About this Course
14.01 Principles of Microeconomics is an introductory undergraduate
course that teaches the fundamentals of microeconomics. At MIT, this
is the first course that undergraduates take in economics. For some, it
may be the only course they take in the subject, and it provides a solid
foundation for economic analysis and thinking that can last throughout
their education and subsequent professional careers. For other
students, it may provide a foundation for many years of study in
economics, business, or related fields.
This course begins with an introduction to supply and demand and the
basic forces that determine an equilibrium in a market economy. Next,
it introduces a framework for learning about consumer behavior and
analyzing consumer decisions. We then turn our attention to firms and
their decisions about optimal production, and the impact of different
market structures on firms' behavior. The final section of the course
provides an introduction to some of the more advanced topics that can
be analyzed using microeconomic theory. These include international
trade, the impact of uncertainty on consumer behavior, the operation
of capital markets, equity vs. efficiency trade-offs in economic policy
and social insurance.
By the end of the course, you will be able to understand introductory
microeconomic theory, solve basic microeconomic problems, and use
these techniques to think about a number of policy questions relevant
to the operation of the real economy.
Prerequisites and Preparation
This course will include some basic uni-variate calculus material, as
taught in the MIT course 18.01 Single Variable Calculus or in a
comparable high-school calculus course. There are no other There will be nine mandatory problem sets which will be individually
prerequisites.
Visit 18.01SC Single Variable Calculus to learn or review this
material.
Course Goals
After completing this course, students should have developed a range
of skills enabling them to understand economic concepts and use those
concepts to analyze specific questions.
cover all of the course materials. This will count as the remaining 34%
By the end of this course, students should be able to:
 Understand consumer behavior.
 Understand firm behavior.
 Analyze different types of market structures (monopoly,
oligopoly and a competitive market).
 Understand how to apply economic principles to a range of
policy questions.
Students should also have the skills needed to:
 Use supply and demand diagrams to analyze the impact of
overall changes in supply and demand on price and quantity. make the best decision given that resources are limited. You can use
 Solve a consumer's utility maximization problem
mathematically and graphically; analyze the impact of
changes in price and income on a consumer's decision via
shifting income and substitution effects.
 Understand the consumer's labor supply decision.
 Solve a firm's cost minimization problem mathematically and
graphically.
 Analyze the behavior of firms in a perfectly competitive Keywords: Microeconomics; prices; normative economics; positive
market in the short-run and the long-run.
 Calculate producer and consumer surplus.
 Analyze the behavior of firms in a monopoly or oligopoly,
and calculate the resulting changes in producer or consumer
surplus.
 Understand consumer behavior under uncertainty.
 Use economic tools to analyze economic policies.
Course Components and Requirements
 Assigned readings
 Recitations
 Lectures
 Nine problem sets
 Two midterm exams
 Final Exam
Assigned Readings
Readings are assigned for each lecture, and should be completed prior
to watching the lecture videos and completing subsequent activities.
TEXTBOOK DESCRIPTION
This is the official textbook used
[Perloff] = Perloff, by students enrolled in the class at
Jeffrey M. Microeconomics. 5th MIT. While OCW cannot provide
ed. Addison Wesley, 2008. ISBN: online access to this book, we
9780321558497. provide "For Further Study" links
to supplemental materials.
[R&T] = Rittenberg, Libby, and
Timothy Tregarthen. Principles of This Creative Commons-licensed
Microeconomics (PDF - 15.1MB). text is a free online alternative to
2009. (Courtesy of Libby Perloff text used in the class at
Rittenberg, Timothy Tregarthen, MIT.
and the Saylor Foundation.)
Recitations
In Recitations, students meet with a Teaching Assistant in a smaller
group to go over problem set and exam solutions, review key
concepts, and occasionally learn new material. A selection of
recitation notes is included throughout this course and highlights some
of the key teachings of 14.01.
Deliverables and Grading
graded. At the end of the term students will have the best eight
homework grades cumulated up and this will count for 22% of the
final course grade.
There will be two midterm exams held throughout the term. These
will each cover roughly one -third of the course material, will be 2
hours long, and will count as 22% (collectively 44%) of the grade.
There will also be a three hour final, which will be cumulative and
of the grade.
Acknowledgements
1 Supply nd demand
Intro to microeconomics
Economics may have a reputation as a dismal science, but in fact it
addresses some of the most fundamental problems we face: How to
the tools of microeconomics to decide how best to spend your
income; how best to divide your time among leisure activities; or
how many people to hire in the business you run. Life is full of
choices. Microeconomics can help you decide how to make them.
Economics can't help you make a selection from this box of
chocolates, but can be a vital tool in other decision-making
situations. Image courtesy of ninanord on Flickr.
economics; microeconomic applications.
Session Activities
Readings
Before watching the lecture video, read the course textbook for an
introduction to the material covered in this session:
 [R&T] Chapter 1, "Economics: The Study of Choice."
 [Perloff] Chapter 1, "Introduction." (optional)
Lecture Videos
 View Full Video
o Lecture 1: Introduction to Microeconomics
(00:34:14)
 o Transcript - PDF English - US
o Subtitle - SRT (English - US)
View by Chapter
o What is Microeconomics? (0:08:15)
o The Role of Prices: Examples (0:04:44)
o Important Distinctions in Economics (0:04:02)
o Positive vs. Normative Analysis of the eBay Kidney
Auction (0:10:39)
o Everyday Applications of Economics (0:06:30)
Complete this quiz before moving on to the next session to make sure
Check Yourself
Concept Quiz
This concept quiz covers key vocabulary terms and also tests your
intuitive understanding of the material covered in this session.
Complete this quiz before moving on to the next session to make sure
you understand the concepts required to solve the mathematical and
graphical problems that are the basis of this course.
Question 1 of 5
Which of the following is an accurate description of the primary
theme of microeconomics?
o Government Intervention: Water Shortages
(0:08:28)
Resources
 Graphs and Figures (PDF)
Check Yourself
Concept Quiz
This concept quiz covers key vocabulary terms and also tests your
intuitive understanding of the material covered in this session.
you understand the concepts required to solve the mathematical and
graphical problems that are the basis of this course.
Question 1 of 5
What determines the price and quantity of a good in a perfectly
competitive market?
1. The position of the demand curve.
2. The presence or absence of substitute goods.
3. The intersection of the supply and the demand curve.

1. A set of constrained optimization problems. 4. The government. more

2. Analyzing tradeoffs.
Further Study
These optional resources are provided for students that wish to explore
3. All of these. this topic more fully.
4. Studying how individuals and firms make themselves
Study Materials
See the course website for Econ 302, Intermediate Microeconomics
as well off as possible given conditions of scarcity.
taught at Penn State in 2011.
Supply nd demand Additional Resources
You may not realize it, but every time you purchase something, you CONTENT PROVIDER NOTES
are participating in a market for that good. Some people supply it,
Demand Curve – Moving Along the College- Interactive
and some people—you!—demand it. In this lecture, we will examine
Curve Cram.com tutorial
how to analyze supply and demand curves and the impact changes in
market conditions and government policy can have on market College- Interactive
Demand Curve – Shifting the Curve
equilibrium. Cram.com tutorial
Government intervention can impact gasoline prices. Image courtesy Supply Curve – Moving Along the College- Interactive
of Aaron Tyo-Dikerson on Flickr. Curve Cram.com tutorial
Keywords: Supply and demand; equilibrium; demand shift; supply College- Interactive
Supply Curve – Shifting the Curve
shift; government interference. Cram.com tutorial
Session Activities Equilibrium Curve – Shifting the College- Interactive
Readings Curve Cram.com tutorial
Read the recitation notes, which cover new content that adds to and Government Intervention and College-
supplements the material covered in lecture. Economics: Price Ceiling Cram.com
 Recitation: Supply-Demand Analysis (PDF) Government Intervention and College-
Before watching the lecture video, read the course textbook for an Economics: Price Floor Cram.com
introduction to the material covered in this session:
 [R&T] Chapter 3, "Demand and Supply." elasticityession Overview
 [R&T] Chapter 4, "Applications of Demand and Supply." Everyone knows the unpleasant feeling that results from the price of
Sections 4.1-4.2. something you've been longing to buy increasing – or the excitement
 [Perloff] Chapter 2, "Supply and Demand." (optional) of seeing your favorite snack go on sale! When the price of a good
Lecture Videos changes, consumers' demand for that good changes. We can
 View Full Video understand these changes by graphing supply and demand curves and
o Lecture 2: Applying Supply and Demand (00:49:07) analyzing their properties.
o Transcript - PDF English - US Toilet paper is an example of an elastic good. Image courtesy of Nic
o Subtitle - SRT (English - US) Stage on Flickr.
View by Chapter Keywords: Elasticity; revenue; empirical economics; demand
oOverview of Supply and Demand (0:04:16) elasticity; supply elasticity.
o Impact of a Demand Shift (0:07:15) Session Activities
o Impact of a Supply Shift (0:02:58) Readings
o Government Interference: The Labor Market Before watching the lecture video, read the course textbook for an
(0:08:26) introduction to the material covered in this session:
o Government Interference: Gasoline Prices (0:04:57)  [R&T] Chapter 5, "Elasticity: A Measure of Response."
o Costs and Benefits of Government Intervention  [Perloff] Chapter 3, "Applying the Supply-and-Demand
(0:12:39) Model." (optional)
 Lecture Videos problem solving techniques for approaching similar questions on the
 View Full Video problem set and exams.
o Lecture 3: Elasticity (00:47:58)  View Full Video
o Transcript - PDF English - US o Problem 3 Solution Video (00:15:20)
o Subtitle - SRT (English - US) o Transcript - PDF English - US
View by Chapter o Subtitle - SRT (English - US)
o The Elasticity of Supply and Demand (0:15:02) View by Chapter
o Using Empirical Economics to Determine Elasticity o Part A (0:03:51)
(0:10:06) o Part B (0:03:23)
o Elasticity and Taxation (0:11:09) o Part C (0:03:17)
o Elasticity and Medical Care (0:11:37) o Part D (0:04:46)
Resources  View Full Video
 Graphs and Figures (PDF) o Problem 4 Solution Video (00:15:15)
o Transcript - PDF English - US
Check Yourself o Subtitle - SRT (English - US)
Concept Quiz View by Chapter
This concept quiz covers key vocabulary terms and also tests your
o Part A (0:07:35)
intuitive understanding of the material covered in this session. o Part B (0:07:38)
Complete this quiz before moving on to the next session to make sure
you understand the concepts required to solve the mathematical and
graphical problems that are the basis of this course.

Question 1 of 5 2 Consumer th
Which of the following accurately characterize perfectly inelastic The second unit of the course introduces you to the analysis of
demand? consumer behavior. The decisions that individuals make about what
and how much to consume are among the most important factors that
1. The demand curve is vertical but does not change shape the evolution of the overall economy, and we can analyze these
regardless of what happens to price. decisions in terms of their underlying preferences. You will learn how
2. The demand curve is horizontal. to model consumer preferences in a utility function, and use this utility
function to make predictions about what consumers will do when they
3. The demand curve is vertical. have a given income and can buy goods at a given price. You will also
4. Demand does not change regardless of what happens to learn how to analyze the decision of whether and how much
price. more individuals choose to work.
Further Study Prefernces nd utility
These optional resources are provided for students that wish to explore Behind every supply and demand curve is an army of producers and
this topic more fully. consumers making their own decisions. For consumers, their
Textbook Study Materials decisions are driven, quite simply, by what they want! All consumers
See the [Perloff] chapter for the topics covered, as well as quizzes, make decisions to maximize their utility. In this lecture, we will learn
applications, and other related resources. about utility, how to define it and how we represent it
 Chapter 3 mathematically.
How does each slice of pizza you consume impact your utility for the
Other OCW and OER Content next? Image courtesy of William Jones on Flickr.
CONTENT PROVIDER NOTES
Keywords: Consumer theory; preference assumptions; indifference
College- Interactive curves; utility functions; marginal utility.
Price Elasticity of Supply
Cram.com tutorial
Session Activities
Price Elasticity of Demand – College- Interactive
Readings
Standard Cram.com tutorial
Read the recitation notes, which cover new content that adds to and
supplements the material covered in lecture.
Problem set  Recitation: Calculating Elasticities (PDF)
Before watching the lecture video, read the course textbook for an
The problem set is comprised of challenging questions that test your introduction to the material covered in this session:
understanding of the material covered in the course. Make sure you
 [R&T] Chapter 7, "The Analysis of Consumer Choice."
have mastered the concepts and problem solving techniques from the
Sections 7.1, 7.2.1-2, and 7.3.2.
following sessions before attempting the problem set:
 [Perloff] Chapter 4, "Consumer Choice." (optional)
 Introduction to Microeconomics
Lecture Videos
 Applying Supply and Demand
 View Full Video
 Elasticity
o Lecture 4: Preferences and Utility (00:48:10)
Problem Set and Solutions o Transcript - PDF English - US
 Problem Set Questions (PDF) o Subtitle - SRT (English - US)
 Problem Set Solutions (PDF) View by Chapter
Problem Solving Video o Introduction to Consumer Theory (0:04:39)
In the video below, a teaching assistant demonstrates his approach to o Consumer Preference Assumptions (0:04:52)
the solution for problems 1 and 4 from the problem set. The teaching o Properties of Indifference Curves (0:10:26)
assistant notes common mistakes made by students and provides o Utility Functions (0:03:15)
o Marginal Utility (0:04:18)
 o Marginal Rate of Substitution (0:15:34) Transformation (0:10:12)
Resources o
Shocking the Budget Constraint (0:04:47)
 Graphs and Figures (PDF) o Constrained Utility Maximization: Graphical
Analysis (0:06:44)
Check Yourself o Constrained Utility Maximization: Mathematical
Concept Quiz Derivation (0:14:16)
This concept quiz covers key vocabulary terms and also tests your o Corner Solutions (0:03:03)
intuitive understanding of the material covered in this session. o Applying Constrained Utility Maximization
Complete this quiz before moving on to the next session to make sure (0:07:06)
you understand the concepts required to solve the mathematical and
Resources
graphical problems that are the basis of this course.
 Graphs and Figures (PDF)
Question 1 of 5 Check Yourself
Which of the following is NOT an assumption that we make about Concept Quiz
consumer preferences? This concept quiz covers key vocabulary terms and also tests your
intuitive understanding of the material covered in this session.
1. Downward-sloping.
Complete this quiz before moving on to the next session to make sure
2. Transitivity. you understand the concepts required to solve the mathematical and
graphical problems that are the basis of this course.
3. Non-satiation.
4. Completeness. Question 1 of 5
Further Study Which of the following concepts is equivalent to the marginal rate of
transformation between two goods?
These optional resources are provided for students that wish to explore
this topic more fully. 1. The rate at which you can turn one good into the other
Textbook Study Materials good in the marketplace.
See the [Perloff] chapter for the topics covered, as well as quizzes,
2. The slope of the budget constraint.
applications, and other related resources.
 Chapter 4 3. None of these.
Other OCW and OER Content 4. The ratio of the prices of the two goods.
CONTENT PROVIDER NOTES
Further Study
"Axioms of Consumer These optional resources are provided for students that wish to explore
Alternative notes
Preference and the Theory of this topic more fully.
MIT with an advanced
Choice." Lec #3 in 14.03 Textbook Study Materials
OpenCourseWare theoretical
Microeconomic Theory and See the [Perloff] chapter for the topics covered, as well as quizzes,
approach.
Public Policy, Fall 2010. applications, and other related resources.
 Chapter 4
budget constraint Problema set 2
Life would be easy if it was just a question of deciding what we
Life would be easy if it was just a question of deciding what we would like most. The answer would probably be more of
would like most. The answer would probably be more of everything! Of course, economic decisions are not that simple, and
everything! Of course, economic decisions are not that simple, and the reason is that we are constrained in what we can choose:
the reason is that we are constrained in what we can choose: constrained by the amount of income, the amount of time, or any
constrained by the amount of income, the amount of time, or any one of a number of factors. In this lecture we will analyze how
one of a number of factors. In this lecture we will analyze how consumers make choices when they face a budget constraint.
consumers make choices when they face a budget constraint. Our monetary income constrains our consumption. Image courtesy
Our monetary income constrains our consumption. Image courtesy of allison.johnston on Flickr.
of allison.johnston on Flickr. Keywords: Budget constraints; marginal rate of transformation;
Keywords: Budget constraints; marginal rate of transformation; opportunity cost; constrained utility maximization; corner solutions.
opportunity cost; constrained utility maximization; corner solutions. Session Activities
Session Activities Readings
Readings Before watching the lecture video, read the course textbook for an
Before watching the lecture video, read the course textbook for an introduction to the material covered in this session:
introduction to the material covered in this session:  [R&T] Chapter 7, "The Analysis of Consumer Choice."
 [R&T] Chapter 7, "The Analysis of Consumer Choice." Sections 7.3.
Sections 7.3.  [Perloff] Chapter 4, "Consumer Choice." (optional)
 [Perloff] Chapter 4, "Consumer Choice." (optional) Lecture Videos
Lecture Videos  View Full Video
 View Full Video o Lecture 5: Budget Constraints (00:46:14)
o Lecture 5: Budget Constraints (00:46:14) o Transcript - PDF English - US
o Transcript - PDF English - US o Subtitle - SRT (English - US)
o Subtitle - SRT (English - US) View by Chapter
View by Chapter o Budget Constraints and the Marginal Rate of
o Budget Constraints and the Marginal Rate of Transformation (0:10:12)
 o
Shocking the Budget Constraint (0:04:47)
o
Constrained Utility Maximization: Graphical
Analysis (0:06:44)
o Constrained Utility Maximization: Mathematical
Derivation (0:14:16)
o Corner Solutions (0:03:03)
o Applying Constrained Utility Maximization
(0:07:06)
Resources
 Graphs and Figures (PDF)
Check Yourself
Concept Quiz
This concept quiz covers key vocabulary terms and also tests your
intuitive understanding of the material covered in this session.
Complete this quiz before moving on to the next session to make sure
you understand the concepts required to solve the mathematical and
graphical problems that are the basis of this course.
Question 1 of 5
Which of the following concepts is equivalent to the marginal rate of
transformation between two goods?
1. The rate at which you can turn one good into the other
good in the marketplace.
Complete this quiz before moving on to the next session to make sure
2. The slope of the budget constraint.
3. None of these.
View by Chapter
o Review: Income and Substitution Effects (0:10:10)
o The Labor-Leisure Tradeoff (0:07:33)
o Impact of Wage Changes on Labor-Leisure Tradeoff
(0:08:43)
o Determinants of Labor Supply: Change in
Consumption (0:14:15)
o Impact of Labor Supply on Unemployment
(0:09:38)
Resources
 Graphs and Figures (PDF)
 Tables (PDF)
 View Full Video
o Lecture 8a: Applying Consumer Theory: Child
Labor (00:13:38)
o Transcript - PDF English - US
o Subtitle - SRT (English - US)
Resources
 Graphs and Figures (PDF)
Check Yourself
Concept Quiz
This concept quiz covers key vocabulary terms and also tests your
intuitive understanding of the material covered in this session.
you understand the concepts required to solve the mathematical and
graphical problems that are the basis of this course.

4. The ratio of the prices of the two goods. Question 1 of 4

Further Study What is a Giffen good?
These optional resources are provided for students that wish to explore 1. A good where consumption rises when income falls.
this topic more fully.
Textbook Study Materials 2. A good where consumption rises when income rises.
See the [Perloff] chapter for the topics covered, as well as quizzes, 3. A good where consumption falls when the price
applications, and other related resources. increases.
 Chapter 4
4. A good where consumption increases when the price
increases.
Apling consumer th Other OCW and OER Content
Along with what to buy, another key decision that we make every day CONTENT PROVIDER NOTES
as economic agents is how much to work and how much to relax. The 14.64 Labor Economics
decision about supplying labor can be analyzed with the same tools MIT An in-depth course
and Public Policy, Fall
used to analyze the market for pizza or movies, and we call this the OpenCourseWare on labor economics.
2009.
analysis of the labor market. This lecture provides an overview of the
economics of the labor market.
The decision to nap instead of work can be analyzed by economic Problem set
tools. Image courtesy of Joi Ito on Flickr.
Keywords: Labor supply; Giffin good; leisure; consumer theory; labor reparation
economics; child labor. The problem set is comprised of challenging questions that test your
understanding of the material covered in the course. Make sure you
Session Activities have mastered the concepts and problem solving techniques from the
Readings following sessions before attempting the problem set:
Before watching the lecture video, read the course textbook for an  Deriving Demand Curves
introduction to the material covered in this session:  Applying Consumer Theory: Labor
 [R&T] Chapter 7, "The Analysis of Consumer Choice."
Sections 7.2. Problem Set and Solutions
 [R&T] Chapter 12, "Wages and Employment in Perfect  Problem Set Questions (PDF)
Competition."  Problem Set Solutions (PDF)
 [Perloff] Chapter 5, "Applying Consumer Theory." (optional) Problem Solving Video
Lecture Videos In the video below, a teaching assistant demonstrates his approach to
The lecture video for this session consists of two parts. the solution for problem 5 from the problem set. The teaching
 View Full Video assistant notes common mistakes made by students and provides
o Lecture 7: Applying Consumer Theory: Labor problem solving techniques for approaching similar questions on the
Supply (00:50:26) problem set and exams.
o Transcript - PDF English - US  View Full Video
o Subtitle - SRT (English - US) o Problem 5 Solution Video (00:24:34)
 o Transcript - PDF English - US  [Perloff] Chapter 6, "Firms and Production." (optional)
o Subtitle - SRT (English - US) Lecture Videos
View by Chapter  View Full Video
o Part A (0:03:41) o Lecture 8: Introduction to Producer Theory
o Part B (0:03:34) (00:37:21)
o Part C, D & E (0:04:33) o Transcript - PDF English - US
o Part F (0:04:15) o Subtitle - SRT (English - US)
o Part G (0:08:27) View by Chapter
Midterm o Firm Production Functions (0:11:18)
reparation o Short Run Production and Diminishing Marginal
Midterm exam 1 covers material from the beginning of the course: Product (0:07:04)
 Unit 1: Supply and Demand o Long Run Production and the Marginal Rate of
 Unit 2: Consumer Theory Technical Substitution (0:11:03)
The exam tests your conceptual, mathematical and graphical o Returns to Scale (0:07:52)
understanding of the material covered in this portion of the course. Resources
 Graphs and Figures (PDF)
Content Review
Please review the content from the units covered before attempting the Check Yourself
exam. The summary notes below are concise outlines of the main Concept Quiz
points covered in each session, but are presented only as a study aid in This concept quiz covers key vocabulary terms and also tests your
reviewing for the exam. They do not provide the in-depth knowledge intuitive understanding of the material covered in this session.
needed to successfully complete the exam problems. Complete this quiz before moving on to the next session to make sure
 Midterm 1 Summary Notes (PDF) you understand the concepts required to solve the mathematical and
Practice Exams graphical problems that are the basis of this course.
Once you are comfortable with the course content, complete the
Question 1 of 4
following practice exams. These exams are from Professor William
What is the primary objective of firms?
Wheaton's course site, 14.01 Principles of Microeconomics, Fall
2007, and are used with permission. 1. Maximizing revenue.
 Practice Midterm 1 Problems (PDF)
2. Minimizing costs.
 Practice Midterm 1 Solutions (PDF)
Exam Problems and Solutions 3. Maximizing profit.
The exam should be completed in 2 hours. This is a closed book 4. Maximizing utility.
exam. You are not allowed to use notes, equation sheets, books or any 5. Productivity nd costs
other aids. Everything has a cost, and that is true for firms as well as consumers.
 Midterm 1 Problems (PDF) When firms produce goods, they incur costs that vary depending on
 Midterm 1 Solutions (PDF) how much they are producing. In this lecture, we will analyze firms'
Producer th cost functions.
he goods purchased by consumers are produced by firms, another key set of Building factory infrastructure is a producer cost. Image courtesy of
economic players. This unit introduces you to the study of firm, or producer, AndreasPraefcke on Wikipedia.
behavior. You will learn how to analyze firms' decisions mathematically using
Keywords: Productivity; food production; costs; marginal costs; long
a production function and calculate their optimal level of production, costs,
and profits. In addition, you will begin to learn how firms interact in a
run costs; short run costs.
competitive market in the short-run and the long-run. Session Activities
Introduction Readings
As we've already learned, consumers gain utility from buying goods— Before watching the lecture video, read the course textbook for an
but every good has to come from somewhere! Goods are produced by introduction to the material covered in this session:
firms, and analyzing the decisions of firms is also central to our  [R&T] Chapter 8, "Production and Cost."
understanding of the economy. In this lecture, we will learn how  [Perloff] Chapter 7, "Costs." (optional)
companies make important operation decisions. Lecture Videos
When considering firm production decisions, we must consider the  View Full Video
two forms of firm input – labor and capital. This image is a work of o Lecture 9: Production Theory (00:47:30)
the US Federal Government and in the public domain. Source: o Transcript - PDF English - US
Library of Congress. o Subtitle - SRT (English - US)
Keywords: Production theory; firm production functions; variable View by Chapter
inputs; fixed inputs; short run production; long run production; o Productivity (0:15:27)
marginal rate of technical substitution; returns to scale. o Introduction to Costs and Short Run Costs (0:08:45)
Session Activities o Long Run Costs (0:15:10)
Readings o Long Run Expansion Path (0:04:03)
Read the recitation notes, which cover new content that adds to and Resources
supplements the material covered in lecture.  Graphs and Figures (PDF)
 Recitation: Demand Function (PDF) Check Yourself
Before watching the lecture video, read the course textbook for an Concept Quiz
introduction to the material covered in this session: This concept quiz covers key vocabulary terms and also tests your
 [R&T] Chapter 8, "Production and Cost." intuitive understanding of the material covered in this session.
Complete this quiz before moving on to the next session to make sure
you understand the concepts required to solve the mathematical and
graphical problems that are the basis of this course.
Question 1 of 5
In the short run, how is the marginal cost defined?
1. The capital rental rate multiplied by the number of
machines needed to produce one additional unit.
2. The capital rental rate multiplied by the number of
machines used.
3. The wage rate multiplied by the amount of labor used.
4. The wage rate multiplied by the number of hours
needed to produce one additional unit.
Competition 1
Working with the firm's cost function enables us to learn how much of
each input the firm should optimally use to produce a given level of
output. However, the firm still has to decide how much output it
should produce. This decision depends on the type of market the firm
is operating in. We begin by analyzing the most common type of
market: perfect competition.
Firms, like auto racers, operate in a competitive environment. This
image is a work of the US Federal Government and in the public
domain. Source: Wikipedia.
Keywords: Perfect competition; search theory; residual demand; cost
measurement; profit maximization.
Session Activities
Readings
Read the recitation notes, which cover new content that adds to and
supplements the material covered in lecture.
 Recitation: The Production Function and Costs (PDF)
Before watching the lecture video, read the course textbook for an
introduction to the material covered in this session:
 [R&T] Chapter 9, "Competitive Markets for Goods and
Services."
 [Perloff] Chapter 8, "Competitive Firms and Markets."
(optional)
Lecture Videos
 View Full Video
o Lecture 10: Competition I (00:48:59)
o Transcript - PDF English - US
o Subtitle - SRT (English - US)
View by Chapter
o Introduction to Perfect Competition (0:09:17)
o Search Theory (0:04:34)
o Firm Demand vs. Market Demand (0:05:28)
o Measuring Costs in Profit Maximization (0:07:04)
o Short Run Profit Maximization in a Competitive
Market (0:13:21)
o Short Run Profit Maximization with Taxation
(0:05:26)
o Short Run Shutdown Decisions (0:03:43)
Resources
 Graphs and Figures (PDF)
Check Yourself
Concept Quiz
This concept quiz covers key vocabulary terms and also tests your
intuitive understanding of the material covered in this session.
Complete this quiz before moving on to the next session to make sure
you understand the concepts required to solve the mathematical and
graphical problems that are the basis of this course.
Question 1 of 5
What is the definition of perfect competition?
1. All firms have the optimal levels of labor and capital.
2. There is at least one firm producing the good of
interest.
3. All firms are price takers on both output and input
sides.
4. All firms maximize profits.
Problem set 4
 Introduction to Producer Theory
 Productivity and Costs
 Competition I
Problem Set and Solutions
 Problem Set Questions (PDF)
 Problem Set Solutions (PDF)
Problem Solving Video
In the video below, a teaching assistant demonstrates his approach to
the solution for problem 3 from the problem set. The teaching
assistant notes common mistakes made by students and provides
problem solving techniques for approaching similar questions on the
problem set and exams.
 View Full Video
o Problem 3 Solution Video (00:15:01)
o Transcript - PDF English - US
o Subtitle - SRT (English - US)
View by Chapter
o Part A & B (0:08:04)
o Part C (0:06:56)competition 2
In this lecture, we continue to learn about competition, and its
implications for the supply curve for different goods. We can use this
to construct the market supply curve from firms' supply curves. Now
we have all the ingredients for fully understanding the basic supply
and demand diagrams that launched our study of economics.
In this lecture, we will learn about the factors that influence a firm's
shutdown decision. Image courtesy of johnthurm on Flickr.
Keywords: Shutdown decisions; market supply curves; short-run
market equilibrium; long-run market equilibrium.
Session Activities
Readings
Read the recitation notes, which cover new content that adds to and
supplements the material covered in lecture.
 Recitation: Economics of Scale (PDF)
Before watching the lecture video, read the course textbook for an
introduction to the material covered in this session:
 [R&T] Chapter 9, "Competitive Markets for Goods and
Services."
 [Perloff] Chapter 8, "Competitive Firms and Markets."
(optional)
Lecture Videos
 View Full Video
o Lecture 11: Competition II (00:50:06)
o Transcript - PDF English - US
o Subtitle - SRT (English - US)
View by Chapter
oShort Run Shutdown Decisions (cont.) (0:06:51)
o Determining Short Run Market Equilibrium
(0:12:29)
o Long Run Market Equilibrium: Firm Entry and Exit
(0:12:34)
o Long Run Market Supply Curve with Perfect
Competition (0:06:15)
 o Long Run Market Supply Curve in Real World
(0:11:56)
Resources
 Graphs and Figures (PDF)
Check Yourself
Concept Quiz
This concept quiz covers key vocabulary terms and also tests your
intuitive understanding of the material covered in this session.
Complete this quiz before moving on to the next session to make sure
you understand the concepts required to solve the mathematical and
graphical problems that are the basis of this course.
Question 1 of 5
If you compare the elasticity of short-run supply in the markets for
two different goods and one market has more firms than the other,
which will have a more elastic supply curve?
1. There is no difference.
2. The market with fewer firms.
3. The market with more firms.
4. It depends on the specific production function.
4 welfare economics
While we typically analyze the operation of markets by examining the
movements of price or quantity, we may also be interested in asking broader
questions about how much market participants, both consumers and
producers, benefit from consuming or producing a certain good. In this unit,
you will learn how to calculate producer and consumer welfare in a given
market. You will also learn how to analyze the changes in social welfare that
result when policies are implemented that alter the market equilibrium.
Competition 3
Models are easy to construct, but they may not always exactly match
reality. While we assume that firms maximize profits, this may not
always be true, and in this lecture we start to learn why. We also start
to think about how we can measure the welfare that consumers gain
from participating in a market.
Stocks and stock options are commonly used to overcome the agency
problem. Image courtesy of Lance Ball on Flickr.
Keywords: Agency problem; corporations; stock options; normative
economics; welfare economics; consumer surplus.
Session Activities
Readings
Before watching the lecture video, read the course textbook for an
introduction to the material covered in this session:
 [Perloff] Chapter 8, "Competitive Firms and Markets."
(optional)
Lecture Videos
 View Full Video
o Lecture 12: Competition III (00:45:05)
o Transcript - PDF English - US
o Subtitle - SRT (English - US)
View by Chapter
o The Agency Problem (0:11:25)
o CEO Compensation: Stocks and Stock Options
(0:05:22)
o Negative Impact of CEO Compensation Structure
(0:12:51)
o Introduction to Welfare Economics: Individual
Consumer Surplus (0:15:24)
Resources
 Graphs and Figures (PDF)
Check Yourself
Concept Quiz
This concept quiz covers key vocabulary terms and also tests your
intuitive understanding of the material covered in this session.
Complete this quiz before moving on to the next session to make sure
you understand the concepts required to solve the mathematical and
graphical problems that are the basis of this course.
Question 1 of 4
Which of the following is NOT an example of the agency problem?
1. The owner of a pizza parlor hires an employee to
manage the business while he is away, but he can't monitor
whether the employee actually sells pizza or just wastes time.
2. Shareholders find it challenging to control a chief
executive officer, who may seek to increase his own pay
rather than increase the value of the company.
3. A company hires workers to expand its business, but
then finds it doesn't have enough equipment for them to work
on.
Problem set 5
Problem Set and Solutions
 Problem Set Questions (PDF)
 Problem Set Solutions (PDF)
Problem Solving Video
In the video below, a teaching assistant demonstrates his approach to
the solution for problem 4 from the problem set. The teaching
assistant notes common mistakes made by students and provides
problem solving techniques for approaching similar questions on the
problem set and exams.
 View Full Video
o Problem 4 Solution Video (00:14:17)
o Transcript - PDF English - US
o Subtitle - SRT (English - US)
View by Chapter
o
Part E (0:06:50)
oPart F & G (0:03:53)
o Part H (0:03:32)
Werfare economics
When changes occur in a market—whether they are shifts in demand,
shifts in supply, or government policies that interfere in the market's
workings—they affect the welfare that market participants gain by
virtue of being in the market. We can understand these changes by
analyzing producer and consumer surplus, and this is the focus of this
lecture.
Taxicab medallions are distributed and restricted by the government,
and have an impact on social welfare. Image courtesy of Vilseskogen
on Flickr.
Keywords: Welfare economics; consumer surplus; producer surplus;
social welfare; dead weight loss.
Session Activities
Readings
Read the recitation notes, which cover new content that adds to and
supplements the material covered in lecture.
 Recitation: Competition Review (PDF)
Before watching the lecture video, read the course textbook for an
introduction to the material covered in this session:
 [R&T] Chapter 6, "Markets, Maximizers, and Efficiency."
 [Perloff] Chapter 9, "Welfare Economics." (optional)
Lecture Videos
 View Full Video
o Lecture 13: Welfare Economics

o (00:47:07)
o Transcript - PDF English - US
o Subtitle - SRT (English - US)
 View by Chapter
oMarket Consumer Surplus (0:12:46)
o Producer Surplus (0:05:07)
o Social Welfare and Dead Weight Loss (0:06:24)
o Impact of Government Interference on Social
Welfare (0:05:01)
o Occupational Restrictions: Taxicab Medallions
(0:14:27)
o Occupational Restrictions: Medical Residency
(0:03:17)
Resources
 Graphs and Figures (PDF)
Check Yourself
Concept Quiz
This concept quiz covers key vocabulary terms and also tests your
intuitive understanding of the material covered in this session.
Complete this quiz before moving on to the next session to make sure
you understand the concepts required to solve the mathematical and
graphical problems that are the basis of this course.
Question 1 of 5
Consumers will generally have consumer surplus that is highest when
the demand curve has what characteristic?
1. Highly elastic.
2. Horizontal.
3. Downward-sloping.
4. Highly inelastic.
Monopoly and oligopolyUp to this point, we have analyzed the operation
of firms in a perfectly competitive market. However, there are many markets
that are not competitive: either there is only one firm operating (a
monopoly), or a small number of firms are present (an oligopoly). Firm
behavior in the context of a monopoly or an oligopoly can be very different.
In this unit, you will learn how to model the decisions made by firm in a
monopoly and an oligopoly, and the implications of these alternate
structures for consumer welfaremonopoly
In the previous lectures, we began to learn about firms' decisions in a
competitive market where there are a large number of firms. However,
different markets have different characteristics, and in some markets
there may be only one or a few firms. In this lecture, we begin to learn
about the operations of a monopoly market, where only one firm is
producing a given good.
The game Monopoly is named after the economic concept, in which
one firm dominates an entire market. Image courtesy of William
Boncher on Flickr.problem set 6roblem Set and
Solutions
 Problem Set Questions (PDF)
 Problem Set Solutions (PDF)
Problem Solving Video
In the video below, a teaching assistant demonstrates his approach to
the solution for problems 3 and 4 from the problem set. The teaching
assistant notes common mistakes made by students and provides
problem solving techniques for approaching similar questions on the
problem set and exams.
 View Full Video
o Problem 3 Solution Video (00:16:37)
o Transcript - PDF English - US
o Subtitle - SRT (English - US)
View by Chapter
o Part A (0:06:44)
o Part B (0:06:06)
o Part C (0:03:45)
 View Full Video
o Problem 4 Solution Video (00:17:43)
o Transcript - PDF English - US
o Subtitle - SRT (English - US)
View by Chapter
o Part A (0:08:55)
o Part B (0:06:14)
o Part C (0:02:25)
Keywords: Monopoly; marginal revenue; marginal cost; profit
maximization; shutdown rule; market power; price discrimination.
Session Activities
Readings
Before watching the lecture video, read the course textbook for an
introduction to the material covered in this session:
 [R&T] Chapter 10, "Monopoly."
 [Perloff] Chapter 11, "Monopoly." (optional)
Lecture Videos
 View Full Video
o Lecture 14: Monopoly I (00:46:58)
o Transcript - PDF English - US
o Subtitle - SRT (English - US)
View by Chapter
o Marginal Revenue For a Monopolistic Firm
(0:15:16)
o Elasticity and Marginal Revenue (0:05:42)
o Profit Maximization and Shutdown Conditions
(0:08:01)
o Market Power (0:04:50)
o Welfare Effects of Monopoly (0:06:03)
o Price Discriminating Firms (0:06:59)
Resources
 Graphs and Figures (PDF)
Check Yourself
Concept Quiz
This concept quiz covers key vocabulary terms and also tests your
intuitive understanding of the material covered in this session.
Complete this quiz before moving on to the next session to make sure
you understand the concepts required to solve the mathematical and
graphical problems that are the basis of this course.
Question 1 of 4
What is the key defining feature of a monopoly?
1. The market has only one firm.
2. Firms are price makers, not price takers.
3. The demand curve is downward-sloping rather than
horizontal.
4. All of these.
Further Study
These optional resources are provided for students that wish to explore
this topic more fully.
Textbook Study Materials
See the [Perloff] chapter for the topics covered, as well as quizzes,
applications, and other related resources.
 Chapter 11 (PDF - 1.6MB)
Monopoly 2
he analytical picture of monopolies presented in our last lecture may
be too simple. Monopolies may not always charge the same price to
every customer – they can choose to charge different prices, a
phenomenon known as price discrimination. Monopolies are regulated
by governments to limit their market power, yet in some cases
governments may encourage the operation of monopolies. These cases
 are discussed in greater detail in this lecture.
The U.S. Department of Justice enforces antitrust laws. Image
courtesy of John Taylor on Flickr.
Keywords: Monopoly; price discrimination; natural monopolies; price
regulation; antitrust policy; mergers; contestable markets.
Session Activities
Readings
Read the recitation notes, which cover new content that adds to and
supplements the material covered in lecture.
 Recitation: Price Ceilings and Price Floors (PDF)
Before watching the lecture video, read the course textbook for an
introduction to the material covered in this session:
 [R&T] Chapter 10, "Monopoly."
 [R&T] Chapter 16, "Antitrust Policy and Business
Regulation."
 [Perloff] Chapter 11, "Monopoly." (optional)
Lecture Videos
 View Full Video
o Lecture 15: Monopoly II (00:48:24)
o Transcript - PDF English - US
o Subtitle - SRT (English - US)
View by Chapter
o Examples of Price Discrimination (0:08:32)
o Sources of Monopoly Formation: Cost Advantages
(0:05:58)
o Sources of Monopoly Formation: Government
Actions (0:08:32)
o Price Regulation (0:15:05)
o Contestable Market: The Airline Industry (0:10:13)
Resources
 Graphs and Figures (PDF)
Check Yourself
Concept Quiz
This concept quiz covers key vocabulary terms and also tests your
intuitive understanding of the material covered in this session.
Complete this quiz before moving on to the next session to make sure
you understand the concepts required to solve the mathematical and
graphical problems that are the basis of this course.
Question 1 of 4
Which of the following descriptions corresponds to a natural
monopoly?
1. A firm that can produce at lower average cost than any
other firm for all relevant quantities.
2. A firm for which average cost is declining everywhere
in the relevant range.
3. All of these.
4. A firm with extremely large fixed costs and tiny
marginal costs
Oligopoly 1
We have already learned about the operation of two very different
types of markets: perfectly competitive markets and monopolists.
However, most markets don’t fall into either category. For example,
think of the market for soda - both Pepsi and Coke are major
producers, and they dominate the market. This type of market
structure is known as an oligopoly, and it is the subject of this lecture.
Learn about the prisoner’s dilemma in this lecture. Image courtesy of
Sheep purple on Flickr.
Keywords: Oligopoly; cartel; game theory; Nash equilibrium; Cournot
model; duopoly; non-cooperative competition.
Session Activities
Readings
Before watching the lecture video, read the course textbook for an
introduction to the material covered in this session:
 [R&T] Chapter 11, "The World of Imperfect Competition."
 [Perloff] Chapter 12, "Pricing and Advertising." (optional)
Lecture Videos
 View Full Video
o Lecture 16: Oligopoly I (00:50:05)
o Transcript - PDF English - US
o Subtitle - SRT (English - US)
View by Chapter
o Types of Oligopolies (0:04:57)
o Game Theory and the Prisoner's Dilemma (0:13:17)
o Applications of Game Theory (0:06:31)
o Repeated Games (0:06:05)
o Cournot Competition (0:10:52)
o Best Response Curves (0:08:18)
Resources
 Graphs and Figures (PDF)
Check Yourself
Concept Quiz
This concept quiz covers key vocabulary terms and also tests your
intuitive understanding of the material covered in this session.
Complete this quiz before moving on to the next session to make sure
you understand the concepts required to solve the mathematical and
graphical problems that are the basis of this course.
Question 1 of 4
What is the definition of a dominant strategy?
1. A strategy that is optimal if the other player plays the
opposite strategy.
2. A strategy that is optimal if the other player plays an
identical strategy.
3. A strategy that is never optimal.
4. A strategy that is optimal independent of the other
player's decision.problem set
roblem Set and Solutions
 Problem Set Questions (PDF)
 Problem Set Solutions (PDF)
Problem Solving Video
In the video below, a teaching assistant demonstrates his approach to
the solution for problem 2a-e from the problem set. The teaching
assistant notes common mistakes made by students and provides
problem solving techniques for approaching similar questions on the
problem set and exams.
 View Full Video
o Problem 2 Solution Video (00:16:33)
o Transcript - PDF English - US
o Subtitle - SRT (English - US)
View by Chapter
o Part A & B (0:07:29)
o Part C & D (0:04:57)
o Part E (0:04:05)
Oligopoly 2
roblem Set and Solutions
 Problem Set Questions (PDF)
 Problem Set Solutions (PDF)
Problem Solving Video
In the video below, a teaching assistant demonstrates his approach to
the solution for problem 2a-e from the problem set. The teaching
assistant notes common mistakes made by students and provides
problem solving techniques for approaching similar questions on the
problem set and exams.
 View Full Video
o Problem 2 Solution Video (00:16:33)
o Transcript - PDF English - US
o Subtitle - SRT (English - US)
View by Chapter
o Part A & B (0:07:29)
o Part C & D (0:04:57)
o Part E (0:04:05)
Intermediate micron this unit of the course, we provide an
introduction to a number of more advanced topics in
microeconomics that round out our basic understanding of the
economy, and are relevant in more advanced study and research.
First, you will be provided with an overview of firm operation in
factor markets. Next, you will learn about how consumers
incorporate uncertainty into their decision-making. You will also be
introduced to the analysis of international trade and capital
markets.
Earlier in the semester, we discussed the labor supply decisions made
by consumers when deciding how much they should or should not
work. However, firms have the power to decide how many workers to
hire. This lecture focuses on the operation of firms in the factor
markets that supply the factors (labor and capital) they use in
production.
A firm made the decision to hire these workers. In this lecture,
discover the determinants of this decision! Image courtesy of Remko
Tanis on Flickr.
Keywords: Input markets; labor supply; monopsony; expenditure
curves; wage discrimination; empirical economics.
Session Activities
Readings
Before watching the lecture video, read the course textbook for an
introduction to the material covered in this session:
 [R&T] Chapter 14, "Imperfectly Competitive Markets for Factors of
Production."
 [Perloff] Chapter 15, "Factor Markets and Vertical Integration."
(optional)
Lecture Videos
 View Full Video
o Lecture 18: Factor Markets (00:39:19)
o Transcript - PDF English - US
o Subtitle - SRT (English - US)
View by Chapter
o
Determining Demand for Labor (0:11:36)
o
The Monopsony Model (0:13:22)
o Barriers to Wage Discrimination (0:05:48)
o Minimum Wage and Employment Rates (0:15:48)
Resources
 Graphs and Figures (PDF)
Check Yourself
Concept Quiz
This concept quiz covers key vocabulary terms and also tests your
intuitive understanding of the material covered in this session.
Complete this quiz before moving on to the next session to make sure
you understand the concepts required to solve the mathematical and
graphical problems that are the basis of this course.
Question 1 of 4
In a perfectly competitive labor market, firms should hire workers until the
wage is equal to what quantity?
1. The marginal revenue.
2. The marginal product of labor.
3. The price multiplied by the marginal product of labor.
4. The price.
International trade
w many of you have received flowers for Valentine's Day? Of course,
February in New England is snowy, and those flowers are not raised
locally—they are imported from other countries. International trade is
hugely important in national and international economies today, but
up to this point it has been excluded from our models. In this lecture, a
basic introduction to the principles of international trade is provided.
Roses you receive on Valentine’s Day may have been imported from
another country as a product of international trade. Image courtesy of
ntknicole on Flickr.
Keywords: International trade; comparative advantage; specialization;
autarky; tariffs; free trade.
Session Activities
Readings
Before watching the lecture video, read the course textbook for an
introduction to the material covered in this session:
 [R&T] Chapter 17, "International Trade."
Lecture Videos
 View Full Video
o Lecture 19: International Trade (00:45:42)
o Transcript - PDF English - US
o Subtitle - SRT (English - US)
View by Chapter
o Comparative Advantage: The Market for Roses (0:17:13)
o Sources of Comparative Advantage (0:04:46)
o Impact of International Trade on Welfare (0:07:34)
o Trade Restrictions: Tariffs (0:07:56)
o The Argument for Free Trade (0:08:09)
Resources
 Graphs and Figures (PDF)
Check Yourself
Concept Quiz
This concept quiz covers key vocabulary terms and also tests your
intuitive understanding of the material covered in this session.
Complete this quiz before moving on to the next session to make sure
you understand the concepts required to solve the mathematical and
graphical problems that are the basis of this course.
Question 1 of 4
Assume two countries, Country 1 and Country 2, are producing only two
goods, apples and oranges. The opportunity cost of producing an apple is
higher in Country 1. Which country has a comparative advantage in
producing apples?
1. Neither country.
2. Country 1.
3. Country 2.
4. Both countries.
Capital supply nd markers
w many of you have received flowers for Valentine's Day? Of course,
February in New England is snowy, and those flowers are not raised
locally—they are imported from other countries. International trade is
hugely important in national and international economies today, but
up to this point it has been excluded from our models. In this lecture, a
basic introduction to the principles of international trade is provided.
Roses you receive on Valentine’s Day may have been imported from
another country as a product of international trade. Image courtesy of
ntknicole on Flickr.
Keywords: International trade; comparative advantage; specialization;
autarky; tariffs; free trade.
 Session Activities
Readings
Before watching the lecture video, read the course textbook for an
introduction to the material covered in this session:
 [R&T] Chapter 17, "International Trade."
Lecture Videos
 View Full Video
o Lecture 19: International Trade (00:45:42)
o Transcript - PDF English - US
o Subtitle - SRT (English - US)
View by Chapter
o Comparative Advantage: The Market for Roses (0:17:13)
o Sources of Comparative Advantage (0:04:46)
o Impact of International Trade on Welfare (0:07:34)
o Trade Restrictions: Tariffs (0:07:56)
o The Argument for Free Trade (0:08:09)
Resources
 Graphs and Figures (PDF)
Check Yourself
Concept Quiz
This concept quiz covers key vocabulary terms and also tests your
intuitive understanding of the material covered in this session.
Complete this quiz before moving on to the next session to make sure
you understand the concepts required to solve the mathematical and
graphical problems that are the basis of this course.
Question 1 of 4
Assume two countries, Country 1 and Country 2, are producing only two
goods, apples and oranges. The opportunity cost of producing an apple is
higher in Country 1. Which country has a comparative advantage in
producing apples?
1. Neither country.
2. Country 1.
3. Country 2.
4. Both countries.
2 Wheaton's course site, 14.01 Principles of Microeconomics, Fall
Now that we understand what the cost and benefits are of different
consumption and investment decisions over time, we can understand
how both firms and individual consumers make decisions about how
much to invest in different types of opportunities. In this lecture, we
will discuss how individuals make major decisions, such as whether to
attend college and how much to save for retirement.
The savings of individuals drive the growth of our economy. Image
courtesy of B3OK on Flickr.
Keywords: Investment decisions; net present value; discount rate;
subsidized retirement savings programs.
Session Activities
Readings
Before watching the lecture video, read the course textbook for an
introduction to the material covered in this session:
 [R&T] Chapter 13, "Interest Rates and the Markets for Capital and
Natural Resources."
 [Perloff] Chapter 16, "Interest Rates, Investments, and Capital
Markets." (optional)
Lecture Videos
 View Full Video
o Lecture 22: Capital Supply and Markets II (00:47:31)
o Transcript - PDF English - US
o Subtitle - SRT (English - US)
View by Chapter
o Determining Savings Decisions Over Time (0:06:56)
o Investment Decisions and Net Present Value (0:12:21)
o Application of Investment Decisions: Human Capital
(0:06:34)
o The Importance of Savings (0:03:43)
o Policy Efforts to Increase Long Term Savings (0:17:52)
Resources
 Graphs and Figures (PDF)
Check Yourself
Concept Quiz
This concept quiz covers key vocabulary terms and also tests your
intuitive understanding of the material covered in this session.
Complete this quiz before moving on to the next session to make sure
you understand the concepts required to solve the mathematical and
graphical problems that are the basis of this course.
Question 1 of 3
If a firm is making an investment decision, what measure should it use to
compare two different potential projects and decide which to invest in?
1. Present value.
2. Total revenues summed over time.
3. Net present value.
4. Total profits summed over time.
Exam
Content Review
Please review all course content before attempting the exam. The
summary notes below are concise outlines of the main points covered
in each session for the final third of the course. These notes are
presented only as a study aid in reviewing for the exam. They do not
provide the in-depth knowledge needed to successfully complete the
exam problems.
 Final Summary Notes (PDF)
Practice Exams
Once you are comfortable with the course content, complete the
following practice exams. These exams are from Professor William
2007, and are used with permission.
 Practice Final Exam Problems (PDF)
 Practice Final Exam Solutions (PDF)
Exam Problems and Solutions
The exam should be completed in 3 hours. This is a closed book
exam. You are not allowed to use notes, equation sheets, books or any
other aids.
 Final Exam Problems (PDF)
 Final Exam Solutions (PDF)