#micro syllabus

[thatdoubleninestudies]

Government and public choice

outline and explain the difference between various theories of social welfare and their implications

state Arrow’s impossibility theorem and discuss his hypothesis

describe the potential problems with majority voting

define the median voter theorem.

[thatdoubleninestudies]

Externalities and public goods

define positive and negative externalities, and explain how and why the presence of externalities creates inefficient outcomes

compute the socially efficient outcome, and the outcome in the presence of externalities, and compare the two for standard problems

show (both in theory and in exercises) how taxation, regulation, property rights and licensing can overcome market failure in the presence of externalities

define and give examples of public goods

explain why competitive markets with public goods may not operate efficiently.

[thatdoubleninestudies]

Asymmetric information

describe the inefficiencies that may arise in the presence of asymmetric information

discuss and analyse simple cases of adverse selection, with and without the presence of possible signals

discuss and analyse the problem of adverse selection in insurance markets

explain the conditions under which signalling can overcome the adverse selection problem

define the moral hazard problem and give examples of situations in which it may arise

discuss and analyse the principal–agent problem and suggest appropriate solutions.

[thatdoubleninestudies]

General equilibrium and welfare economics

define the competitive general equilibrium

analyse the competitive equilibrium in the case of a pure exchange economy

define Pareto efficiency and apply it to a general equilibrium setting

find the contract curve

explain the welfare theorems

discuss the theory of second best.

[thatdoubleninestudies]

Introduction to game theory

explain what a static game is, and compute the Nash equilibria of static games in pure and mixed strategies

define what a dominant strategy is, and find dominant strategy equilibria

explain what a dynamic game is, and compute the subgame perfect Nash equilibria

analyse finitely and infinitely repeated games.

[thatdoubleninestudies]

Competition and monopoly

derive a price-taking firm’s supply function from its cost function

compute the equilibrium price and quantity in markets with perfect competition and monopoly, and discuss the results in terms of total surplus

outline appropriate regulatory responses to different types of monopoly

define the three different types of price discrimination and compare their welfare implications to non-discriminatory monopoly pricing.

[thatdoubleninestudies]

The firm

describe the objective of a firm, and the reasons for its existence

draw the isoquants starting from the firm’s production function

compute the marginal physical product of an input and describe what type of marginal returns to that input are implied by the production function

calculate the returns to scale of a production function

outline the difference between the short run and the long run

compute the optimal input combination and the long-run cost function for different production functions

understand whether a firm displays economies of scale

compute the short-run cost function.

[thatdoubleninestudies]

Choice under uncertainty

demonstrate how to use a state-contingent diagram to analyse choice under uncertainty

demonstrate how to use expected utility theory to analyse choice under uncertainty

define risk aversion, risk neutrality and risk propensity and show the differences between individuals with different risk attitudes both in the state-contingent framework and in the expected utility one

discuss the insurance problem and explain why risk-averse people are willing to pay for insurance.