• Trade flows
• Resource flows
• Information and technology flows
• Financial flows

• Specialization allows for overall increase in output and income
  
• Production Possibilities Analysis
• Assumptions and Comparative Costs
  
• Terms of Trade: a mutually beneficial agreement in which each benefits better than they would if they were to continue domestic production by itself

• This website play a major role in your Econ studies in Welker's. This is your class Wiki, where you will make regular contributions to a comprehensive study guide covering the topics from the AP and IB Econonomics courses.
• In addition, this wiki will serve as a discussion forum to extend class discussions beyond the classroom, a chat room to gather and talk economics with one another and your teacher, a study center to review for unit tests and exams, and a social network for enhancing your understanding of the principles of economics.
• The Wiki is to be used in partnership with Welker's Wikinomics Blog, where Mr. Welker and other Economics educators write regular posts aimed at extending the content knowledge learned in AP and IB Economcis beyond the classroom and into the real world.
• Contributions to the Wiki and the Blog are a required part of your grade in Welker's class. Scroll down for details.
  

• Microeconomics Unit Overview (IB Units 1 & 2)
• Microeconomics Units homepage

• Macroeconomics Unit Overview (IB Unit 3)
• Macroeconomics Units homepage

• International Economics Unit Overview (IB Unit 4)

• Development Economics Unit Overview (IB Unit 5)
  

• Student Edition - CLICK HERE
• Instructor Edition (password required) - CLICK HERE

• Unit quizzes and tests will be given every two to four weeks
• Assessments will consist of multiple choice, short and long response, data and document based questions, and free response questions (AP only).

• contribute to at least THREE pages from the unit's Wiki,
  
• respond to or begin at least ONE thread in the wiki's discussion forum,
  
• post comments to at least THREE posts on Welker's blog or the class blog, and
  
• Write at least ONE blog post on his or her class's group blog.

1. Contributed to at least three pages from the the current Unit's Wik: 5 points per contribution = 15 points
2. Responded to or start at least one thread in the wiki's discussion forum: 10 points
3. Commented on at least three blog articles: 15 points
   
4. Authored at least one new post for your class's group blog relating to the topics covered in the class: 20 points

• Natural factors; human factors; physical capital and technological factors; institutional factors. Externalities, income distribution and sustainability.

• The poverty cycle. Institutional and political factors. International trade barriers.
• International financial barriers. Social and cultural factors acting as barriers.

• The Harrod-Domar growth model. Structural change/dual sector model.
• Aid – types of aid (bilateral; multilateral; grant aid; soft loans; official aid; tied aid)
• Export led growth/outward-oriented strategies. Import substitution/inward-oriented strategies/protectionism.
• Commercial loans. Foreign direct investment. Micro-credit schemes. Fair trade organizations.
• Sustainable development.

• Evaluation of trade v aid and market-led v interventionist strategies.
• Evaluation of the role of international financial institutions (the IMF; the World Bank; private sector banks; non-government organisations; multinational corporations/transnational corporations; commodity agreements).

• Differences in factor endowments. Variety and quality of goods. Gains from specialization. Political reasons.
• Absolute and comparative advantage. Opportunity cost. The limitations of the theory.
• Definition of the Terms of Trade. Consequences of a change in the terms of trade – especially deterioration for developing countries.
• Measurement of the Terms of Trade. Short and long run causes of changes in a country’s Terms of Trade. Elasticity of demand for exports and imports.

• Definition of free trade. Arguments for protectionism. Arguments against protectionism.
• Types of protectionism.

• Globalization. Trading blocs – free trade areas; customs unions; common markets.
• Trade creation and trade diversion. Obstacles to achieving integration.

• Measurement of the Balance of Payments.
• Consequences of a deficit or surplus in current or capital accounts. Methods of correction.
• The Marshall-Lerner condition and the J-curve.

• Fixed, floating and managed exchange rates. Depreciation v devaluation and appreciation v revaluation. Factors affecting exchange rates.
• Advantages and disadvantages of different exchange rate systems. Advantages and disadvantages of single currencies/monetary integration. Purchasing Power Parity (PPP).

A. National income accounts

1. Circular flow
2. Gross domestic product
3. Components of gross domestic product
4. Real versus nominal gross domestic product

B. Inflation measurement and adjustment

1. Price indices
2. Nominal and real values
3. Costs of inflation

C. Unemployment

1. Definition and measurement
2. Types of unemployment
3. Natural rate of unemployment

1. State the purposes of national income accounting.
2. List the components of GDP in the expenditures approach and in the income approach.
3. Compute GDP using either the expenditure or income approach when given national income data.
4. Differentiate between gross and net investment
5. Explain why changes in inventories are investments.
6. Discuss the relationship between net investment and economic growth

1. Define GDP verbally and in written format; learn and use the formula for deriving GDP.
2. Given data on nominal GDP, calculate the real GDP using the price deflator/price index.
3. Discuss the limitations of GDP as a measurement of economic well-being.
4. Explain how economists define economic growth, how often it is measured and in what way it is measured (GDP per capita), to understand what are the main sources of growth.
5. Learn how different countries’ economies have grown historically and learn how the business cycle contributes to these variations in economic growth.

1. Define two measures of economic growth.
2. Explain why growth is a desirable goal.
3. Identify two main sources of growth.
4. Explain the “rule of 70.”
5. Explain what is meant by a business cycle.
6. Identify two types of non-cyclical fluctuations in business activity.
7. Explain why business cycles affect capital and consumer durable goods industries more than non-durable goods industries.
8. State causes of frictional, cyclical, and structural unemployment.
9. Identify the full employment or natural rate of unemployment.
10. Identify the economic costs of unemployment and the groups that bear unusually heavy unemployment burdens.

1. State causes of frictional, cyclical, and structural unemployment.
2. Identify the full employment or natural rate of unemployment.
3. Identify the economic costs of unemployment and the groups that bear unusually heavy unemployment burdens.
4. Define inflation and the states the different stages/measurements of inflation
5. Identify the causes for demand pull and cost-push inflation
6. Identify the losers and the winners during times of inflation
7. Explain how inflation affects economic growth and other economic goals, ( price stability, economic security)

1. Identify the losers and the winners during times of inflation
2. Explain how inflation affects economic growth and other economic goals, ( price stability, economic security)

A. Aggregate demand

1. Determinants of aggregate demand
2. Multiplier and crowding-out effects

B. Aggregate supply

1. Short-run and long-run analyses
2. Sticky versus flexible wages and prices

3. Determinants of aggregate supply

C. Macroeconomic equilibrium

1. Real output and price level
2. Short and long run
3. Actual versus full-employment output
4. Economic fluctuations

1. Examine the relationships between several economic aggregates.
2. Recognize, construct, and explain the consumption, saving, and investment schedules.
3. Identify the determinants of the location of the consumption and saving schedules.

1. Differentiate between the average and marginal propensities to consume (and save).
2. Identify the immediate determinants of investment and construct an investment demand curve.
3. Identify the factors that may cause a shift in the investment-demand curve or schedule.

1. Define aggregate demand and aggregate supply
2. Give three reasons why the aggregate demand curve slopes downward.
3. Illustrate, label, and explain the three ranges of the aggregate supply curve.
4. State the determinants of the aggregate demand curve’s location.

1. Explain the shape of the aggregate supply curve.
2. Indicate the determinants of the supply curve’s location.
3. Explain how a market economy moves to equilibrium price and output level.
4. Predict effects of an increase in aggregate demand when economy is in (a) horizontal range, (b) intermediate range, and (c) vertical range.
5. Explain how the multiplier is weakened in the intermediate or vertical range of aggregate supply.
6. State three basic causes of changes in aggregate supply differentiating between leftward and rightward shifts of the curve.

1. Distinguish between discretionary and nondiscretionary fiscal policy.
2. Differentiate between expansionary and contractionary fiscal policy.
3. Recognize the conditions for recommending an expansionary or contractionary fiscal policy.
4. Explain expansionary fiscal policy and its effects on the economy and Federal budget.
5. Explain contractionary fiscal policy and its effects on the economy and Federal budget.
6. Describe the two ways to finance a government budget deficit and how each affects the economy.
7. Describe the two ways to handle a government budget surplus and how each affects the economy.
8. Give two examples of how built‑in stabilizers help eliminate recession or inflation.
9. Explain the differential impacts of progressive, proportional, and regressive taxes in terms of stabilization policy.

1. Explain the significance of the “full-employment budget” concept.
2. List three timing problems encountered with fiscal policy.
3. State political problems that limit effective fiscal policy.
4. Explain and recognize graphically how crowding out and inflation can reduce the effectiveness of fiscal policy.
5. Give two examples of complications that may arise when fiscal policy interacts with international trade.
6. Give an example of supply‑side fiscal policy and three possible positive effects from it.

A. Money, banking, and financial markets

1. Definition of financial assets: money, stocks, bonds
2. Time value of money (present and future value)

3. Measures of money supply
4. Banks and creation of money
5. Money demand
6. Money market
7. Loanable funds market

B. Central bank and control of the money supply

1. Tools of central bank policy
2. Quantity theory of money
3. Real versus nominal interest rates

1. Explain and recognize graphically how crowding out and inflation can reduce the effectiveness of fiscal policy.
2. Give two examples of complications that may arise when fiscal policy interacts with international trade.
3. List and explain the three functions of money.
4. Define the money supply, M1 and near‑monies, M2, and M3.
5. State three reasons why currency and checkable deposits are money and why they have value.

1. Identify two types of demand for money and the main determinant of each.
2. Describe the relationship between GDP and the interest rate and each type of money demand.
3. Explain what is meant by equilibrium in the money market and the equilibrium rate of interest.
4. Explain the relationship between bond prices and the money market.
5. Describe the structure of the U.S. banking system.
6. Explain why Federal Reserve Banks are central, quasi‑public, and bankers’ banks.
7. Describe seven functions of the Federal Reserve System and point out which role is the most important.

1. Recount the story of how fractional reserves began with goldsmiths.
2. Explain the effects of a currency deposit in a checking account on the composition and size of the money supply.
3. Compute a bank’s required and excess reserves when you are given its balance‑sheet figures.
4. Explain why a commercial bank is required to maintain a reserve and why it isn’t sufficient to cover deposits.
5. Describe what happens to the money supply when a commercial bank makes a loan or buys securities.
6. Describe what happens to the money supply when a loan is repaid or a bank sells its securities.
7. Explain what happens to a commercial bank’s reserves and checkable deposits after it has made a loan.
8. Describe how a check drawn on one commercial bank and deposited in another will affect the reserves and excess reserves in each bank after the check clears.
9. Describe what would happen to a single bank’s reserves if it made loans that exceeded its excess reserves.

1. Explain how it is possible for the banking system to create an amount of money that is a multiple of its excess reserves when no single bank ever creates money greater than its excess reserves.
2. Compute the size of the monetary multiplier and the money‑creating potential of the banking system when provided with appropriate data.
3. State the two leakages that reduce the money‑creating potential of the banking system.
4. Identify the goals of monetary policy.
5. List the principal assets and liabilities of the Federal Reserve Banks.
6. Explain how each of the three quantitative controls may be used by the Fed to expand and to contract the money supply.
7. Describe three monetary policies the Fed could use to reduce unemployment.
8. Describe three monetary policies the Fed could use to reduce inflationary pressures in the economy.

1. Describe three monetary policies the Fed could use to reduce unemployment.
2. Describe three monetary policies the Fed could use to reduce inflationary pressures in the economy.
3. Explain the cause‑effect chain between monetary policy and changes in equilibrium GDP.
4. Demonstrate graphically the money market and how a change in the money supply will affect the interest rate.
5. Show the effects of interest rate changes on investment spending.
6. Describe the impact of changes in investment on aggregate demand and equilibrium GDP.
7. Contrast the effects of an easy money policy with the effects of a tight money policy.
8. Identify the federal funds rate and its importance for monetary policy.
9. List four shortcomings and three strengths of monetary policy.
10. Explain the net export effect of an expansionary and a contractionary monetary policy.

1. Identify the federal funds rate and its importance for monetary policy.
2. List four shortcomings and three strengths of monetary policy.
3. Explain the net export effect of an expansionary and a contractionary monetary policy.

A. Fiscal and monetary policies

1. Demand-side effects
2. Supply-side effects
3. Policy mix
4. Government deficits and debt

B. Inflation and unemployment

1. Types of inflation

a. Demand-pull inflation
b. Cost-push inflation

2. The Phillips curve: short run versus long run
3. Role of expectations

A. Investment in human capital
B. Investment in physical capital
C. Research and development, and technological progress
D. Growth policy

1. Explain the difference between the short-run and long-run aggregate supply curves and their significance for economic policy.
2. Distinguish between demand-pull and cost-push inflation using the aggregate demand-aggregate supply model.
3. Explain and construct a traditional short-run Phillips Curve using the aggregate demand-aggregate supply model.
o Ch. 16

1. Differentiate between the short-run and long-run Phillips Curves.
2. Identify the supply‑side shocks to the U.S. economy in the 1970s and 1980s.
3. Use an aggregate demand‑aggregate supply graph to show how supply‑side shocks led to stagflation in the 1970s and 1980s.
4. Explain why demand‑management policies cannot eliminate stagflation.
o Ch. 16

1. Explain two possible effects of taxation on aggregate supply.
2. Explain the Laffer Curve concept and list three criticisms of this theory.
o Ch. 16

1. Identify six main ingredients in economic growth.
2. Show economic growth using production possibilities analysis and aggregate demand‑aggregate supply analysis.
3. Describe the growth record of the U.S. economy since 1940, including two measures of its long‑term growth rates.

o Ch. 17

1. Identify six major factors that contributed to U.S. economic growth according to empirical studies.
2. List five reasons for increasing returns in the New Economy.
3. Give four positive side effects to New Economy besides improved living standards.

o Ch. 17

1. Differentiate between deficit and debt.
2. Explain each of the three budget philosophies.
3. Identify three principal causes of the public debt.
4. State the absolute size of the debt and the relative size as a percentage of GDP.
5. Describe the annual interest charges on the debt, who holds the debt, and the impact of inflation on the debt.

o Ch. 18

1. Explain why the debt can also be considered public credit.
2. Identify and discuss two widely held myths about the public debt.
3. Explain the real or potential effect of the debt on income distribution, economic incentives, fiscal policy, and private investment.
4. State how debt plays a positive role in society.
5. Explain the four policy options for the current and future surpluses.
6. Describe how budget deficits are related to trade deficits.

o Ch. 18

1. Contrast the classical and Keynesian views of the aggregate supply curve.
2. Compare the classical and Keynesian views of the stability of the aggregate demand curve.
3. Give two reasons for macroeconomic instability according to mainstream economists.
4. Explain the equation of exchange.
5. Identify the single most important cause of macroeconomic instability according to the monetarists.
6. Explain the main reasons for macro economic instability according to the real-business-cycle theory.

o Ch. 19

1. Explain the view of self-correction held by mainstream economists.
2. List three reasons why a higher wage could result in greater efficiency.
3. Explain how insider-outsider relationships contribute to downward wage inflexibility.
4. Describe the monetary rule and explain why monetarists prefer it to discretionary monetary policy.
o Ch. 19

A. Balance of payments accounts

1. Balance of trade
2. Current account
3. Capital account

B. Foreign exchange market

1. Demand for and supply of foreign exchange
2. Exchange rate determination
3. Currency appreciation and depreciation

C. Net exports and capital flows

1. Links to financial and goods markets

1. Summarize the importance of international trade to the U.S. in terms of overall volume.
2. List the major imports and exports of the United States.
3. State two economic points that explain why nations trade.
4. Compute, when given appropriate data, the relative costs of producing two commodities in two countries and determine which nation has the comparative advantage in each good.
5. Compute, when given appropriate data, the range for the terms of trade.
6. Calculate the potential gains from trade and specialization for each nation and the world when given appropriate data.
7. State the economist’s case for free trade.

o Ch. 37

1. Explain the relationship between world prices and American export supply curve, and the relationship between world prices and American import demand curve.
2. Explain international equilibrium price and quantity using a two-nation market model for import demand and export supply.
3. Identify four types of trade barriers.
4. Describe the economic impact of tariffs, including both direct and indirect effects.
5. Contrast the economic impact of a quota with that of a tariff.
6. List seven arguments in favor of protectionist barriers, and critically evaluate each.
7. Identify the costs of protectionist policies and their effects on income distribution.
8. Describe the major provisions of the WTO.

o Ch. 37

1. Explain how U.S. exports create a demand for dollars and a supply of foreign exchange; and how U.S. imports create a demand for foreign exchange and a supply of dollars.
2. Explain and identify the various components of the balance of payments.
3. Identify trade and balance of payments deficits or surpluses when given appropriate data.
4. Explain how a nation finances a “deficit” and what it does with a “surplus.”
5. Explain how exchange rates are determined in a flexible system.

o Ch. 38

1. Explain how flexible exchange rates eliminate balance of payments disequilibria.
2. List five determinants of exchange rates.
3. List three disadvantages of flexible exchange rates.
4. List three ways a nation could control exchange rates under a fixed‑rate system.
5. Describe a system based on the gold standard, the Bretton Woods system, and a managed float exchange rate system.
6. Describe two effects of a trade deficit.

o Ch. 38

1. Scarcity, choice, and opportunity cost
2. Production possibilities curve
3. Comparative advantage, absolute advantage, specialization, and trade
4. Economic systems
5. Property rights and the role of incentives
6. Marginal analysis

1. Introduce opportunity cost, decisions, scarcity and tradeoffs
2. Understand the “economic problem”: infinite human wants and desires, finite resources
3. Explain the three basic economic question: a) what to produce, b) how to produce, c) for whom to produce
4. Identify the four productive resources (factors of production)

1. Explore the role of scarcity and opportunity costs in the study of economics
2. Review the three basic economic questions
3. Introduce Production Possibilities Curve as a graphical representation of tradeoffs and opportunity cost

1. Apply the concept of opportunity costs to real world examples
2. Practice using PPCs to model scarcity, trade-offs, and begin discussing comparative advantage.

1. Introduce the circular flow of resources between the firms and households,
2. Learn the four productive resources: land, labor, capital and entrepreneurship (refer to them as factors of production and inputs as well),
3. Examine how economists develop models of behavior of consumer, business and governments engaged in the production, exchange and consumption of goods and services

1. Introduce the following concepts: Comparative and Absolute Advantage, Specialization in Trade, Connection to Opportunity Cost
2. Use data to determine absolute and comparative advantage by calculating the opportunity cost.
3. Using a grid to make these calculations

1. Students will review the main concepts from Unit 1
2. Unit 1 Test

1. Market equilibrium
2. Determinants of supply and demand
3. Price and quantity controls
4. Elasticity

1. Consumer surplus, producer surplus, and market efficiency
2. Tax incidence and deadweight loss

1. Introduce concept of demand as an economic principle
2. Define demand versus desire
3. Learn how demand is represented through a demand schedule and in demand curve (2 economic models)
4. Introduce concept of Utility as an economic measure of well-being and the law of diminishing marginal utility

1. Learn how determinants of demand shift the demand curve to right or left
2. Explain the downward sloping Demand curve as representing the economic principles of diminishing marginal utility, income and substitution effects
3. Apply knowledge of determinants of demand to various scenarios
4. Introduce the concept of consumer surplus

1. Define price elasticity of demand
2. Apply the law of demand to the price elasticity of demand
3. Understand the factors that determine whether the price elasticity of demand is elastic or inelastic
4. Compare the elasticities of different goods
5. Calculate the price elasticity of a good
6. Identify the determinants of elasticity of Demand

1. Understand the factors that determine whether the price elasticity of demand is elastic or inelastic.
2. Be able to recognize that the slope of the demand curve reflects relative elasticity
3. Learn the difference between price elasticity, cross elasticity and income elasticity

1. Simulate an oral auction in order to introduce the concept of a Supply schedule
2. Derive supply, the law of supply, the supply curve from the simulation
3. Brainstorm the determinants of supply and apply these to the example from the auction
4. Practice creating supply schedule, curves, shifting supply curves
5. Introduce market equilibrium as the intersection of the Demand and Supply curves

1. Learn about the determinants of supply elasticity
2. Understand that equilibrium price represents a trade-off for buyer and seller
3. Examine the impacts of government intervention in the market equilibrium

1. Examine the impact on efficiency of excise taxes, price ceilings and price floors
2. Learn how a tax burden is shared between producers and consumers.

1. Practice graphing the impacts of government interventions (ceilings, floors and excise taxes) on consumer and producer surplus, illustrating efficiency loss
2. Review concepts on Demand, Elasticity, Supply, Equilibrium and government interventions

• Illustrate and correctly label a supply and demand graph.

• Graphically demonstrate the difference between shifts and movements along demand and supply curves
• Show the effects of a price ceiling and price floors

• Draw and illustrate an elastic and inelastic demand curves and supply curves
• Draw and illustrate consumer/producer tax burden given an elastic and inelastic demand curve
• Given a change in supply, compare and contrast the effects of price and quantity changes with elastic and inelastic demand curves

1. Total utility and marginal utility
2. Utility maximization: equalizing marginal utility per dollar
3. Individual and market demand curves
4. Income and substitution effects

1. Identify the factors that affect consumer behavior.
2. Learn about utility and the role it plays in maximizing the satisfaction of a consumer.
3. Learn how consumers measure and use their utility for a product/s as a way to make decision about the bundle of goods and services that they purchase.
4. Examine how these ideas when applied to real life situations explain why people or companies behave the way that they do

1. Understand how to calculate marginal utility per dollar
2. Learn how to use the utility maximization rule and use it given a set income,
3. Learn how to identify implicit versus explicit costs of production,
4. Calculate accounting, economic and normal profits given a production scenarios

1. Production functions: short and long run
2. Marginal product and diminishing returns
3. Short-run costs
4. Long-run costs and economies of scale
5. Cost minimizing input combination

1. Explain the law of diminishing returns
2. Compute marginal and average product when given total product data
3. Explain the relationship between total, marginal, and average product

1. Distinguish between fixed, variable and total costs
2. Explain the difference between average and marginal costs
3. Compute and graph AFC, AVC, ATC, and marginal cost when given total cost data
4. Explain how AVC, ATC, and marginal cost relate to one another
5. Relate average product to average variable cost, and marginal product to marginal cost

1. Explain what can cause cost curves to rise or fall
2. Explain the difference between short‑run and long‑run costs
3. State why the long‑run average cost is expected to be U‑shaped
4. List causes of economies and diseconomies of scale
5. Indicate relationship between economies of scale and number of firms in an industry
6. Understand the relationship between the shape of a long-run ATC curve and market structure

• Draw and interpret a production function graph.
• Draw and interpret a total-cost graph and average-cost graphs.
• Identify average-fixed, average-variable, and average-cost curves and marginal cost.

1. Profit:

a. Accounting versus economic profits
b. Normal profit

c. Profit maximization: MR=MC rule

2. Perfect competition

a. Profit maximization
b. Short-run supply and shutdown decision
c. Behavior of firms and markets in the short run and in the long run
d. Efficiency and perfect competition

3. Monopoly

a. Sources of market power
b. Profit maximization
c. Inefficiency of monopoly
d. Price discrimination
e. Natural monopoly

4. Oligopoly

a. Interdependence, collusion, and cartels

b. Game theory and strategic behavior

5. Monopolistic competition

a. Product differentiation and role of advertising
b. Profit maximization
c. Short-run and long-run equilibrium
d. Excess capacity and inefficiency

1. List the four basic market models and characteristics of each.
2. Describe characteristics of a purely competitive firm and industry.
3. Explain how a purely competitive firm views demand for its product and marginal revenue from each additional unit sale.

1. Compute average, total, and marginal revenue when given a demand schedule for a purely competitive firm
2. Use both total-revenue—total-cost and marginal-revenue—marginal-cost approaches to determine short‑run price and output that maximizes profits (or minimizes losses) for a competitive firm
3. Use both total-revenue/total-cost and marginal-revenue/marginal-cost approaches to determine short‑run price and output that maximizes profits (or minimizes losses) for a competitive firm

1. Find the short‑run supply curve when given short‑run cost schedules for a competitive firm
2. Explain how to construct an industry short‑run supply curve from information on single competitive firms in the industry

1. Learn how to find Long Run Equilibrium, Long Run Profit Maximization
2. Draw and illustrate a Long Run Supply Curve for a Constant Cost Industry, (Perfectly Elastic Long Run Supply Curve) and for an Increasing Costs Industry/Decreasing Costs Industry
3. Explain how the behavior of a purely competitive firm/industry demonstrates productive and allocative efficiency

1. Draw and illustrate a Long Run Supply Curve for a Constant Cost Industry, (Perfectly Elastic Long Run Supply Curve) and for an Increasing Costs Industry/Decreasing Costs Industry
2. Explain how the behavior of a purely competitive firm/industry demonstrates productive and allocative efficiency

1. List the five characteristics of pure monopoly
2. Explain the difference between a “pure” monopoly and a “near” monopoly
3. List and give examples of the four barriers to entry
4. Describe the demand curve facing a pure monopoly and how it differs from that facing a firm in a purely competitive market
5. Compute marginal revenue when given a monopoly demand schedule
6. Explain why the marginal revenue is equal to the price in pure competition but not in monopoly
7. Determine the price and output level the monopoly will choose given demand and cost information in both table and graphic form.

1. Learn about the possibility of losses by monopolists,
2. Examine the economic effects of monopoly (price, output and efficiency, income transfer, cost complications, rent seeking expenditures, the effects of monopolies on society)
3. Identify tools governments use to regulate monopolies and the effects of regulation, price determination and the dilemma of regulation.

1. List three conditions necessary for price discrimination.
2. Explain why profits and output will be higher for a discriminating monopoly as compared to non-discriminating monopoly.
3. Identify two pricing strategies of monopoly regulation and explain the dilemma the regulators face in utilizing these strategies.

1. List the characteristics of monopolistic competition
2. Explain how product differentiation occurs in similar products
3. Determine the profit‑maximizing price and output level for a monopolistic competitor in the short run when given cost and demand data
4. Explain why a monopolistic competitor will realize only normal profit in the long run
5. Identify the reasons for excess capacity in monopolistic competition
6. Explain how product differentiation may offset these inefficiencies

1. Describe the characteristics of an oligopolistic industry
2. Differentiate between homogeneous and differentiated oligopolies
3. Identify and explain the most important causes of oligopoly
4. Describe and compare the concentration ratio and the Herfindahl index as ways to measure market dominance in an industry
5. Use a profit-payoffs matrix (game theory) to explain the mutual interdependence of two rival firms and why oligopolists might tempt to cheat on a collusive agreement
6. Explain the major advantages of collusion for oligopolistic producers
7. List the obstacles to collusion behavior
8. Explain price leadership as a form of tacit collusion
9. Explain why oligopolies may prefer non-price competition over price competition
10. List the positive and negative effects of advertising
11. Explain why some economists assert that oligopoly is less desirable than pure monopoly
12. Explain the three ways that the power of olipogolists may be diminished

• Draw graphs and differentiate between a competitive firm and a competitive industry.
• Draw graphs and correctly label a competitive firm that makes excessive profits, earns zero profits, and minimizes losses.
• Draw a sequence of graphs that show a competitive firm making excessive profits (or minimizing its losses) with a return to long-run equilibrium.
• Draw and label a monopoly firm that makes excessive profits (and minimization of losses).
• Draw a graph to illustrate the effects in output, price, and profits if the demand increases (or decreases) in a monopolistic firm.
• Illustrate graphically the problems of monopoly inefficiency (allocative and technical).
• Draw and label a monopolistic competitive firm and illustrate long-run equilibrium.

1. Derived factor demand
2. Marginal revenue product
3. Labor market and firms’ hiring of labor
4. Market distribution of income

1. Explain the concept of derived D as it applies to resource D.
2. Determine the marginal-revenue-product schedule for an input when given appropriate data.
3. State the principle employed by a profit‑maximizing firm in determining how much of a resource it will employ.
4. Apply the MRC = MRP principle to find the quantity of a resource a firm will employ when given the necessary data.
5. Explain why the MRP schedule of a resource is the firm’s D schedule for the resource in a purely competitive product market.
6. Explain why the resource D curve is downward sloping when a firm is selling output in a purely competitive product market; an imperfectly competitive product market.

1. List the three determinants of D for a resource and explain how a change in each of the determinants would affect the D for the resource.
2. List four determinants of the price‑elasticity of D for a resource, and state how changes in each would affect the elasticity of D for a resource.
3. State the rule for determining the least‑cost combination of resources.
4. Find the least‑cost combination of resources when given appropriate data.
5. State the rule used by a profit‑maximizing firm to determine how much of each of several resources to employ.
6. Explain the marginal productivity theory of income distribution and present two criticisms of it.

1. Practice concepts related to MRP and MRC.
2. State the rule for determining the least‑cost combination of resources.
3. Find the least‑cost combination of resources when given appropriate data.
4. State the rule used by a profit‑maximizing firm to determine how much of each of several resources to employ.
5. Differentiate between nominal and real wages.
6. List those factors that have led to an increasing level of real wages in the U.S. historically.
7. Determine the equilibrium wage rate and employment level when given appropriate data for a firm operating in a purely competitive product and labor market; a firm operating in a monopolistically competitive product market and a purely competitive labor market; and a firm operating in a purely competitive product market and a monopsonistic labor markets.
8. Present the major points in the cases for and against the minimum wage.

1. Understand the concept of economic rent.
2. Graphically demonstrate how land rent is determined
3. Explain the effects of changes in demand on economic rent
4. Explain how land rent is a surplus payment
5. Explain what determines rent differentials.
6. Explain how rent functions as a cost to the individual firm.
7. Describe how the interest rate is determined.
8. Explain how business firms make investment decisions.
9. Distinguish between nominal and real interest rates--Explain why profits are received by some firms and not by others.
10. List three sources of economic profits.
11. Describe the general function of profits.

1. After test: Introduce Role of Government: maintaining competition, redistributing income, reallocating resources, public goods and services

• Draw and illustrate a demand curve for labor.
• Draw and illustrate a supply curve for labor in a single competitive firm and a competitive market.
• Draw and illustrate an effective minimum wage.
• Draw and illustrate the demand and supply curve for labor in a monopolistic market.
• Draw and illustrate the various effects of labor union negotiations on wages and employment in a monopolistic industry.

1. Marginal social benefit and marginal social cost
2. Positive externalities
3. Negative externalities
4. Remedies

1. Public versus private goods
2. Provision of public goods

1. Antitrust policy
2. Regulation

1. Equity
2. Sources of income inequality

1. Explain how government alters the income distribution.
2. Define and explain the effects of spillover benefits and spillover costs.
3. Describe how the government can correct the effects of spillover costs and benefits.
4. Explain what is meant by a “public good” and why government must provide these goods and services.
5. Describe graphically the collective demand curve for a particular public good and explain this curve.
6. Explain why the supply curve for public goods is upward sloping and explain how the optimal quantity of a public good is determined.
7. Identify the purpose of cost-benefit analysis and explain the major difficulty in applying this analysis.

1. Explain what is meant by spillovers or externalities.
2. Describe graphically and verbally how an overallocation of resources results when spillover costs are present and how this can be corrected by government action.
3. Describe graphically and verbally how an underallocation of resources occurs when spillover benefits are present and how this can be corrected by government action.
4. Explain the Coase theorem, its significance, and the three conditions necessary for it to work.
5. Describe three policies that would reduce negative externalities.
6. Use an example to explain a market for pollution rights and how this market would lead to a better allocation of resources.

1. Apply knowledge of government interventions and society’s optimal amount of externality reduction to present proposals to various externality scenarios,
2. Use graphical illustrations of proposed solutions

1. Describe graphically and verbally how an overallocation of resources results when spillover costs are present and how this can be corrected by government action.
2. Describe graphically and verbally how an underallocation of resources occurs when spillover benefits are present and how this can be corrected by government action.
3. Explain the Coase theorem, its significance, and the three conditions necessary for it to work.
4. Describe three policies that would reduce negative externalities.
5. Use an example to explain a market for pollution rights and how this market would lead to a better allocation of resources.
6. Discuss the predicted effects of global warming and how cost-benefit could be used to determine international policies and goals

• Illustrate the effects of externalities and spillovers on a demand/supply graph.

• Illustrate the effects of a government regulation on producers and/or consumers.

• Illustrate price ceilings and floors.

1. Each student will work a partner to research a topic of their choice for their podcast. A good place to look for ideas is in any unit’s Student Thought Forum on the wiki. The topics debated and discussed in these forums represent controversial and unique applications of the field of economics. You also may look for ideas on Mr. Welker's blog, or follow the links to other econ blogs from there.
2. Due dates set by your teacher will be selected by groups students on a first-come, first-serve basis. To sign-up for a due date, partners must enter their names next their desired date on the Podcast Assignment sign-up sheet.
3. Topics must be chosen three weeks before your due date and posted to the Wiki in the “Topic” category.
4. A one or two sentence description of the story you plan to podcast should be posted to the Wiki two weeks before your due date.
5. Stories should be researched and written as a team. A draft of your script must be shown to your teacher one week before your due date.
6. On the due date, teams must submit to your teacher an mp3 file of their podcast. Your teacher will post podcasts to both the wiki and the blog once they’ve been approved and final edits are done. Podcasts will also be available for download through iTunes.
7. All students will listen to and assess all podcasted stories. Your final grade will depend on a combination of both student and teacher feedback. A grading rubric will be published to the Wiki before September 28.

• Modern technology in some industries cause extensive economies of scale.
  • Only single large firm can achieve low ATC.
  • When ATC ↓, only single producer (monopolist) can produce any particular output at min. TC
  • Single firm produces x units at lower cost than could more than 2 firms with combined output of x units -- benefits society in this case as cost (therefore, price is minimal).
    

• How do economies of scale act as an entry barrier and protect monopolist from competition?
  • Small-scale producers cannot achieve low ATC. Therefore they can't achieve normal profit which results in consistent lost, which keeps the producers from surviving.
    • e.g. The plane industry requires expensive machines, so new companies would have to sell their planes at a very high price to make up for their costs, while companies like Boeing have the ability to sell their planes for lower prices.
  • Financial obstacles + “starting big” risks – prohibitive.
    

• Natural monopoly – when market demand cuts long-run ATC curve when ATC is still declining.
  • Society better off with single monopoly producing at lower costs.
  • Doesn't guarantee consumer benefits since monopolist can choose not to minimize prices to maximize profit.
  • Therefore government will set a price celling.
  • Company will not produce at the socially optimal level.

• Patent: exclusive right of an inventor to use, or to allow another to use, her or his invention.
  • protect the inventor from rivals who would use the invention w/o having shared in effort and expense in developing it.
  • provides the inventor with a monopoly position for the life of patent.
  • profit from one patent can finance the research required to develop new patentable products.
    • eg. In the pharmaceutical industry, patents of prescription drugs have produced large monopoly profts that help finance the discovery of new patentable medicine (therefore, monopoly power achieved through patents can be self-sustaining).
• Licensing : Government using its authority to limit entry into industry.
  • Limited number of licenses given to radio/television stations, taxicab drivers, etc.; in this way, the market is controled so that new firms beyond a certain number cannot enter the industry to drive down prices and profits.
  • Sometimes the government also "licenses" itself to provide some product and thereby create a public monopoly.
    • eg. lotteries, state-owned liquor retail outlets.

• A monopolist can use private property as an obstacle to potential rivals.
  • eg. a firm that owns or controls a resource essential to the production process can prohibit the entry of rival firms.
• For example, the International Nickel Company of Canda (now known as Inco) used to control 90 percent fo the world's known nickel reserves. A new firm trying to enter the nickel market at that time would have an extremely hard time since the monopoly had all the resources.

• The monopolist may "create an entry barrier" by:
  • slashing prices to drive consumers towards their firm and away from other firms (Although this results in short term losses, in the long run, the monopoplist can maintain market power and aim for economic profits again).
  • stepping up advertising.
  • taking other strategic actions to make it difficult for entrants to succeed.

• Entry and exit only: The only long-run adjustment is the entry or exit of firms. Short-run adjustments are ignored in order to concentrate on the effects of the long-run adjustments.
• Identical costs- All firms in the industry have identical cost curves. This assumption lets us discuss and "average" or "representative," firm, knowing that all other firms in the industry are similarly affected by any long-run adjustments that occur.
• Constant-cost industry- The industry is a constant-cost industry. This means that the entry and exit of firms does not affect resource prices or, consequently, the locations of the average-total-cost curves of individual firms.

• Entry eliminates economic profits:
  • Economic profit will lure new firms into the industry. Some entrants will be newly created firms; others will shift from less prosperous industries. Since more firms are in the same industry, the market supply of the product will increase, pushing the product price lower. This will lead to the lower economic profits, and as a result, the previous incentive for more firms to enter the industry has disappeared.
• Exit eliminates losses:
  • Economic losses will cause firms to leave the industry (the demand curve already shifted to downwards and the price has decreased). Exit of firms causes the supply curve to shift to the left, thus restoring the original equilibrium price.

• Firms experiences lower costs as the industry expands, indicated by the third graph of the figure at the right (the title of that graph should be DECREASING-cost industry rather than "increasing")
  • An example is the personal computer industry, in which the supply of personal computers increases by more than demand, causing the price of personal computers to decline. This decline in price is because the component producers (the makers of RAM, or the CPU, etc) can achieve economies of scale.

• All resources and costs are variable