Econ 201 Week 10 Notes
Econ 201 Week 10 Notes Phil 101
Popular in Philosophical Problems
Popular in PHIL-Philosophy
This 5 page Class Notes was uploaded by Quintin Notetaker on Tuesday January 5, 2016. The Class Notes belongs to Phil 101 at University of Oregon taught by Lauren Eichler in Fall 2016. Since its upload, it has received 31 views. For similar materials see Philosophical Problems in PHIL-Philosophy at University of Oregon.
Reviews for Econ 201 Week 10 Notes
Can you just teach this course please? lol :)
-Mrs. Gunner Jones
Report this Material
What is Karma?
Karma is the currency of StudySoup.
You can buy or earn more Karma at anytime and redeem it for class notes, study guides, flashcards, and more!
Date Created: 01/05/16
Nov. 28, 2015 Week 10 for Ec 201: Assignment Five and the Final Exam Howdy Everyone: The final week of the course is here Yikes! So these Junk Economics 201 emails will soon conclude. From my end, the quarter certainly has moved by quickly. Several items: 1. Be sure and complete Assignment Five, which covers Chapter 15: Public Goods and Public Choice; and Chapter 18: International Trade and Public Policy. The last day for completion of the assignment is Saturday, Dec. 5th. You should conclude this assignment and study the answer key to Assignment Five prior to taking the final exam! 2. If you have not already done so, sign up with SSIL for a date to take the final exam ASAP. The last day to take the exam is Wednesday, Dec. 9th. Do not wait, as about a dozen courses use SSIL for exams, and testing slots fill quickly. 3. I repeat the SUMMARIES, CHECKLISTS, AND PRACTICE QUESTIONS AND ANSWERS that we emailed last week at the end of this email, for both the new Chapters 15 and 18 and the review chapters that will be on the final. Hope all your finals go well! Steve Haynes 1. CHAPTER 15, PUBLIC GOODS AND PUBLIC CHOICE (10 questions). SUMMARY: Public Goods are nonrivalrous and nonexcludable. The benefits of producing or consuming public goods good are not confined to the producer and/or consumer of the good. The markets for these goods will be inefficient because quantities produced will be too low. The government can internalize the positive externality by paying a subsidy equal to the external benefit. However, the government may make inefficient decisions due to inadequate information such as: costs and benefits, inflexible tax systems, and specialinterest lobbying. Voluntary contributions cannot be relied upon to ensure optimal provision of public goods because of the freerider problem. The free rider problem occurs when those who do not pay for a good or service cannot be prevented from using the good or service. Because public goods are nonexcludable, people have an incentive to understate their true willingness to pay for these goods. Public choice economics provides four theories of government behavior: 1. That the government takes actions to promote efficiency; 2. That the voters tell the government what to do and thus government actions reflect the will of the voters; 3. That government officials pursue their own selfinterest; 4. and that specialinterest groups manipulate the government. CHECKLIST: a. Public Goods (a good that is available to everyone to consume, regardless of who pays and who doesn't) are nonrival in consumption (available for everyone to consume) and nonexcludable (it is impractical to exclude people who don't pay). Private Goods (a good that is consumed by a single person or household) are rival in consumption (only one person can consume the good) and excludable (it is possible to exclude a person who does not pay for the good). Know examples of these concepts. Note that governments, through taxation, make collective decisions about the provision of public goods. How can some private goods generate spillover benefits, e.g., education? b. FreeRider Problem: person will try to get the benefit of a public good without paying for it, i.e., get a free ride at the expense of others who actually pay for the good. Know examples of this concept, e.g., national defense. How might voluntary contributions or appealing to people's sense of civic or moral responsibility help reduce the free rider problem? c. Public Choice Economics how governments actually operate. Median voter rule suggests that choices made by government reflects the preferences of the median voter. d. Alternative models of governments selfinterest and special interests. PRACTICE QUESTIONS AND ANSWERS: See QUES15 and ANS15 #123; ASSIGNMENT 5 QUESTIONS. CHAPTER 18: INTERNATIONAL TRADE AND PUBLIC POLICY (12 questions) SUMMARY: This chapter discusses the benefits of specialization and trade. It also explores the tradeoffs associated with protectionist policies. The basic conflict is often between us as consumers and us as workers. The main points of the chapter are specialization and trade between nations as determined by comparative advantage will benefit both countries. Therefore free trade is not a zero sum game and nations should not become selfsufficient autarkies. Any restrictions on trade, whether in the form of a ban, quotas or VER’s raises the domestic price, helping domestic producers and harming domestic consumers. Retaliation leaves a country’s exporters vulnerable if that nation restricts another’s exports. A tariff restricts trade and raises revenue for the government. A quota restricts trade and raises revenue for importers. Nations have reduced trade restrictions through multilateral agreements under the auspices of the GATT. The WTO was created to enforce GATT. Nations have also formed smaller, regional freetrade zones such as NAFTA, the EU and APEC. Antidumping laws and the threats of lawsuits often act to limit trade. CHECKLIST: a. Review how a production possibility curve illustrates the principle of opportunity cost (Table 18.1 and Fig. 18.1). b. Autarky is the situation in which each country is selfsufficient, so there is no trade. Hence, each country is forced to consumer on or inside its production possibility curve. c. For a nation to have a Comparative Advantage in a good it must have a lower opportunity cost of producing that good. Compare this to Absolute Advantage. d. Consumption Possibilities Curve shows the combinations of two goods that can be consumed in a nation when that nation specializes in producing the good it has a comparative advantage and trading some of it to the other nation (Fig. 18.2). Note it lies beyond the production possibilities curve, hence illustrates the benefits from specialization and trade (i.e., avoiding autarky). e. If a country has a comparative advantage in good X, then a shift to free trade will benefit those workers who produce good X, harm the workers who produce the "other" good, but benefit the country as a whole. f. Protectionist Policies Outright import ban (Fig. 18.3). And see Fig. 18.4 for effects of an import quota (a limit on the amount of a good that can be imported); voluntary export restraint (a country voluntarily decreases its exports); and tariff (a tax on an imported good). g. Rationales for Protectionism shield workers from foreign competition (poor argument); and infant industry protection (possibly valid). h. International Tariff and Trade Agreements: World Trade Organization (WTO) formed to enforce agreements. Two very important ones NAFTA and European Union (EU). i. Some countries have pursued Dumping, i.e., in order to increase exports, have priced export goods lower than the market price of the good in their home market (or its production costs). i. Some argue that trade has tended to increase income inequality. PRACTICE QUESTIONS AND ANSWERS: See QUES18 and ANS18 #140; ASSIGNMENT 5 QUESTIONS. B. The following are CONDENSED CHECKLISTS on earlier chapters adapted from past emails. If you wish to review the more DETAILED CHECKLISTS, see past emails which are posted on Canvas. For the final, review these topics in the text, relevant practice questions, and other related materials on Canvas (again, the number of questions on the final is in parentheses). Four earlier chapters that you have studied are not included on this list below Chapters 1, 2, 3, and 6 and I recommend that you ignore these chapters in preparing for the final exam. 1. CHAPTER 4, SUPPLY, DEMAND, AND MARKET EQUILIBRIUM (6 questions) a. Excess supply, excess demand, how excess demand causes prices to rise, and excess supply causes prices to fall (Fig. 4.6). b. Normal and inferior goods, substitutes, and complements. c. The several factors that cause demand to shift, including direction of the shifts (Tables 4.1 and 4.2). d. The several factors that cause supply to shift, including the direction of the shifts (Tables 4.3 and 4.4). e. How shifts in demand affect equilibrium price and quantity. Repeat for shifts in supply. Repeat for combined shifts in demand and supply. (Fig. 4.13) 2. CHAPTER 5, ELASTICITY (5 questions) a. The definition of price elasticity of demand: percent change in quantity demanded divided by percent change in price, and how to compute it using the initial value formula. b. Cases of elastic demand (elasticity greater than one), inelastic demand (elasticity less than one), and unitary elasticity (elasticity of one), how these look graphically, and the two extreme cases (Fig. 5.1). c. Relationship between elasticity and availability of substitutes. d. Relationship between elasticity and total revenue (Tables 5.5 and 5.6). 3. CHAPTER 7, CONSUMER DEMAND, SKIP PP. 165176 (5 questions) a. Budget constraint (Fig. 7.1). b. Total Utility and Marginal Utility (Fig. 7.2) c. Equimarginal Rule: Consumers pick the combination of two activities where the marginal utility (benefit) per dollar for the first activity equals the marginal utility (benefit) per dollar for the second activity. d. There are two conditions for utility maximization: the equimarginal rule, and affordability, i.e., consumers choose goods on or within the budget line. e. Derive demand curve by decreasing price and reequilibrate with equimarginal rule; see Figure 7.5. f. A decrease in price of a good will cause both a substitution and income effects. See Figure 7.6. 4. CHAPTER 8, FIRM SUPPLY (5 questions) a. Difference between economic cost and accounting cost (Table 8.1). b. Shortrun versus longrun. c. Diminishing marginal returns beyond 3 units in Fig. 8.1. d. Meaning and general shape of shortrun average and marginal cost curves (Fig. 8.4, 11.4). e. Meaning and general shape of longrun average cost (Fig. 8.5 to 8.7). 5. CHAPTER 9, PERFECT COMPETITION (6 questions) a. Definition and features. b. Firms are price takers under perfect competition. c. Profit maximizing output level is where price (also marginal revenue under competition) equals marginal cost (Fig. 9.3). Identify profits. d. Firm's shortrun supply is marginal cost curve above average variable cost. e. Short and longrun effects of an increase in demand (Figs. 9.89.11). f. GREAT SUM in Table 9.1 of all market structures! 6. CHAPTER 10, MONOPOLY (6 questions) a. Definition and features. b. Faces a downward sloping demand curve. c. Profit maximizing output is where marginal revenue equals marginal cost, and then draw line vertically to demand to obtain price (Fig. 10.2). If produce to the left of point where MR=MC, should increase production, etc. Per unit profit is distance between equilibrium price and average total cost. d. Monopoly produces less and charges a higher price relative to the competitive firm, and excess profits persist because entry is blocked (Fig. 10.2). e. Natural monopoly. Patents to encourage innovation. f. Price discriminating monopolist (Fig. 10.5). 7. CHAPTER 11, MONOPOLISTIC COMPETITION (5 questions) a. Definition and features. b. Faces a downward sloping demand curve, like a monopolist. c. If price is greater than average total cost, i.e., if economic profit is positive, then firms enter the market, which shifts the demand that one firm faces to the left (Fig. 11.2). d. Tradeoffs: charge a price lower than a monopolist, but have higher production costs than a perfectly competitive firm. 8. CHAPTER 12, OLIGOPOLY (5 questions) a. Definition and features. b. Faces a downward sloping demand curve, like a monopolist. c. Identify equilibrium output (MR=MC), price (draw line up to demand curve), and total profit (per unit profit times equilibrium output). Fig. 12.2A. d. Charge a higher price and produce a lower output than the perfectly competitive firm, but charge a lower price and produce a larger output than a monopolist. e. Game trees, e.g., Prisoner's Dilemma Fig. 12.8. f. Price Fixing Fig. 12.7. PLUS EXCELLENT SUMMARY TABLE 9.1
Are you sure you want to buy this material for
You're already Subscribed!
Looks like you've already subscribed to StudySoup, you won't need to purchase another subscription to get this material. To access this material simply click 'View Full Document'