Dr. Frank D.

Weiss AY 2014—2015
Program in Applied Economics Fall Semester

Microeconomic Theory
440.601.52

Course Outline
This course is about human decision making in the face of scarcity. Topics include: choice and
demand; production and cost; the firm and market structure; and market failure. Game theory is
introduced, as is uncertainty and asymmetric information.

Course Requirements
Problem sets, midterm exam, and final exam will each account for ⅓ of the grade. Six problem
sets will be handed out; each is due at the following class meeting. You are encouraged to work
on the problem sets in groups of three. Each group need hand in only one neat and legible copy
of the answers. Therefore, groups must remain stable, and late homework is not accepted. Class
participation is welcome anytime.

Contact
Office: BOB, Rm 104-R on M, W afternoons by appointment.
e-mail: fdweiss@jhu.edu

Prerequisites
Principles of Microeconomics, and 440.304 Math Methods, or equivalent.

Textbook, Readings
Walter Nicholson, Christopher M. Snyder, Microeconomic Theory: Basic Principles and
Extensions, 11th ed., South-Western College Publishers 2012, is the required text and is
genuinely recommended for purchase. Any edition from the 10th may be used. The International
Edition is cheapest. Buy used. For a less mathematical treatment, consult an Intermediate Micro
Theory text, e.g. Michael L. Katz, Harvey S. Rosen, Microeconomics, McGraw-Hill, any recent
edition. Other readings are available on Blackboard..

Weekly Topic Schedule

Math Review: As needed from N & S: 2.

1. Introduction, Supply and Demand.

N & S: 1.
Eugene Silberberg, Wing Suen, The Structure of Economics— A Mathematical Analysis,
3nd ed., McGraw-Hill, 2001, Chapter 1: “Comparative Statics and the Paradigm of
Economics”, through p. 15 only.

2. Theory of the Consumer

Preferences and Utility—N & S: 3.
Utility Maximization and Choice—N & S: 4.

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 Silberberg, Suen, ibid., pp. 266 – 268. Interpretation of the Lagrange Multiplier.
Homework I handed out. Due next class meeting.

3. Theory of the Consumer

Income and Substitution Effects—N & S: 5.
Demand Relationships among Goods—N&S: 6.
Homework II handed out. Due next class meeting.

4. Theory of the Firm

Production—N & S: 9.
Cost—N & S: 10.
Eugene Silberberg, The Viner-Wong Envelope Theorem, Journal of Economic
Education, Winter 1999.
Homework III handed out. Due next class meeting.

5. Theory of the Firm

Profit Maximization—N & S: 11.
Perfect Competition—N & S: 12

6. Factor Markets
Labor—N & S: 16
Capital—N & S: 17

7. MIDTERM EXAM

8. General Equilibrium and Welfare—N & S: 13.

Friederich Hayek, “The Use of Knowledge in Society”, American Economic Review, 35/4
(Sept. 1945), pp. 519-30.
Homework IV handed out. Due next class meeting.

9. Monopoly—N & S: 14.

Steven Landsburg, The Armchair Economist: Economics and Everyday Life, The Free
Press 1993, “Why Popcorn Costs More at the Movies and Why the Obvious Answer is
Wrong”.
Homework V handed out. Due next class meeting.

10. Game Theory—N & S: 8.

Robert Axelrod, The Evolution of Cooperation, Basic Books 2006 (1985). Delightful, and
genuinely recommended, but not required. Can be recycled as a birthday present.
Oligopoly—N&S: 15.
Homework VI handed out. Due next class meeting .

11. Uncertainty—N &S: 7.

12. Asymmetric Information—N & S: 18.

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 Liran Einav, Amy Finkelstein, “Selection in Insurance Markets: Theory and Empirics in
Pictures”, Journal of Economic Perspectives, 25/1 (Winter 2011).

13. Externalities and Public Goods—N & S: 19.

14. FINAL EXAM