NORTHEASTERN  UNIVERSITY

                                                University College

 

ECN 4117; Key #67565                                                                                  Keshab R. Bhattarai

Economic Principles and Problems III                            Office Hours: Fri. 7.00 - 8.00 PM  

Winter 1995                                                                                                  342 Holmes

Friday :  5:50-8:00 PM                                                                     .          Phone:  (617)-373-5596

 

Text:

C. R. McConnell and S. L. Brue,  Economics : Principles, Problems and Policies,  12th ed., McGraw-Hill, 1993 (Required).

W. B. Wastand and R. C. Bingham, Study Guide to Accompany McConnell and Brue: Economics, 12th ed.,  MacGraw-Hill, 1993 (recommended).

 

Course Description:

 

            Economic Principles I introduced you to markets for goods and services, Keynesian theory of determination of national income, output, employment and the price level. Besides it covered system of national accounting , macroeconomic indicators and fiscal policy.

            Economic Principles II looked deeper into the workings of the economy covering the issues of monetary and financial aspects of economy and the role of monetary and fiscal  policies in combating major economic problems. It also dealt with the optimization behavior of individual consumers, production function and various types of cost functions.

            This course, Economic Principles and Problems III, aims at introducing optimal pricing and output decisions of a firm and influence of  a structure of  an industry in the behaviors of firms operating in different market situation. Particularly we will study behavior of firms in a perfectly  competitive markets, in a purely monopolistic market, strategic (game theoretic) behavior of  firms in an oligopoly, and product differentiation and market outcome in a monopolistic competition. Then we will study the functioning of factor markets where the factor incomes such as  wage rates, interest rates, rents and profits are determined. We will cover four policy issues such as  public choice theory and taxation, anti-trust rules and regulations, labor market issues such as unionism, migration and discrimination, and issues in international trade and balance of payment. Other topics such as  income, inequality and poverty,  growth prospects in less developed countries and the prospects of the countries that transformed from communism to capitalism during early 1990s, will be left for individual projects.

            During the period of  this course some up-to-date information on the pricing and output decisions and employment determination of a few big firms and many other small firms will be studied. The effect taxes, antitrust regulations, union activities , and protection and liberalization of international trade on output, prices, employment and income distribution will be analyzed.

 Snows !!!  If it is snowing heavily check at 373-2000 before you come to the class.

Grading Policy:

 

            Overall grades in this course will depend on four components: solutions to problem sets, scores on mid-term and final exam, and a project paper. The questions on problem sets, mid-term and final exams will be based on class discussions. Please read the relevant section of the text book to follow to make  materials presented more clear and useful.

 

Problem Sets: The problem sets will account twenty percent of the grade. You will be asked to solve four problem sets in this course. Each problem set will be due in two weeks period from the date of assignment. Any problem set handed in late will loose 20% of its original value.

 

Mid Term Exam : Mid-term exam will be an one hour in class test and it will be given on Friday, February 10. It will be based on materials covered till that time and account for 25 percent of the grade

 

Final Exam : Final exam will be cumulative and will account for 35 percent of grade. It will be a two hours exam and will be given on Friday, March 24.

 

Project Paper

            The individual study project will account for 20 percent of the grade; from my experience these papers have been helpful both to enhance the analytical skills of students and to upgrade the grades in the course.

            You may choose, according to your interest, any one industry and a firm operating within that industry.  Then you may analyze the market structure relevant for that industry. You may report on what type of price and output strategy are available to the firm. How have the entry and exit behavior of other firms affected the firms' pricing and output decisions in the past, what is the current situation, and how is the future prospect. How the government regulations, taxes and subsidies have affected the industry and the firm. What factors determine the international competitiveness of your firm. You may further investigate on how the employment inputs such as capital and labor and advancement in the production technology by these firms may contribute to the overall growth rate of the economy, on  inequality and income distribution. What sorts of  policies are required to make market more efficient and competitive.

             If  you like to present your draft in order to get a feed-back, I may allocate some time to go over your topic after the class. I encourage you to choose an industry at least by the second class and start collecting  information on that industry immediately. You will realize why this is important at the end of the quarter.

            The project paper will be due on Friday, March 17, the class before the final exam week. The two month's period allows enough time to develop the concept and skills on the topic and to present your ideas systematically.  A written paper of  about five  pages, summarizing your works including the main points you got from the your research is sufficient. You could approach me  to find relevant materials. I would suggest that you follow such news magazines as the Business Week, the Economist, Industry Surveys, commodity reviews, and business sections on New York Times and Wall Street Journals .

Overall Policy:

            While the principal  aim of this course is the acquisition of knowledge in market structure and relevant policy issues, students  should be aware that University College requires that clear and effective writing be an integral part of the learning process.

            Besides my office hours, you may call me or leave a message any time at my office phone number (617)-373-5596 in the Department of Economics.

 

Course Outline and Class Schedule

 

Part One: Pricing and Output Decision of Firms

 

            Review of the Markets (Chapter 4) and Costs of Production (Chapter 22)

                        I

            Perfect Competition,(Chapter 23)

                        II

            Pure Monopoly(Chapter 24)

                        III

            Monopolistic Competition (Chapter 25)

                        IV

            Oligopoly (Game theory) (Chapter 26)

 

Part Two: Employment and Resource Prices

                        V

            Production and Demand for Economic Resources (Chapter 27)

                        VI

            Review and midterm  exam (February 10)

                        VII

            Pricing and Employment of Resources: Wage Determination and Effect of Unionism, Discrimination and Immigration on wages (Chapter 28, 36)

                        VIII

            Pricing and Employment of Resources: Rent, Interest and Profits (Chapter 29)

 

Part Three: Some Microeconomic Policy Issues    

                        IX

            Public Choice Theory and Taxation (Chapter 32)

                        X

            Antitrust Laws and Regulations(Chapter 33)

                        XI

            International Trade and Exchange Rates(Chapter 37, 38)

                        XII

            Final Exam (Friday, March 24)