Econ E-1010 Spring 2018 Syllabus-1 PDF

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Syllabus ECON 1010...

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ECON E-1010 Microeconomic Theory

Harvard University Extension School Spring, 2018

Course Web Site: https://canvas.harvard.edu/courses/35227 Professor: Bruce Watson [email protected] Lectures: Mondays 7:40 – 9:40

Science Center A

Teaching Assistants: Jodi Beggs Online Sections TBA Rob Munger Online Sections TBA

SYLLABUS This course presents the basic analytical tools of microeconomics, building on the concepts and intuition that students will have derived from their micro principles courses. We start by looking at the decision making of individual consumers and ask how consumers (or decision-makers generally) optimize subject to constraints. Decision-making in situations involving an uncertain outcome is then analyzed. This analysis has multiple applications, and we will consider the relevance to insurance. Then we look at the ways firms make and coordinate their decisions under varying market structures, including perfect competition, monopoly, and oligopoly. We examine strategic behavior in oligopolistic markets making use of concepts from game theory, such as dominant strategies and Nash equilibrium. A lecture is then devoted to welfare theory—the analysis of how various policies contribute or detract from the overall welfare of society. Building on the basic concepts of consumer and producer surplus, we can analyze the concept of “market efficiency,” as well as the relationship between market equilibrium and efficiency. Finally, we conclude the semester with a survey of an issue which can arise when one of the assumptions undergirding perfect competition is violated: Asymmetric information. Problems arising from asymmetric information occur throughout the economy, as well as in our personal lives. Prerequisites: ECON E-10a, or the equivalent and MATH E-8 or satisfactory placement test score. Calculus is not used, but proficiency with college algebra is essential.

Course Requirements Exams There will be two exams for the course, a midterm and a final. Both will be taken on-line. The midterm will be available on-line on MyEconLab from 7:40 PM (Eastern US time) on Monday, March 5 to 7:40 PM (Eastern US time) on Tuesday, March 6. The final will be available on-line on MyEconLab from 7:40 PM (Eastern US time) on Monday, May 7 to 7:40 PM (Eastern US time) on Tuesday, May 8. Detailed information and instructions will be given to students well in advance of the exam dates.

Please Note: 

It is your responsibility to plan your travel ahead around exam dates. In particular, the date of the final exam is determined by the Registrar and cannot be changed for any reason. Requests to take the final on a different day, including requests for a make-up final, involve a formal appeal process through the Extension School Examination Committee.



No makeup midterms will be given.



Please see the section below on “Grading” to understand how your semester grade will be determined if you must miss the midterm for any reason.

Proctored exams To ensure the integrity of the exam taking process, exams will be proctored. The Extension School offers remote proctoring integrated into the central course website, Canvas, and allows you to take exams at your convenience within the scheduled exam availability window. With remote proctoring there is no need to hire or pre-schedule an in-person proctor, and you can take your exams wherever you are most comfortable. Remote proctoring requires you to use a computer outfitted with an external or built-in webcam and microphone, Google Chrome browser, and a stable internet connection (LTE hot-spots need not apply!). More information about setting up your computer and an opportunity to test the remote proctoring service will be provided long before scheduled exams. Taking the exam with remote proctoring is the default option for all students, distance and local; students who cannot take a remotely proctored exam must seek the permission of the Extension School's distance exams office to hire an in-person proctor.

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Problem Sets There will be ten problem sets assigned during the term. These will be multiple choice assignments completed on MyEconLab. Further instructions about MyEconLab will be given before the first problem set is assigned.

Grading Your semester grade will be the higher of: 30% problem set scores 30% midterm exam 40% final exam

or

30% problem sets 70% final exam

So, if you do poorly on the midterm, or are unable to take it for any reason, your final exam will automatically be reweighted to be 70% of your semester grade, with the problem sets constituting the remaining 30%. We will make these calculations automatically for each student—you don’t have to “opt in” or “opt out” of one or the other weighting. We will make certain you receive the highest grade to which you are entitled. Your grade will be calculated two ways, and if there’s any difference in the result, I’ll give you the higher of the two letter grades which result. 

Curve

In the first calculation, semester grades will determined by a curve. The nature of a curve is that your grade is based on your performance relative to all other students in the class. It does not involve an “absolute standard,” e.g., 90 – 100 = A, 80 – 90 = B, etc., which you may be used to from some other courses. With a curve, your grade is based on your percentile rank in the class, i.e., the percentage of students in the class who scored below you. If you are in the 60th percentile, for example, that means that 60% of students had scores equal to or below yours, while 40% of students had scores above yours.

The Curve Used in Assigning Your Letter Grade for the Semester Letter Grade



Percentile Rank Range of Letter Grade

A

60th Percentile – 100th Percentile

A-

45th Percentile – 60th Percentile

B+

40th Percentile – 45th Percentile

B

35th Percentile – 40th Percentile

B-

28th Percentile – 35th Percentile

C+

25th Percentile – 28th Percentile

C

22nd Percentile – 25th Percentile

C-

20th Percentile – 22nd Percentile

D

5th Percentile – 20th Percentile

E/F

0th Percentile – 5th Percentile

Absolute Scale

In the second calculation, grades will be determined by the standard curve you may be familiar with from other courses. In this approach, your letter grade is based on your total points as a percentage of the total possible points for the semester. Here is the scale: A

93.0%

C+

77.0%

A-

90.0%

C

73.0%

B+

87.0%

C-

70.0%

B

83.0%

D

65.0%

B-

80.0%

E/F

0.0%

So, for example, if your total points for the semester were 85% of the total possible points, you would get a letter grade of B.

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Readings Readings are drawn from the textbook: Microeconomics, 9th edition, by Robert Pindyck and Daniel Rubinfeld. The majority of the reading in the text reinforces material you'll learn in class, but some of the topics we cover may not appear in the book. Conversely, some of the reading is for background, and will not be covered explicitly in class. Consider the text to be a reference only; your main focus should be on the material presented in lecture, and available on PowerPoint slides and the lecture videos. You will not be responsible--on problem sets or on exams--for material in the book that we have not covered in class. If you have purchased a used copy of an earlier edition of Pindyck and Rubinfeld, you should still find it useful. However, the page numbers given below refer to the latest, 9th, edition. As we go through the topics during the semester, you might also want to consider reviewing the relevant chapters in a principles of microeconomics text. An excellent example is R. Glenn Hubbard and Anthony O’Brien, Microeconomics. Any other good principles book will also suffice.

Academic Integrity Harvard takes matters of academic honesty very seriously. While you may discuss problem sets with your classmates, make sure that all work and all answers are ultimately your own. Use of old course materials, including problems sets and exams, and any other internet resources, is prohibited unless made available to all students by the instructor. Examples of unacceptable conduct include plagiarism, downloading answers to problem sets or exams from other students or the internet, collaborating on examinations, etc. You should consult the website https://www.extension.harvard.edu/resources-policies/student-conduct/academic-integrity to familiarize yourself with the possible serious consequences of academic dishonesty. All work on problem sets and exams MUST be your own.

Accessibility The Extension School is committed to providing an accessible academic community. The Accessibility Office offers a variety of accommodations and services to students with documented disabilities. Please visit www.extension.harvard.edu/resources-policies/resources/disability-services-accessibility for more information.

Student Profiles Every term, the course enrolls people from an amazing variety of backgrounds and walks of life. And, the reasons for taking the class are almost as diverse as students’ backgrounds. In order to share a little of their life stories with their classmates, students are encouraged to write a few lines about themselves on the course Canvas “Discussion” page. There will be a section there devoted to student profiles; students can even post a video if they wish (which must be less than two minutes long). Full instructions are available on the page. Please note that this is completely voluntary, and also that the only people who will be able to view what you submit will be your classmates and the teaching staff—nobody else. You do not have to identify yourself with anything besides your first name if you don’t want to. Just submit a few lines about your job, background, interests, and/or why you have decided to study economics. Even if you decide not to submit a profile, you will enjoy reading about some of your fellow students.

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COURSE CALENDAR Mon., Jan. 22

Course Overview Introduction to Intermediate Microeconomics Review of Demand, Supply and Elasticity Pindyck and Rubinfeld: Chap. 2 (pp. 21 – 60)

Mon., Jan. 29

Behind the Demand Curve: Consumer Theory Indifference Curves Budget Constraints Consumer Optimum Pindyck and Rubinfeld: pp. 67 – 97 PS 1 Available on MyEconLab

Mon., Feb. 5

Consumer Theory (cont.) Changes in the Consumer’s Budget Changes in Prices Income and Substitution Effects Deriving the Demand Curve Pindyck and Rubinfeld: pp. 112 – 131 PS 1 Must Be Completed by 11:45 PM (Eastern US Time) PS 2 Available on MyEconLab

Mon., Feb. 12

Choice Under Uncertainty Attitudes Toward Risk Application to Insurance and Asset Markets Pindyck and Rubinfeld: Sections 5.1 – 5.2 (pp. 160 – 170) pp. 171 – 174 “Insurance”

PS 2 Must Be Completed by 11:45 PM (Eastern US Time) PS 3 Available on MyEconLab

Mon., Feb. 26

Behind the Supply Curve: Theory of Production The Production Function Firms’ Costs in the Short and Long Run Economies of Scale and Scope Pindyck and Rubinfeld: Sections 6.1 – 6.2 (pp. 202 – 215) p. 223 Sections 7.1 – 7.5 (pp. 229 – 261) PS 3 Must Be Completed by 11:45 PM (Eastern US Time) PS 4 Available on MyEconLab

Sun., March 4

PS4 Must Be Completed by 11:45 PM (Eastern US Time)

Mon., March 5Tues, March 6

Midterm Exam (Available on MyEcon Lab from 7:40 PM, EST, Mon. March 5 to 7:40 PM EST, Tues., March 6)

Mon., March 19

The Perfectly Competitive Firm Profit Maximization A Perfectly Competitive Firm’s Supply in the Short Run Perfectly Competitive Market Dynamics in the Long Run Pindyck and Rubinfeld: Sections 8.1 – 8.5 (pp. 279 – 295) pp. 300 – 304 pp. 306 – 309 PS 5 Available on MyEconLab

Mon., March 26

Monopoly Marginal Revenue for a Monopoly Sources and Consequences of Monopoly Power Measuring Monopoly Power Price Discrimination Monopolistic Competition Short-run and Long-run Equilibrium Pindyck and Rubinfeld: pp. 358 – 365 Sections 10.2 – 10.3 (pp. 368 – 377) Section 11.2 (pp. 401 – 410) PS 5 Must Be Completed by 11:45 PM (Eastern US Time) PS 6 Available on MyEconLab

Mon., April 2

Oligopoly Cournot Model Stackelberg Model Pindyck and Rubinfeld: Sections 12.2 – 12.3 (pp. 456 – 469) PS 6 Must Be Completed by 11:45 PM (Eastern US Time) PS 7 Available on MyEconLab

Mon., April 9

Game Theory Prisoner’s Dilemma Nash Equilibrium Dominant Strategies Repeated Games Sequential Games Pindyck and Rubinfeld: Sections 12.4 (pp. 469 – 472) pp. 487 – 496 Section 13.4 – 13.5 (pp. 498 – 505) PS 7 Must Be Completed by 11:45 PM (Eastern US Time) PS 8 Available on MyEconLab

Mon., April 16

Welfare Theory and Applications Consumer, Producer and Social Surplus Calculations Market Efficiency and Pareto Optimality Welfare Analysis of Price Controls and Monopoly Pindyck and Rubinfeld: Section 4.4 (pp. 132 – 135) Sections 9.1 – 9.4 (pp. 317 – 339) pp. 377 – 378 pp. 298 – 300 Section 11.1 (pp. 400 – 401) PS 8 Must Be Completed by 11:45 PM (Eastern US Time) PS 9 Available on MyEconLab

Mon., April 23

Asymmetric Information and Applications Adverse Selection Moral Hazard The Principal-Agent Problem Pindyck and Rubinfeld: Sections 17.1 – 17.4 (pp. 631 – 651) PS 9 Must Be Completed by 11:45 PM (Eastern US Time) PS 10 Available on MyEconLab

Mon., April 30

Review Session PS 10 Must Be Completed by 11:45 PM (Eastern US Time)

Mon., May 7 Tues., May 8

Final Exam (Available on MyEcon Lab from 7:40 PM, EDT, Mon. May 7 to to 7:40 PM, EDT, Tues., May 8)...