity loan through your bank

o Of your three (3) choices, discuss the implications of the opportunity costs, the

real return, and how inflation factors into your final choice.

• Homework Problems: o Chapter 13 – 13.1(a-b), 13.2(a-b), 13.3(a-e), 13.4(a-d), 13.6(a-c) o Chapter 14 – 14.2(a-d), 14.4(a-d), 14.6(a-d), 14.8(a-b), 14.10(a-d)

Note: Homework problems are worth 2 points for each part of the problem

• Week 8 Quiz Students are to take the Week 8 quiz that covers the material in Chapters 11 and 12. The quiz is located in the course shell under the Week 8 tab. This is an open-book, timed quiz that can only be taken once with a time limit of two hours. The quiz consists of 20 multiple-choice questions with each question worth five points for a total of 100 points for the quiz. Online students are to complete the quiz by Sunday Midnight of Week 8. On-ground students are to complete this quiz before the Week 8 class meeting.

Assignment 2: Imperfect Competition: Tacit Collusion Imagine that you are the owner of a firm. You would like your firm to enter the market in an area where there is imperfect competition and possible tacit collusion. Analyze the market environment to determine whether or not it would be a wise strategy for you to enter the market. Write a three to five (3-5) page paper that answers the following:

1. Analyze a market environment with tacit collusion, including deterrents from entry.

2. Evaluate the profitability of entering the market. 3. Examine how the time horizon affects the profitability of entering the market. 4. Determine whether or not you should enter the market and justify your answer.

The format of the paper is to be as follows: o Typed, double-spaced, Times New Roman font (size 12), one-inch margins on

all sides, APA format. o Use headers for each of the subjects being covered, followed by your response. o In addition to the three to five (3-5) pages required, a title page is to be

included. The title page is to contain the title of the assignment, your name, the instructor’s name, the course title, and the date.

Note: You will be graded on the quality of your answers, the logic/organization of the report, your language skills, and your writing skills.

The assignment will be graded using the following rubric:

Outcomes Assessed • Describe the characteristics and operating concepts of monopolies and firms operating

in markets with imperfect competition. • Use technology and information resources to research issues in microeconomics.

Grading Rubric for Assignment 2 – Imperfect Competition: Tacit Collusion

Criteria 0

Unacceptable 20

Developing 30

Competent 40

Exemplary 1. Analyze a market

environment with tacit collusion, including deterrents from entry.

Did not complete the assignment or did not analyze a market environment with tacit collusion, including deterrents from entry; omitted information and/or included irrelevant information. Completed with less than 60% accuracy, thoroughness, and

Partially analyzed a market environment with tacit collusion, including deterrents from entry; omitted some key information. Completed with 60- 79% accuracy, thoroughness, and logic.

Sufficiently analyzed a market environment with tacit collusion, including deterrents from entry. Completed with 80- 89% accuracy, thoroughness, and logic.

Fully analyzed a market environment with tacit collusion, including deterrents from entry. Completed with 90- 100% accuracy, thoroughness, and logic.

logic. 2. Evaluate the

profitability of entering the market.

Did not complete the assignment or did not evaluate the profitability of entering the market; omitted information and/or included irrelevant information. Completed with less than 60% accuracy, thoroughness, and logic.

Partially evaluated the profitability of entering the market; omitted some key information. Completed with 60- 79% accuracy, thoroughness, and logic.

Sufficiently evaluated the profitability of entering the market. Completed with 80- 89% accuracy, thoroughness, and logic.

Fully evaluated the profitability of entering the market. Completed with 90- 100% accuracy, thoroughness, and logic.

3. Examine how the time horizon affects the profitability of entering the market.

Did not complete the assignment or did not examine how the time horizon affects the profitability of entering the market; omitted information and/or included irrelevant information. Completed with less than 60% accuracy, thoroughness, and logic.

Partially examined how the time horizon affects the profitability of entering the market; omitted some key information. Completed with 60- 79% accuracy, thoroughness, and logic.

Sufficiently examined how the time horizon affects the profitability of entering the market. Completed with 80- 89% accuracy, thoroughness, and logic.

Fully examined how the time horizon affects the profitability of entering the market. Completed with 90- 100% accuracy, thoroughness, and logic.

4. Determine whether or not you should enter the market and justify your answer.

Did not complete the assignment or did not determine whether or not you should enter the market and/or justify your answer; omitted information and/or included irrelevant information. Completed with less than 60% accuracy, thoroughness, and logic.

Partially determined whether or not you should enter the market and justified your answer; omitted some key information. Completed with 60- 79% accuracy, thoroughness, and logic.

Sufficiently determined whether or not you should enter the market and justified your answer. Completed with 80- 89% accuracy, thoroughness, and logic.

Fully determined whether or not you should enter the market and justified your answer. Completed with 90- 100% accuracy, thoroughness, and logic.

5. Clarity

Did not complete the assignment or explanations are unclear and not organized. (Major issues)

Explanations generally unclear and not well organized. (Many issues)

Explanations generally clear and/or organized. (Minor issues)

Explanations very clear and well organized. (Added helpful details)

6. Writing – Grammar, sentence structure, paragraph structure, spelling,

Did not complete the assignment or had 8 or more different errors in grammar, sentence

Had 6–7 different errors in grammar, sentence structure, paragraph structure, spelling,

Had 4–5 different errors in grammar, sentence structure, paragraph structure, spelling,

Had 0–3 different errors in grammar, sentence structure, paragraph structure, spelling,

punctuation, APA usage.

structure, paragraph structure, spelling, punctuation, or APA usage. (Major issues)

punctuation, or APA usage. (Many issues)

punctuation, or APA usage. (Minor issues)

punctuation, or APA usage.

WEEK 9 Course outcome in focus:

• Describe and recommend actions to deal with the economic issues created by asymmetric information and the provision of public goods.

Activities: Readings:

• Read Chapter 15: “Asymmetric Information.” • Read Chapter 16: “Externalities and Public Goods.

e-Activity:

• Research the basics of proposed and existing Carbon Emissions taxes in order to participate in the weekly discussion.

Supporting Topics: Lecture 1 Topics: • Asymmetric information • Principal-agent model • Moral-hazard problem • Adverse-selection problem • Signaling

Lecture 2 Topics: • Externalities and allocational efficiency • Coase theorem • Using legal redress, taxation, and

regulation to address the issue of externalities

• Public goods Lectures/Discussions:

• Lecture on asymmetric information, principal-agent model, moral-hazard problem, adverse-selection problem, and signaling.

• Discussion 1: “Asymmetric Information.” Students will respond to the following:

o In your opinion, discuss when it makes sense to forego purchasing car insurance

(assuming the state did not require it). In your answer, use moral hazard and risk aversion to describe your decision.

• Lecture on externalities and allocational efficiency, Coase theorem, using legal redress, taxation, and regulation to address the issue of externalities, and public goods.

• Discussion 2: “Public Goods.” Students will respond to the following:

o Imagine the lake in your small community, which brings lots of tourist dollars to the community, becomes polluted. In order to keep tourists coming, the

government levies an equal payment from each resident in order to cover the cost of the clean-up. Discuss two (2) pros and two (2) cons to this solution. Are you in favor of the government’s action?

• Homework Problems:

o Chapter 15: 15.2(a-c), 15.5(a-e), 15.6(a-c), 15.8(a-b), 15.9(a-c) o Chapter 16: 16.2(a-c), 16.4(a-d), 16.6(a-e), 16.8(a-c), 16.9(a-d)

Note: Homework problems are worth 2 points for each part of the problem

• Week 9 Quiz Students are to take the Week 9 quiz that covers the material in Chapters 13 and 14. The quiz is located in the course shell under the Week 9 tab. This is an open-book, timed quiz that can only be taken once with a time limit of two (2) hours. The quiz consists of 20 multiple-choice questions with each question worth 5 points for a total of 100 points for the quiz. Online students are to complete the quiz by Sunday Midnight of Week 9. On-ground students are to complete this quiz before the Week 9 class meeting.

WEEK 10 Course outcome in focus:

• Explain one of the major areas of active research in economics – behavioral economics. Activities: Readings:

• Read Chapter 17: “Behavioral Economics.” e-Activity:

• Read about the background and history of Behavioral Economics in the Harvard Magazine, March-April 2006 article titled “The Marketplace of Perceptions,” found at http://harvardmagazine.com/2006/03/the-marketplace-of-perce.html

• Watch the video titled “Dan Ariely asks, “Are we in control of our decisions?” (17 min 27 s) found at http://youtube.com/watch?v=9X68dm92HVI

Supporting Topics: Lecture Topics: • The limits of neoclassical economics • The limits to human decision making • Limited cognitive power • Limited willpower • Limited self-interest • Policy implications

Lectures/Discussions: • Lecture on the limits of neoclassical economics, the limits to human decision making,

limited cognitive power, limited willpower, limited self-interest, and policy implications.

• Discussion 1: “Behavioral Economics.” Students will respond to the following:

o Describe how the limited self-interest of humans impacts their ability to

maximize their welfare. If you project into the future, what effects can be foreseen on future generations?

• Discussion 2: “Application” Students will respond to the following:

o Provide an example of a recent occurrence when you either procrastinated about

a purchase or impulsively made a purchase. Discuss what made you behave that way or describe the circumstances that caused you either to procrastinate the purchase or impulsively make the purchase.

o Using what you now know about the field of behavioral economics, describe the new insight you have on the behavior you described above.

o Describe how the U.S. IRS can apply behavioral economics to entice individuals

to pay their taxes and on time.

• Homework Problems: o Chapter 17: 17.1(a-c), 17.2(a-d), 17.6(a-b), 17.8(a-c), 17.10(a-d)

Note: Homework problems are worth 2 points for each part of the problem

• Week 10 Quiz Students are to take the Week 10 quiz that covers the material in Chapters 15 and 16. The quiz is located in the course shell under the Week 10 tab. This is an open-book, timed quiz that can only be taken once with a time limit of two (2) hours. The quiz consists of 20 multiple-choice questions with each question worth 5 points for a total of 100 points for the quiz. Online students are to complete the quiz by Sunday Midnight of Week 10. On-ground students are to complete this quiz before the Week 10 class meeting.

WEEK 11 Course outcome in focus: • No new material. Activities: Readings:

• No new material. Lectures/Discussions:

• Discussion 1: “Course Wrap-Up.” Students will respond to the following:

o Imagine you are at a party. Explain how you would describe this course to the party-goers.

o Explain who you would recommend this class to and state why.

• Discussion 2: “Course Wrap-Up.” Students will respond to the following:

o Discuss how the concepts of this course can be applied to your current or future work position.

o Discuss what concepts from the course you felt were most valuable.

• Week 11 Quiz

Students are to take the Week 11 quiz that covers the material in Chapter 17. The quiz is located in the course shell under the Week 11 tab. This is an open-book, timed quiz that can only be taken once with a time limit of one (1) hour. The quiz consists of 10 multiple-choice questions with each question worth 5 points for a total of 50 points for the quiz.

Online students are to complete the quiz by Sunday Midnight of Week 11. On-ground students are to complete this quiz before the Week 11 class meeting.

ASSIGNMENT OUTLINE AND GRADING Assignment Type Total Points Percentage* Homework 672 30% Weekly Quizzes 850 38% Assignment 1 240 11% Assignment 2 240 11% Participation 220 10%

Total 2,222 100% * The percentages may not total 100% due to rounding.

Grading Scale Points Percentage Grade

2,000-2,222 90-100 A 1,778-1,999 80-89 B 1,555-1,778 70-79 C 1,333-1554 60-69 D Below 1,333 Below 60 F

Appendix A: ECO301 Homework Grading Calculations

Chap 1 # of Prob Chap 7

# of Prob Chap 13

# of Prob

1.2 (a-i) 9 7.2(a-e) 5 13.1(a-b) 2 1.3(a-c) 3 7.4(a-c) 3 13.2(a-b) 2 1.5(a-c) 3 7.5(a-d) 4 13.3(a-e) 5 1.8(a-d) 4 7.7(a-d) 4 13.4(a-d) 4 1.10(a-f) 6 7.10(a-d) 4 13.6(a-c) 3 Chap 2 Chap 8 Chap 14 2.1(a-e) 5 8.1(a-c) 3 14.2(a-d) 4 2.2(a-f) 6 8.2(a-d) 4 14.4(a-d) 4 2.5(a-e) 5 8.5(a-e) 5 14.6(a-d) 4 2.7(a-d) 4 8.7(a-d) 4 14.8(a-b) 2 2.10(a-e) 5 8.9(a-d) 4 14.10(a-d) 4 Chap 3 Chap 9 Chap 15 3.2(a-e) 5 9.1(a-g) 7 15.2(a-c) 3 3.4(a-f) 6 9.3(a-d) 4 15.5(a-e) 5 3.6(a-d) 4 9.5(a-d) 4 15.6(a-c) 3 3.8(a-d) 4 9.7(a-e) 5 15.8(a-b) 2 3.10(a-f) 6 9.10(a-d) 4 15.9(a-c) 3 Chap 4 Chap 10 Chap 16 4.1(a-c) 3 10.1(a-c) 3 16.2(a-c) 3 4.4(a-d) 4 10.2(a-h) 8 16.4(a-d) 4 4.7(a-c) 3 10.6(a-d) 4 16.6(a-e) 5 4.9(a-d) 4 10.7(a-d) 4 16.8(a-c) 3 4.10 (a-b) 2 10.10(a-f) 6 16.9(a-d) 4 Chap 5 Chap 11 Chap 17 5.1(a-b) 2 11.2(a-d) 4 17.1(a-c) 3 5.2(a-c) 3 11.4(a-c) 3 17.2(a-d) 4 5.3(a-c) 3 11.7(a-c) 3 17.6(a-b) 2 5.5(a-c) 3 11.9 (a-c) 3 17.8(a-c) 3 5.10(a-c) 3 11.10(a-c) 3 17.10(a-d) 4 Chap 6 Chap 12 6.2(a-e) 5 12.1(a-b) 2 6.4(a-e) 5 12.2(a-d) 4 6.6 (a-d) 4 12.4(a-c) 3 6.7(a-e) 5 12.6(a-c) 3 6.9(a-d) 4 12.8(a-c) 3 12.10(a-c) 3 Total 128 123 85 336 2 672