Economics 2203.01: Microeconomic Theory - Honors
Fall 2015
MW 3-4:15, O’Neill Library 257
Professor:
Sam Richardson
Office hours:
sam.richardson@bc.edu
Tuesdays 3-5
or by appointment
Maloney 314
Review sessions:
Fridays 3-4:15
Maloney 313
Course Overview
This is a course on microeconomic theory and how that theory can be applied to policy analysis.
We will focus on how microeconomists think about policy issues, and upon what assumptions
microeconomists’ thinking rests. For example:
Where do supply and demand curves come from, and when does their intersection represent an
efficient market outcome?
How do we capture the essence of real-world situations in simplified models?
How do we solve economic models, and how do we interpret their implications?
When do free markets lead to efficient outcomes, and when do markets fail?
What are the implications of government intervention in markets, and how do we compare the
effects of different possible government policies?
Note on prerequisites: Economists tend to think about the world through mathematical models,
and we will use mathematical notation and differential calculus extensively in this course. I will
assume students are comfortable with the material from Calculus I, and I will be teaching some
more extended mathematical tools during the course, particularly in multivariable differential
calculus.
1
Course Requirements and Grading
10%
Weekly problem sets
Problem sets are worth a small portion of your grade, but they are the best way to learn
the material. It will be very difficult to succeed on the exams without completing the
problem sets.
You are strongly encouraged to work in small groups on problem sets, but each student
must hand in original work (you will not receive credit if your answers are identical to
another student’s). Problem sets are due by the beginning of class. Late assignments will
not be accepted, but your lowest problem set grade of the semester will be dropped.
20%
Midterm exam
In-class, closed-book exam on October 26. You will be allowed one letter-sized sheet of
notes, and may use a standard (non-graphing) calculator or a calculator app on your
phone (which must be in airplane mode).
30%
Policy brief and in-class presentation
Students will work in small groups to analyze a case of market failure and recommend a
policy response. You will prepare a written policy brief (emphasis on brief) due on
December 7, and present your case in class on December 7 or 9.
40%
Final exam
December 18, 12:30pm. In-class, closed-book exam covering material from the entire
semester (with somewhat of an emphasis on post-midterm material). You will be
allowed two letter-sized sheets of notes, and may use a standard (non-graphing)
calculator or a calculator app on your phone (which must be in airplane mode).
Note: Although not formally part of your grade, class participation is strongly encouraged and may be
used to break ties if you are on the borderline between two grades.
2
Readings
The recommended textbook will be Microeconomics: Theory and Applications with Calculus, by
Jeffrey M. Perloff. You are welcome to use any edition (don’t spend $200 on the latest edition
unless you have money to burn!). The book will be on reserve at O’Neill Library. Also note that
the course is only loosely linked to the textbook, and you will only be responsible for material
that is covered in class or on problem sets. Be aware that Perloff has another microeconomics
textbook; we will be using the one that has “calculus” in the title.
You are welcome to use a different textbook if you prefer. If you find that you dislike the Perloff
text, feel free to come talk with me and I would be happy to suggest (and loan out) alternative
texts that may work better given your math background and learning style.
Additional required readings will be posted on Canvas and will serve as the basis for
discussions.
Request for Accommodations
If you have a disability and will be requesting accommodations for this course, please register
with either:
Dr. Kathy Duggan (dugganka@bc.edu), Associate Director, Connors Family Learning
Center (learning disabilities or AHD) or
Dean Paulette Durrett (paulette.durrett@bc.edu), Assistant Dean for students with
disabilities (all other disabilities).
Advance notice and appropriate documentation are required for accommodations.
Academic Integrity
Students are encouraged to work together on problems sets and the policy brief assignment.
However, your problem sets must be original work that is your own; you will not receive credit
for problem sets that are identical to another student’s work. If you use outside sources for the
policy brief assignment, you must cite them appropriately. Please familiarize yourself with the
university’s policy on academic integrity, available at www.bc.edu/integrity.
3
Course Schedule: tentative and subject to change
Date
Topics & Assignments
Perloff (3rd ed.)
Aug 31
Introduction: supply and demand experiment
Ch. 1
Sep 2
Review: supply and demand, government intervention
Ch. 2
7
Labor Day: no class
9
Consumer theory: utility maximization (1)
Ch. 3
Readings: CNN.com: U.S. destroys tons of elephant ivory; offers
$1 million bounty on traffickers
WSJ.com: U.K. Prices Buffeted by Extreme Weather
Problem set 1 due.
14
Consumer theory: utility maximization (2)
Video:
Ch. 4
Dan Ariely TED talk: Are we in control of our own
decisions?
Reading:
The New Yorker: Clawback
16
Consumer theory: expenditure minimization
Ch. 3.4
21
Consumer theory: welfare analysis (EV, CV, ∆CS)
Ch. 5
Problem set 2 due.
23
Producer theory: profit maximization and cost minimization
Ch. 6
Readings: The Atlantic: The New Economics of Happiness
The Economist: No longer the dismal science?
28
Producer theory: fixed costs and returns to scale
Reading:
Ch. 7
Senate HELP Committee: For Profit Higher Education:
The Failure to Safeguard the Federal Investment and
Ensure Student Success
Problem set 3 due.
30
Producer theory: competition in the short run and long run
Ch. 8
Readings: TechNewsWorld: MySpace is a Natural Monopoly
The New Yorker: Big Is Beautiful
4
Oct 5
The partial equilibrium model
Problem set 4 due.
Ch. 9.1-9.3
7
Government intervention and partial equilibrium
Ch. 9.4-9.6
12
Columbus Day: no class
14
General equilibrium: the Edgeworth exchange economy
Ch. 10.1-10.3
Problem set 5 due.
19
General equilibrium with production
21
Public goods experiment
Ch. 10.4-10.5
Reading: Experiment instructions
Problem set 6 due.
26
Midterm exam covering material through class on October 7 and
problem set 5
28
Externalities and public goods
Ch. 17
Monopoly
Ch. 11
Nov 2
Reading:
Pew Center on Global Climate Change: Economic
Insights from Modeling Analyses of H.R. 2454
(only pages 1-7 are required reading)
4
Price discrimination
Problem set 7 due.
Ch. 12
9
Oligopoly: Bertrand, Cournot, Stackelberg
Ch. 14
11
Oligopoly: Hotelling
Readings: FTC Guide to Antitrust Laws
Vox.com: Will massive mergers make health
insurance as bad as cable?
Problem set 8 due.
16
Choice under uncertainty (1)
18
Choice under uncertainty (2)
Problem set 9 due.
Ch. 16
5
Nov 23
Adverse selection
Reading:
Ch. 18.1-18.4
Akerlof, The Market for “Lemons” (annotated)
Problem set 10 due.
25
Thanksgiving: no class
30
Signaling
Ch. 18.5
Readings: Forbes: Here's How Stripping Down Health Care
Reform Benefits to the Bare Bones Will Backfire and
Drive Up Costs
The Economist: It's adverse, but is it selection?
Dec 2
Contract theory and moral hazard
7
Group presentations: real-world market failures
Written policy brief due.
9
Group presentations: real-world market failures
Problem set 11 due.
18
12:30pm: Cumulative final exam (location TBA)
Ch. 19
6