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Goals
Students
will understand how basic microeconomic concepts can illustrate and
facilitate the analysis of private firm activity, the economic effects
of trade, competition, and industrial and regulatory policy actions by
governments, and other applications.
An important objective is to learn how to use microeconomic
concepts in economic policy decision-making.
The
course is based on the assumption that students have had a basic course
in economics at the college level; accordingly, this course will provide
a concentrated review of the core concepts and demonstrate how they are
applied in real world situations.
Approach
The course will cover fundamental concepts of microeconomics including
the following, emphasizing their practical applications: demand and
supply curves, price and income elasticities, fixed and variable costs,
short-term and long-term equilibrium conditions, competitive conditions
under different market structures, measures of consumer welfare, static
and dynamic economic efficiency, elements of game theory, political
economy and institutional economics.
We
will rely on case studies of policy actions in trade and related policy
areas to understand how microeconomic concepts arise within a real-life
context; material includes documents prepared in support and opposition
of the various positions presented by interested parties.
Texts
and Materials
We will use Schaum’s Outline Series: Microeconomic Theory (3rd.
edition) by Dominick Salvatore as our working text but we will also rely
heavily on Mansfield’s Applied Microeconomics (Norton, 1994).
I also recommend you purchase a copy of Dixit, Avinash &
Barry Nalebuff, Thinking Strategically (Norton, 1991).
Criteria
for Evaluating Teaching and Student Performance
You should be able to describe key microeconomic concepts in their own
words and be able to apply them to the analysis of hypothetical policy
issues involving trade actions and trade-related microeconomic domestic
policy actions. Students should be able to analyze the effects on prices,
wages, profits, jobs, productivity and consumer welfare.
I
will use the first hour of each two-hour class to review microeconomic
theory. The balance of the
period will be spent analyzing the various assigned papers.
You
will have a 30-minute quiz, every Tuesday morning on the material
covered the previous week. Each
of these four quizes will be worth 20% of your grade.
It is possible that I may move the quiz day and time to the
evenings, depending on your schedules.
There will be one final comprehensive exam.
The final exam is 20% of your grade.
Quizes and exam will consist of essays and problems.
Again, I am looking for intuitive critical thinking based on
micro analysis and not necessarily for mathematical skills.
Students
will evaluate the instructor’s performance at the end of the session
on a number of criteria including clarity, availability and grasp of the
material.
Instructions
One
learns micro by doing micro. In
the narrow sense, this means that I expect you to work relevant problems
in Schaum’s. Obviously, neoclassical microeconomics is a powerful tool
and the objective should be to appreciate its logical beauty and
understand its analytical usefulness.
Case
studies examine (a) the economic effects of the Uruguay Round, (b) a
competition policy case involving both potential trade and anti-trust
measures, and issues drawn from the telecom negotiation in the WTO, (d)
a countervailing duty case, and (d) a proposed safeguard action.
Course
Schedule
Week
1:
September 3 and 5
Read:
Shaum’s: Chapter 1-4
Mansfield:
Chapter 1-5
Topics:
Introduction:
Economics and Institutions
Mathematical Tools
Basic Principles of Micro-Economic Analysis
Maximization, Equilibrium, and Efficiency
Marginal Analysis and Opportunity Costs
The Measurement of Elasticities
The Theory of Consumer Choice and Demand
Week
2:
September 10 and 12
Read:
Shaum’s : Chapters 5-8
Mansfield:
Chapter 7-8
Topics:
The Theory of Supply
Week
3:
September 17 and 19
Read:
Schaum’s Chapters 9-12
Mansfield:
10-12
Topics:
Market Structures
Week
4:
September 24-26
Read:
Schaum’s Chapters13-14
Mansfield:
Chapter 15
Topics:
Demand for Inputs and Welfare Economics
Week
5:
October 1 and 3
Applications
Trade
Theory
Overbeek,
Johannes, “Theory of International Trade: The Modern View,” Chapter 4,
in The Modern World Economy: Theories and Policies (Lanham, MD:
University Press of America, 1993).
Hufbauer,
Gary Clyde and Kimberly Ann Elliot, Measuring the Costs of Protection
in the United States, (Washington DC: Institute for International
Economics, 1994)
Dumping
and Countervailing Duties
Krouse,
Clement G. “US Antidumping
Law and Competition in International Trade,” Journal
of the Economics of Business, Vol. 1, No.2, 1994.
Pindyck,
Robert S. and Julio J. Rotemberg, “Are Imports to Blame? Attribution of
Injury Under the 1974 Act,” Journal
of Law and Economics Vol.
30 (April 1987).
Grossman,
Gene M., “Imports as a Cause of Injury: The Case of the U.S. Steel
Industry,”
NBER Working Paper #1494 (November 1984).
Boltuck,
Richard D., “An Economic Analysis of Dumping,”
Swiss Review of International
Competition Law, No. 30 (June 1987).
Protectionism
Carlysle
Ford Runge, "Trade Protectionism and Environmental Regulations: the
New Nontariff Barriers," Northwestern
Journal of International Law and Business Vol. 11 (1990).
Gould,
David and William C. Gruben, “GATT and the New Protectionism,” Economic
Review of the Federal Reserve Bank of Dallas (!994).
Coughlin,
Cletus C., Alec Chrystal & Geoffrey E. Wood., “Protectionist Trade
Policies: A Survey of Theory, Evidence and Rationale,” Review of the Federal Reserve Bank of St. Louis (Jan/Feb 1988).
Topics
in the Theory of Contracts
Williamson,
Oliver, “Credible Commitments: Using Hostages to Support Exchange,” 83
American Economic Review 519 (1983).
Kronman,
Anthony T., “Contract Law and the State of Nature, 1 Journal of Law,
Economics & Organization 5 (1985).
Topics in Antitrust &
Regulation
Caves,
Richard E., “International Trade and Industrial Organization: Problems
Solved and Unsolved,” Harvard
Institute of Economic Research, Discussion Paper No. 1131 (January
1985).
Schumann,
Laurence, Robert P. Rogers and James D. Reitzes, “Case Studies of the
Price Effects of Horizontal Mergers,” (Washington DC: Federal Trade
Commission, 1992).
Masson,
Robert T. and Joseph Shaanan, “Social Costs of Oligopoly and the Value
of Competition,” The Economic
Journal (September 1984) 520-535.
Stewart,
John F. and Sang-Kwon Kim, “Mergers and Social Welfare in U.S.
Manufacturing 1985-86.
Elements
of Game Theory
Dixit,
Avinash K. and Barry J.
Nalebuff, Thinking Strategically (NY: Norton, 1991).
Schelling,
T. “Strategic Analysis and Social Problems,” Chapter 9 in Choice
and Consequence (Cambridge: Harvard University Press, 1984).
Readings
Boltuck,
Richard D., “An Economic Analysis of Dumping,” Swiss Review of International Competition Law, No. 30 (June 1987).
Buffie,
E. and Pablo Spiller, “Trade Liberalization in Oligopolistic Industries:
The Quota Case,” Journal of
International Economics Vol. 20 (1986).
Caves,
Richard E., “International Trade and Industrial Organization: Problems
Solved and Unsolved,” Harvard
Institute of Economic Research, Discussion Paper No. 1131 (January
1985).
Coughlin,
Cletus C., Alec Chrystal & Geoffrey E. Wood., “Protectionist Trade
Policies: A Survey of Theory, Evidence and Rationale,” Review of the Federal Reserve Bank of St. Louis (Jan/Feb 1988).
Gould,
David and William C. Gruben, “GATT and the New Protectionism,” Economic
Review of the Federal Reserve Bank of Dallas (!994).
Grossman,
Gene M., “Imports as a Cause of Injury: The Case of the U.S. Steel
Industry,” NBER Working Paper #1494 (November 1984).
Hufbauer,
Gary Clyde and Kimberly Ann Elliot, Measuring the Costs of Protection
in the United States, (Washington DC: Institute for International
Economics, 1994).
Klein,
Benjamin & Keith Leffler, “The Role of Market Forces in Assuring
Contractual Performance,” 89 Journal
of Political Economy 615 (1981).
Krouse,
Clement G. “US Antidumping
Law and Competition in International Trade,” Journal
of the Economics of Business, Vol. 1, No.2, 1994.
Kronman,
Anthony T., “Contract Law and the State of Nature, 1 Journal of Law, Economics & Organization 5 (1985).
Masson,
Robert T. and Joseph Shaanan, “Social Costs of Oligopoly and the Value
of Competition,” The Economic
Journal (September 1984) 520-535.
Pindyck, Robert S. and Julio J. Rotemberg, “Are Imports to Blame?
Attribution of Injury Under the 1974 Act,” Journal
of Law and Economics Vol.
30 (April 1987).
Carlysle
Ford Runge, "Trade Protectionism and Environmental Regulations: the
New Nontariff Barriers," Northwestern Journal of International Law and Business Vol. 11
(1990).
Schumann,
Laurence, Robert P. Rogers and James D. Reitzes, “Case Studies of the
Price Effects of Horizontal Mergers,” (Washington DC: Federal Trade
Commission, 1992).
Williamson,
Oliver, “Credible Commitments: Using Hostages to Support Exchange,” 83
American Economic Review 519
(1983).
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