CHAPTER 21
POLITICAL ECONOMICS
The problems in this final chapter are of two general types. First are four problems in traditional welfare economics (Problems 21.121.3 and 21.5) that illustrate various issues that arise in comparing utility among individu

CHAPTER 20
EXTERNALITIES AND PUBLIC GOODS
The problems in this chapter illustrate how externalities in consumption or production can affect the optimal allocation of resources and, in some cases, describe the remedial action that may be appropriate. Many

CHAPTER 19
THE ECONOMICS OF INFORMATION
The problems in this chapter stress the economic value of information and illustrate some of the consequences of imperfect information. Only a few of the problems involve complex calculations or utilize calculus max

CHAPTER 18
UNCERTAINTY AND RISK AVERSION
Most of the problems in this chapter focus on illustrating the concept of risk aversion. That is, they assume that individuals have concave utility of wealth functions and therefore dislike variance in their wealth

CHAPTER 17
CAPITAL MARKETS
The problems in this chapter are of two general types: (1) those that focus on intertemporal utility maximization and (2) those that ask students to make present discounted value calculations. Before undertaking the PDV problems

CHAPTER 16
LABOR MARKETS
Because the subject of labor demand was treated extensively in Chapter 9, the problems in this chapter focus primarily on labor supply and on equilibrium in the labor market. Most of the labor supply problems (16.116.6) start with

CHAPTER 15
GAME THEORY MODELS OF PRICING
The first six problems for this chapter are intended to illustrate the concept of Nash equilibrium in a variety of contexts. Many of them have only modest economic content, but are traditional game theory problems.

CHAPTER 14
TRADITIONAL MODELS OF IMPERFECT COMPETITION
The problems in this chapter are of two types: analytical and essay. The analytical problems look at a few special cases of imperfectly competitive markets for which tractable results can be derived.

CHAPTER 13
MONOPOLY
The problems in this chapter deal primarily with marginal revenue-marginal cost calculations in different contexts. For such problems, students primary difficulty is to remember that the marginal revenue concept requires differentiatio

CHAPTER 12
GENERAL EQUILIBRIUM AND WELFARE
The problems in this chapter focus primarily on the simple two-good general equilibrium model in which supply is represented by the production possibility frontier and demand by a set of indifference curves. Beca

CHAPTER 11
APPLYING THE COMPETITIVE MODEL
The problems in this chapter are intended to illustrate the types of calculations made using simple competitive models for applied welfare analysis. Usually the problems start from a supply-demand framework much l

CHAPTER 10
THE PARTIAL EQUILIBRIUM COMPETITIVE MODEL
The problems in this chapter focus on competitive supply behavior in both the short and long runs. For short-run analysis, students are usually asked to construct the industry supply curve (by summing f

CHAPTER 9
PROFIT MAXIMIZATION
Problems in this chapter consist mainly of applications of the P = MC rule for profit maximization by a price-taking firm. A few of the problems (9.29.5) ask students to derive marginal revenue concepts, but this concept is n

CHAPTER 8
COST FUNCTIONS
The problems in this chapter focus mainly on the relationship between production and cost functions. Most of the examples developed are based on the Cobb-Douglas function (or its CES generalization) although a few of the easier on

CHAPTER 7
PRODUCTION FUNCTIONS
Because the problems in this chapter do not involve optimization (cost minimization principles are not presented until Chapter 8), they tend to have a rather uninteresting focus on functional form. Computation of marginal an

CHAPTER 6
DEMAND RELATIONSHIPS AMONG GOODS
Two types of demand relationships are stressed in the problems to Chapter 6: cross-price effects and composite commodity results. The general goal of these problems is to illustrate how the demand for one particu

CHAPTER 5
INCOME AND SUBSTITUTION EFFECTS
Problems in this chapter focus on comparative statics analyses of income and own-price changes. Many of the problems are fairly easy so that students can approach the ideas involved in shifting budget constraints

CHAPTER 4
UTILITY MAXIMIZATION AND CHOICE
The problems in this chapter focus mainly on the utility maximization assumption. Relatively
simple computational problems (mainly based on CobbDouglas and CES utility functions) are
included. Comparative statics

CHAPTER 3
PREFERENCES AND UTILITY
These problems provide some practice in examining utility functions by looking at indifference
curve maps. The primary focus is on illustrating the notion of a diminishing MRS in various
contexts. The concepts of the budg

CHAPTER 2
THE MATHEMATICS OF OPTIMIZATION
The problems in this chapter are primarily mathematical. They are intended to give students some
practice with taking derivatives and using the Lagrangian techniques, but the problems in themselves
offer few econo

.
Microeconomics
.
Chapter 10. Uncertainty and Risk Aversion
Liu Zhentao
Institute for Financial and Accounting Studies
Xiamen University
Autumn 2011
Uncertainty, Information, and Game Theory
Uncertainty and Risk Aversion
Probability
The probability of a

.
Microeconomics
.
Chapter 9. General Equilibrium and Welfare
Liu Zhentao
Institute for Financial and Accounting Studies
Xiamen University
Autumn 2011
General Equilibrium and Welfare
General Equilibrium
Perfectly Competitive Price System
We will assume th

.
Microeconomics
.
Chapter 8. Prot Maximization
Liu Zhentao
Institute for Financial and Accounting Studies
Xiamen University
Autumn 2011
Production and Supply
Prot Maximization
The Nature of Firms
A rm is an association of individuals who have organized
t

.
Microeconomics
.
Chapter 7.Cost Functions
Liu Zhentao
Institute for Financial and Accounting Studies
Xiamen University
Autumn 2011
Production and Supply
Cost Functions
Denitions of Costs 1
It is important to dierentiate between accounting cost and
econo

.
Microeconomics
.
Chapter 5. Demand Relationships among Goods
Liu Zhentao
Institute for Financial and Accounting Studies
Xiamen University
Autumn 2011
Income and Substitution Eects
Two-Good Case
The Two-Good Case
To study the demand relationship among go

.
Microeconomics
.
Chapter 4. Income and Substitution Eects
Liu Zhentao
Institute for Financial and Accounting Studies
Xiamen University
Autumn 2011
Income and Substitution Eects
Demand Functions
Demand Functions 1
The optimal levels of x1 , x2 , . . . ,

.
Microeconomics
.
Chapter 3. Utility Maximization and Choice
Liu Zhentao
Institute for Financial and Accounting Studies
Xiamen University
Autumn 2011
Utility Maximization and Choice
Two-Good Case
Complaints about the Economic Approach 1
Complaint 1: No r

.
Microeconomics
.
Chapter 2. Preferences and Utility
Liu Zhentao
Institute for Financial and Accounting Studies
Xiamen University
Autumn 2011
Preferences and Utility
Preferences
Axioms of Rational Choice 1
3 Axioms of Rational Choice
Zhentao (IFAS)
Micro

.
Microeconomics
.
Chapter 1.The Mathematics of Optimization
Liu Zhentao
Institute for Financial and Accounting Studies
Xiamen University
Autumn 2011
Mathematics of Optimization
Optimization
Optimization
Many economic theories begin with the assumption th

.
Microeconomics
.
Summary on Consumer Theory
Liu Zhentao
Institute for Financial and Accounting Studies
Xiamen University
Autumn 2011
Summary
Consumer Theory
This part is to describe consumers economic behaviors: rational
choice from alternatives.
Zhenta