course number: eco 202 - argosy...

COURSE NUMBER: ECO 202COURSE NAME: Microeconomics

TERM: Spring II 2008

INSTRUCTOR: Jane Sjogren Ph.D.

PHONE:312-777-7675

EMAIL:[email protected]

ALT PHONE:

REQUIRED TEXTS:

Title MicroeconomicsAuthor(s) Parkin, M.Copyright (2005)Publisher Addison-Wesley PublishingISBN 0321246047Edition 7th

This Course Requires the Purchase of a Course Packet: YES NO

Argosy UniversityCOURSE SYLLABUS

ECO202Microeconomics

Faculty InformationFaculty Name: Jane Sjogren Ph.D.Campus:Contact Information:Office Hours:Short Faculty Bio:

Course description: This course places an emphasis on the study of microeconomics. A descriptive and analytical study of the market economy, it includes market structures, pricing, and distribution of wealth and income.

Course Pre-requisites: ECO201

Required Textbook:

Parkin, M. (2005). Microeconomics. (7/e). Addison-Wesley Publishing. ISBN: 0321246047

Technology: Pentium III CPU/ Windows 98; 128MB RAM printer; Microsoft Office; Adobe Acrobat Reader (full version); Microsoft Internet Explorer 5.5 (PC) 5.0 (MAC) or Netscape Navigator 4.08; Norton Antivirus.

Course length: 7.5 Weeks

Contact Hours: 45 Hours

Credit Value: 3.0

Program Outcomes:

1. Communication

1.1 Communicate business concepts effectively, both written and orally appropriate to the audience2. Team

2.1 Define the attributes of an effective team member and leader and the characteristics of an effective team in reaching specific business goals3. Cognitive

3.1 Problem Solving – Given a business problem, select and defend a business solution chosen from specific alternatives 3.2 Information Literacy – Given a business research question, access information from a variety of sources, select appropriate sources to respond to a

business question4. Analysis/Application

4.1 Integration – Describe the interrelationship of the functional business areas of statistics, accounting, operations, finance, marketing, and strategy5. Ethics/Diversity

5.1 Diversity – Identify the issues and challenges related to diversity in current business organizations5.2 Ethics – Identify the issues and challenges related to ethics in current business organizations

Course Objectives:

1. Understand a working definition of economics. (Program Outcome(s): 1, & 4)1.1. Distinguish between macroeconomics and microeconomics.

2. Explain the operation of the free enterprise system of market economy. (Program Outcome(s): 1, & 4)2.1. Explain how price regulation interferes with pure competition equilibrium2.2. Explain the equilibrium process under different market forms

3. Discuss the relationships of pricing, profits, and competition. (Program Outcome(s): 1, & 4)3.1. Discuss the concept of profit maximization

4. Describe the primary and secondary goals of capitalism. (Program Outcome(s): 1, & 4)5. Understand the economic functions of government and their impact upon the private sector of the economy. (Program Outcome(s): 1, & 4)

5.1. Describe the mechanism through which government exercises control and facilitate growth in the economy5.2. Explain the condition under which government intervention leads to optimal output.

6. Describe the circular flow of activity. (Program Outcome(s): 1, & 4)7. Discuss the pricing mechanism, supply, and demand. (Program Outcome(s): 1, & 4)8. Present an analysis of pure competition, monopolistic competition, oligopoly, and monopoly. (Program Outcome(s): 1, & 4)

8.1. Identify the necessary conditions of pure competition8.2. Explain how these necessary conditions relate pure competition to the other market forms

9. Analyze growth of big business; evaluate the validity of government control. (Program Outcome(s): 1, & 4)10. Describe the effect of market conditions and forces on interest rates. (Program Outcome(s): 1, & 4)11. Discuss present-day economic transformation within the former Soviet bloc countries of Europe, and contemporary economic transition in China, Japan, and

Mexico. (Program Outcome(s): 1, & 4)

Assignment Table

Module Module Topics Readings Assignments1 Economics, Macroeconomics, and

Microeconomics A Free Market Economy Demand and Supply

ParkinChapter 1Chapter 2Chapter 3

Discussion Questions:

1. Recently Morocco has become a major provider of call center services to France. India provides the same type of services to the United States. Do you judge the comparative advantages for the services of all four countries as absolute or comparative? What is the impact on the economies of France and the United States of exporting so many jobs?

2. Some people in the U.S. advocate the legalization of narcotic drugs. Some parts of Europe have also experimented on legalizing drugs. Based on your readings in Chapter 3, how will you describe a market for narcotic drugs? Analyze the economic impact of legalization. Justify your response.

3. In a command economy the government owns all the businesses and resources for production. All economic decisions, including what goods and services to provide, are taken by the government. How is the U.S. economy different from a command economy? Can the U.S. economy be called a free market economy? If not then discuss the ways in which the government interacts and regulates our economy.

4. Despite the rise in the price of higher education, the demand for higher education is increasing over the years. Discuss if this is a violation of the law of demand. Provide three reasons for your answer.

Assignments:

1. Project 1Private Consumption – Special Cases

a. Think of a good that you will buy more of if its price goes up. b. To which category does this good belong? Provide reasons for

your answer. Develop a demand curve for the good. Also show the condition of market equilibrium for the category of this good?

c. Compare the demand curve of these goods with the goods that you will buy more off if the price comes down.

d. Create demand and supply curves in Microsoft Excel, and create a Microsoft Word document to present the analysis based on the curves.

Project 2Economic Efficiency

a. The concept of efficiency is essential to economic analysis. What does the statement an economy is operating below the Production Possibilities Curve (PPC) mean? Document your answer in a Microsoft Word document using examples from a private manufacturer and a government agency.Also assess the probable motives of private manufacturers and government agencies for improving the efficiency of their operations.

b. Create the PPC in Excel. Create a Word file to collate your answers.

2 Elasticity Efficiency and Equity Markets in Action Utility and Demand

ParkinChapter 4Chapter 5Chapter 6Chapter 7


1. The concept of consumer surplus indicates how much consumers gain from consuming at a specified price. However you never hear about a consumer deficit or the loss accrued by consumers — at the other end of the demand curve — who cannot afford to consume at the specified price. Consider that you can impose a surplus tax on the consumer by charging an individual sales tax in addition to the market price to cover the consumer surplus. Also consider that you could compensate an equal number of consumers at the bottom of the demand curve, giving them the opportunity to consume what they otherwise will not have. Will this be a fair tax? Rationalize your position.

2. Consumer preferences play a key role in determining consumer demand for a product. Advertising seeks to strengthen consumer need for a product. At times advertising companies have tried subliminal messaging, which is subtle advertising that intersperses a frame containing a brand name into every fourth frame in a movie; consumers subconsciously register the brand without realizing that they’ve seen it. This type of

advertising has proven effective but the government banned it. Should this be so? Consider that you are given a warning note, before buying a ticket for the movie, saying “This film contains subtle commercials that may subconsciously alter your consumption preferences.” With full disclosure should subtle advertising still be illegal? Provide reasons to support your answer.

3. Consider that the high plains in Texas are facing crop failures due to drought. Consider a technology is discovered to irrigate these high plains. As a result of this technology production in the high plains has increased. However due to the overuse of groundwater, the high plains are facing the problem of water depletion. Discuss how the groundwater should be regulated for efficient use. Also discuss if the efficiency in the use of groundwater resources will also ensure equitable the distribution of groundwater. Discuss some of the possible ways to address the issue of equitable distribution of groundwater.

4. Rent ceiling makes it illegal to charge housing rent more than the specified limit. Discuss how such a policy can harm tenants. Also discuss some of the possible solutions to deal with the problems emerging from rent ceiling.

Assignments:

1. Project 1Elasticity and Consumer Surplusa. Imagine that you invent a portable power generator for residences.

This generator can extract energy from tap water. You own a patent on the design and engineering and plan to sell the generator as a monopolist. If you can sell this generator at less than $3,000, the price will make it meaningful and within reach of most homeowners who can almost eliminate utility costs.

b. Now answer the following questions related to the above scenario:i) Use the concept of elasticity of demand to explain what the

demand for your product will be like.ii) Apply the concepts of underproduction and consumer surplus to

the above case.

iii) Suppose the patent was annulled and the design and engineering were made public. How will this effect elasticity of demand? Will the generator still be under produced? Why?

iv) How will this affect consumer surplus?c. Create a report that contains the following:

i) A data file in Excel. Plot the demand curve, supply curve, and PPC to illustrate market equilibrium and inefficiency in production.

ii) A Word document to collate your answers.

Project 2Utility and Demanda. Review your spending over the last few weeks. Sort the expenses by

how much utility they have rendered you. Now consider three individuals: a neighbor, a friend, and your boss.

b. How do you think they would rank the same expenses? Provide reasons for your answer.

c. Create a report that contains the following:d. A table that mentions the sorted expenditure and its utility.e. A table showing the ranking of the expenditure by your neighbor,

friend, and boss.f. The required curves in Excel.g. Reasons for the similarities or differences in the ranking of the

expenditure by you and your neighbor, friend, and boss.

h. You can use the template provided in the URL below to collate and submit your answers. http://www.saskschools.ca/%7Eehs/HeiseIntra/Excel/lesson22.html

Project 3Utility, Elasticity, and Demanda. Suppose you are in charge of designing a TV commercial campaign

for a new shampoo. What will be the goal of the campaign and your methods for achieving the goal? Explain by using the concepts of utility, price elasticity, and demand.

b. Draw the required curves by using Excel, and prepare a Word document containing the goals and the methods to achieve the goals.

http://www.saskschools.ca/~ehs/HeiseIntra/Excel/lesson22.html

3 Possibilities, Preferences, and Choices

Organizing Production

ParkinChapter 8Chapter 9


1. In the early 1990s a department store in Ireland wanted to improve cost management. It needed part of its staff to be on call at home and decided that the staff was to be reimbursed only if they were called in to work. The call-ins might be for only a couple of hours or for the entire day. Is this an efficient method to manage costs? Justify your answer. How does this method benefit the long-term stability of the work force? Was this decision motivated by the fact that the employees were already on contract with the store?

2. Consider the U.S. government raises the excise tax on beer. As a result the price of beer increases. Discuss the impact of taxes in terms of substitution and income effects. Consider that returning the revenue raised through tax to the consumers restores the consumers’ purchasing power to the pretax level. Will the consumers consume the same amount of beer as they did before tax? Why or why not?

Assignments:

1. Project 1Profit Maximizationa. Take a real-life example of a for-profit corporation or small business

with which you are familiar. Compare the modus operandi of the firm with the concept of profit maximization.

b. Use Excel to plot the required curves. Also create a Word document to record the findings based on the curves.

Project 2Organizing Productiona. Does a firm know its costs before it knows its revenues? What is the

ideal relation between knowledge of costs and knowledge of revenues? Suggest ways in which a firm can obtain the ideal relation.

b. Create a Word document to collate your answers.4 Output and Costs

Perfect CompetitionParkinChapter 10


Chapter 11 1. Does an increase in technical efficiency always result in maximizing profit for the producer? Discuss with respect to agricultural goods. Provide reasons for your answer.

2. Consider a firm increases the wage rate of a worker. The worker supplies fewer hours of work at the increased wage rate. The firm then decides to set the overtime wage rate. The worker increases the supply of labor hours at the overtime wage rate. Discuss the reasons for the worker’s behavior. Justify your reasoning.

Assignments:

1. Project 1Budget Constraintsa. Visit http://shopper.cnet.com/Cell_phones/4007-6454_9-0.html to

obtain information about the prices of cell phone services. Visit http://metalwebnews.com/poorman/quantity-special.html to obtain information about prices of first-class mail.

b. Now answer the following questions:i) Draw the budget constraint for a consumer who spends $50 a

month on cell phone services and first-class mail in 2003 and 2004.

ii) Can you identify whether the consumer was better off or worse off in 2002 than in 2000?

iii) Draw some indifference curves for cell phone calls and first-class mail and show the income and substitution effects of the changes in prices that occurred between 2003 and 2004.

c. Given the budget constraint and the prices of cell phone services and first-class mail that you obtained from the websites, create a report that contains the following:i) A table containing the different combinations of cell phone

services and first-class mail the consumer can buy.ii) A data file in Excel containing the budget lines and indifference

curves.iii) A Word document to present an analysis based on the graphs.

5 Monopoly Parkin Discussion Questions:

http://metalwebnews.com/poorman/quantity-special.html

http://shopper.cnet.com/Cell_phones/4007-6454_9-0.html

Monopolistic Competition and Oligopoly

Chapter 12 Chapter 13 1. Most European countries have nationalized universities and colleges.

Some countries also use the law to ban private colleges. Can higher education be classified as a natural monopoly in European countries and why? Can the professional skills and scholarly achievements that constitute a faculty be classified as large, fixed costs? Can the same reasoning be applied to large, established manufacturers such as General Motors? What about medical drugs corporations? Rationalize your answer.

2. The invention of the assembly line provided Ford Motor Company with an incredible advantage over its competitors. This method of production may have made Henry Ford a monopolist but competition never quite vanished. Based on your knowledge of market forms, which form was more suitable to describe the position of Ford Motors and why? Which market conditions make any market form preferable to monopoly? Does regulation of monopolies discourage entrepreneurship? Why?

Assignments:

1. Project 1Market Formsa. Use the Internet to research new passenger cars on the market. b. Visit the websites of at least three manufacturers. Collect information

on prices, models, and technical data on cars in the price range of $15,000-$18,000. Compare the different models in terms of their interiors, equipment, performance, and other relevant criteria. How would you classify the passenger car market in this price segment in terms of market type? Justify your criteria.

c. Create a report that contains the following:i) A table containing a detailed account of the online findings.ii) An Excel worksheet containing the required graphs. iii) A Word document to present an analysis based on the table and

graphs.

You can use the template provided in the URL below to collate and submit your answers. http://argosy-class.com/Courses/ECO402M/Market%20Form.doc

http://argosy-class.com/Courses/ECO402M/Market%20Form.doc

http://argosy-class.com/Courses/ECO402M/Market%20Form.doc

Project 2Oligopoly Marketa. Under what conditions is selling on an oligopoly market preferable to

selling on a perfectly competitive market?b. How can a producer sell on an oligopoly market? Should the

producer be legally allowed to pursue an oligopoly position?c. Plot the required graphs in Excel, and create a Word document to

record your answers.6 Demand and Supply in Resource

Markets Economic Inequality

ParkinChapter 17Chapter 18


1. Consider two firms X and Y produce identically tasting cold drinks. In order to increase the demand for its cold drink, firm X increases its advertisement outlay. However the advertising does not increase its demand in the long run. Discuss why?

2. Consider there are three airlines in the U.S. economy: A, B, and C. There is a huge capital cost of setting up airlines. Consider airline A reduces the fare of its economy class. Airlines B and C react to it by reducing fares for all classes. What type of market form are airlines? Consider that in order to end the price war among themselves, the three airlines enter into an agreement to fix their prices and output. However the agreement fails. Discuss some of the reasons for the failure of such an agreement.

Assignments:

1. Project 1Perfect and Imperfect CompetitionHow many choices among gas stations do you have in your neighborhood? How great is the price difference among them? Is there a difference in quality? Based on the above answers draw conclusions about the market form that applies to your local gasoline market.

Plot the required graphs in Microsoft Excel and create a Microsoft Word document to record your answers.

7 Public Goods and Taxes Regulation and Antitrust Law

Parkin Chapter 14


Externalities Chapter 15Chapter 16

1. The philosopher Robert Nozick made a strong and challenging argument for a minimal state in his book Anarchy, State, and Utopia. He said no state should provide any services beyond law enforcement. This means that all highways, elementary schools, social security, and other services outside police and homeland security should be privatized. Is it reasonable from an economist’s viewpoint to minimize the role of the government in accordance with Nozick’s moral argument? According to you can there be any exceptions to this argument? Which services do you think the government should provide and which services should be privatized? Give reasons to support your answer.

2. According to several studies many Americans lack health insurance. However the number of people not receiving health care is typically small. Health providers are reluctant to deny treatment to anybody in need. What will you call this group of patients who do not have insurance? Will you prefer to pay for their health care through your private insurance bills or through the tax bill? What according to you are the best means to address the health needs of these patients? What role can the government play in this scenario? Discuss and justify your answer.

3. How can the microeconomic theory motivate anti-trust laws? Discuss by providing examples.

4. One of the mechanisms through which the U.S. government controls monopolies is antitrust laws. This protects competition and increases the welfare of the people. Do monopolies always result in lower welfare than competition does? If not then evaluate whether the condition can be used by monopolists as a defense of antitrust laws.

Assignments:

1. Project 1Taxesa. Suppose you are the owner of a small business struggling to make a

profit. Given that all governments have to levy taxes in some way and that firms have to contribute – what type or types of taxes will you prefer the government to levy on your business? Provide reasons in

support of your answer.i) Create a data file in Microsoft Excel and plot the graphs as

mentioned in the criteria.ii) Create a Microsoft Word document to present an analysis based

on the graphs.

Project 2Externalitya. Prepare a document listing the externalities that you experience in

your daily life. In your document explain whether each externality is properly taken care of, paid for, or regulated.

b. Plot the graphs and create a Microsoft Word document to present an analysis based on the graphs.

Project 3Public Goodsa. Imagine that you are an expert on public goods. The mayor of your

town asks you to design a way for the city to charge each person walking or driving down a street for his/her consumption of streetlight. What type of solution will you propose? Give reasons for your solution. Will it be an efficient pricing method? Why or why not?

b. Plot the graphs and create a Microsoft Word document to present an analysis based on the graphs.

8 Trading with the World Global Stock Markets

ParkinChapter 20


1. In South Africa the party opposing the Apartheid regime asked the free world to enforce trade sanctions as a means to weaken the government. Should trade sanctions be used for such reasons? If so where should we draw the line? Are the U.S. sanctions against Cuba fair? Should the U.S. enforce trade sanctions against China’s violations of human rights? Do you agree with this? Why?

2. Recently the French President Jacques Chirac proposed a world tax on trade and financial investments to ease the burden of poverty worldwide. Is this a good idea? Is foreign aid a better way to help poor countries than

trade? What will you support and why?

3. Many arguments have been made in favor of easing international patent laws for medical drugs. It is said that this will help poor countries manufacture affordable medical drugs. This will also help countries such as India build an entirely new export industry. Should patent laws be relaxed for either or both these reasons? Discuss.

Assignments:

1. Project 1Economic Transformationa. Imagine that you are a producer of cereals. One day the government

announces that they are going to nationalize all privately owned firms. However they ask the current owners to stay on as leaders of their firms. Do you think that your firm will produce as good products, at as attractive prices, under governmental control? Provide arguments for your answers. Also state the conditions under which governmental control will hamper cereal production?

b. Create a data file in Microsoft Excel to plot the required graphs. Use a Microsoft Word document to present your answers.

Grading Criteria

Grading Scale Grading requirements

A 100 – 93A- 92 – 90B+ 89 – 88B 87 – 83B- 82 – 80C+ 79 – 78C 77 – 73C- 72 – 70D+ 69 – 68D 67 – 63D- 62 – 60F 59 and below

Attendance/participation 25%Weekly Assignments 20%Final paper 35%Optional 10%Optional 10%

100%

Library:

All resources in Argosy University’s online collection are available through the Internet. The campus librarian will provide students with links, user IDs, and passwords.

Library Resources: Argosy University’s core online collection features nearly 21,000 full-text journals and 23,000 electronic books and other content covering all academic subject areas including Business & Economics, Career & General Education, Computers, Engineering & Applied Science, Humanities, Science, Medicine & Allied Health, and Social & Behavior Sciences. Many titles are directly accessible through the Online Public Access Catalog at http://library.argosy.edu. Detailed descriptions of online resources are located at http://library.argosy.edu/misc/onlinedblist.html.

In addition to online resources, Argosy University’s onsite collections contain a wealth of subject-specific research materials searchable in the Online Public Access Catalog. Catalog searching is easily limited to individual campus collections. Alternatively, students can search combined collections of all Argosy University Libraries. Students are encouraged to seek research and reference assistance from campus librarians.

Information Literacy: Argosy University’s Information Literacy Tutorial was developed to teach students fundamental and transferable research skills. The tutorial consists of five modules where students learn to select sources appropriate for academic-level research, search periodical indexes and search engines, and evaluate and cite information. In the tutorial, students study concepts and practice them through interactions. At the conclusion of each module, they can test their comprehension and receive immediate feedback. Each module takes less than 20 minutes to complete. Please view the tutorial at http://library.argosy.edu/infolit/

Academic Policies

Academic Dishonesty/Plagiarism: In an effort to foster a spirit of honesty and integrity during the learning process, Argosy University requires that the submission of all course assignments represent the original work produced by that student. All sources must be documented through normal scholarly references/citations and all work must be submitted using the Publication Manual of the American Psychological Association, 5th Edition (2001). Washington DC: American Psychological Association (APA) format. Please refer to Appendix A in the Publication Manual of the American Psychological Association, 5th Edition for thesis and paper format. Students are encouraged to purchase this manual (required in some courses) and become familiar with its content as well as consult the Argosy University catalog for further information regarding academic dishonesty and plagiarism.

Scholarly writing: The faculty at Argosy University is dedicated to providing a learning environment that supports scholarly and ethical writing, free from academic dishonesty and plagiarism. This includes the proper and appropriate referencing of all sources. You may be asked to submit your course assignments through “Turnitin,” (www.turnitin.com), an online resource established to help educators develop writing/research skills and detect potential cases of academic dishonesty. Turnitin compares submitted papers to billions of pages of content and provides a comparison report to your instructor. This comparison detects papers that share common information and duplicative language.

Americans with Disabilities Act Policy

http://www.turnitin.com/

http://library.argosy.edu/infolit/

http://library.argosy.edu/misc/onlinedblist.html

http://library.argosy.edu/

It is the policy of Argosy University to make reasonable accommodations for qualified students with disabilities, in accordance with the Americans with Disabilities Act (ADA). If a student with disabilities needs accommodations, the student must notify the Director of Student Services. Procedures for documenting student disability and the development of reasonable accommodations will be provided to the student upon request.

Students will be notified by the Director of Student Services when each request for accommodation is approved or denied in writing via a designated form. To receive accommodation in class, it is the student’s responsibility to present the form (at his or her discretion) to the instructor. In an effort to protect student privacy, the Department of Student Services will not discuss the accommodation needs of any student with instructors. Faculty may not make accommodations for individuals who have not been approved in this manner.

The Argosy University Statement Regarding Diversity

Argosy University prepares students to serve populations with diverse social, ethnic, economic, and educational experiences. Both the academic and training curricula are designed to provide an environment in which students can develop the skills and attitudes essential to working with people from a wide range of backgrounds.

course number: eco 202 - argosy...

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