# Microeconomic Theory

Course Web Site: http://isites.harvard.edu/course/ext-23285/2013/spring

Professor: Bruce Watson

econe1010@dce.harvard.edu

Lectures: Mondays 7:40 – 9:40 Science Center A

Teaching Assistants:

Teo Nicolais (For distance students) teo.the.ta@gmail.com

Sections (On-line) at http://chat.dce.harvard.edu:

To Be Announced

Jodi Beggs (For in-class students) jodi@post.harvard.edu

Sections: Tuesdays 6:30-8:00 (EST) Location TBA

Office Hours: Mondays and Tuesdays, 8:00 – 9:30 (EST) Location 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 two: Insurance, and asset markets.

Then we look at the ways firms make and coordinate their decisions under varying market structures, including perfect competition, monopoly, monopolistic competition and oligopoly. We examine strategic behavior in oligopolistic markets making use of concepts from game theory, such as dominant strategies and Nash equilibrium.

We next investigate factor markets, analyzing labor supply and demand, capital supply and demand, and finally, how firms decide what combination of labor and capital to use in order to produce a given level of output.

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.

Next, we undertake an analysis of the sum total of interactions between markets and the agents in those markets. Known as general equilibrium, the basics of this topic can be illustrated with a graphical device known as the Edgeworth Box.

Finally, we conclude the semester with a survey of three issues which arise when one or more of the assumptions undergirding perfect competition are violated: Asymmetric information, externalities, and public goods.

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 held on Monday, March 11, and the final will be held on Monday, May 13.

Detailed 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.

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....

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