I           Theory of The firm.  

            A.        Production functions.

                        1.         Marginal, total and average physical products.    

                        2.         The Law of Diminishing Marginal Returns. 

            B.         Short run production costs.

                        1.         Define fixed cost, variable cost, total cost and their relationship.

                        2.         Define and derive  average fixed cost, average variable cost and average total cost.

                        3.         Graph the above.

4.         Define increasing and decreasing marginal costs and note how it

affects the shape the above curves.

                        5.         Analyze the relationships between the above. 

                        6.         Define marginal cost. 

                        7.         Graph marginal cost. 

                        8.         Note the relationship between marginal cost and average cost.    

            C.         Long Run Costs 

            1.         Define the long run.

                        2.         Define economies of scale.

                        3.         Note how economies of scale influence the shape of the long run cost

curve.

            D.        Accounting Cost and Economic Cost. 

                        1.         Explicit Cost.

                        2.         Implicit Cost. 

II.        Competitive firms and markets. 

                        1.   Market Structure.              

                                    a.  Monopoly.

                                    b.  Oligopoly.

                                    c.  Monopolistic competition.

                                    d.  Competition 

                        2.         Accounting profits and economics profits.            

                                    a.         Normal profit. 

                                    b.         Zero economic profit. 

                        3.         Note why competitive firms are call price takers. 

                                    a.         Market demand. 

                                    b.         Competitive firm demand.                       

                        4.         Using cost curves find where competitive firms will produce. 

                                    a)         Note and find the shutdown point, break-even point both numerically   and graphically.                                   

                        5.         Define profit maximization. 

                                    a)         P=MR=MC 

                        6.         Note the relationship between Price and ATC in determining profit levels.                                                           

                                    a)         Define economic profit. 

                        7.         Demonstrate the above using spreadsheets and graphs. 

            D.        The Perfectly Competitive Market Model.                       

                        1.         The characteristics of the competitive model. 

                                    a)         Many firms.

                                    b)         Perfect information.

                                    c)         identical products.

                                    d)         MC=P

                                    e)         Free entry and exit.

                                    f)          Zero economics profits.           

                        2.         The role of economics profits in the competitive market model. 

                        3.         Use Supply and Demand analysis to examine the  competitive model. 

                        4.         Economic efficiency and the perfectly competitive model.                            

                                    a)         Resource allocation. 

                        5.         Define short-run equilibrium. 

                        6.         Define long-run equilibrium.                                   

                        7.         Note the role of competitive market model as a benchmark. 

                        8.         Recognize the limitations of competitive model. 

                                    a)         Transaction Costs.

                                                1)         mobility

                                                2)         information. 

                                    b)         Lack of economies of scale. 

                                    c)         Externalities. 

                                    d)         Impact on incentives to innovate. 

                                    e)         Homogeneity and DMU.

Part III      NONCOMPETITIVE MARKETS. 

            A.        Market categories 

                        1.         Monopoly

                        2.         Monopolistic competition.

                        3.         Oligopoly.

                        4.         Competition. 

            B.         Note the market power continuum characteristics. 

                        1.         Firm numbers.

                        2.         Product type.

                        3.         Entry and exit.

                        4.         Information.

                        5.         Economic profit.

                        6.         Economic efficiency. 

            C.         Monopoly Power and marginal revenue. 

                        1.         Derive and graph the marginal revenue for the price taker.

                        2.         Derive and graph the marginal revenue curve for a price searcher.

                        3.         Recognize the relationship between MR for price searchers and price takers.

4.         Derive and graph the predicted output and price for a price taker and compare it   to the predicted output and price for a price searcher. 

            D.        Dead weight Loss and Social Loss. 

            E.         Economic Efficiency. 

IV        MONOPOLISTIC COMPETITION AND OLIGOPOLY  

            A.        Monopolistic Competition. 

                        1.         Review Definition. 

                        2.         Note dominant feature of product definition.

                                    a.         Creates sloping demand curve.

                                    b.         Product loyalty.

                                    c.         difficult to maintain.

                                    d.         Non-price competition.

                                                1)         advertising. 

                        3.         Note that long run solution leads to inefficiency. 

                                    a.         Productive inefficiency.

                                    b.         Excess capacity.                                               

                        4.         Graph the above.

                        5.         Manipulation of consumers.

                        6.         Benefits of Product differentiation.

                                    a.         Product competition vs. Price competition.

                                    b.         Stimulation of entrepreneurial activity.

            B.         Oligopoly. 

                        1.         Review definition.

                        2.         Note dominant characteristic of size.

                        3.         Note dominant behavior is one of Mutual Interdependence.

                                    1.         strategic behavior. 

            C.         Strategies of oligopolies.           

                        3.         Game Theory modeling strategic behavior. 

                                    a..        Noncooperative game:  Prisoners Dilemma. 

                                                1.         Payoff matrix and the prisoners dilemma.                                   

b.         Conditions to move to a cooperative game in an oligopoly market.

                                                1.         Number of players.

                                                2.         Type of product.

                                                3.         Elasticity.

                                                4.         Environment for agreement.

V.        MARKET STRUCTURES AND THE ROLE OF GOVERNMENT.  

            A.        Choices in the face of market power. 

                        1.         Nationalize.

                        2.         Restore Competition.

                        3.         Regulate.

                        4.         Do Nothing.