Wednesday, November 14, 2007

Naked Economics Study Guide

Naked Economics Study Guide
Here are the major areas of Naked Economics to take a look at. This is not a shortcut around reading the entire book - it is meant to help you concentrate on important points. The points that are mentioned are things that you should feel comfortable wtih - have a passing knowledge of them ("Oh, yeah, I remember was ____"). There are some study questions at the end in blue to help you, also. This is all for your assistance in understanding the book; none of it will be collected and graded.

If anyone wants to borrow my book (with notes/highlighting, etc) throughout a school day or overnight, come on by and let me know!

We will be discussing the book the first few days of class as a precursor to Unit 1. There will be a quiz on the critical content as well as information from the book on your Unit 1 Test.

Enjoy! :)



Economic way of thinking - pxiii

Chapter 1 - The Power of Markets

Market Allocation - p3
Invisible Hand of the Economy - p4
Utility - p6+
Opportunity Cost - p9
Demand/Externalities - p10
Cost/Benefit Analysis - p11
Profit Motive - p11
Human Capital - p12+
Barriers to Entry - p14
Market price, pricing decisions & price discrimination - p15+
Lessons of markets - p18+
Globalization - p20+

Chapter 2 - Incentives Matter

Incentive - p23
Command vs. private property - p24
Free Rider problem - p24+
Incentives in Economic Systems - p27
Law of Unintended Consequences & Disincentives - p29+
Behavioral Economics - p34
Game theory & Prisoner's Dilemma - p34+
Externalities - p35
Trade & Quotas - p37
Taxation & Laffer curve - p38+
Deadweight Loss - p40
Tax Systems - p41

Chapter 3 - Government and the Economy

Externalities - p43+
Government solutions to externalities - p48+
Government makes market economies possible - p51+
Property Rights - p54
Public Goods & Free Riders - p57+
Redistribution - p59
Equity vs. Efficiency - p60

Chapter 4 - Government and the Economy II

Government inefficiency - p63
Gov't allocation vs. private allocation - p67
Effects of regulation - p69+
Economic Thinking - p72
Deadweight loss - p74
Taxes as regulation/Effects of taxation - p74+
Laffer Curve - p76
Effect of minimum wage - p77+

Chapter 5 - Economics of Information

Adverse Selection - p82+
Economics of Discrimination - p83+
Assymetry of Information - p84+
Screening mechanism - p89
Equality of information - p90+
Branding - p91
Perfect Competition - p92
Monopolistic Competition/Oligopoly - p92
Signaling - p93+

Chapter 6 - Productivity & Human Capital

Fantasy Spending - p98
Income Inequality - p99
Human Capital - p99+
Scarcity - p100
Human capital and job creation - p102+
Displacement - p104+
Productivity - p107
Standard of Living - p108
Rule of 72 - p109
Income Inequality - p111+
Zero sum game - p115

Chapter 7 - Financial Markets

Purposes of financial market - p118
Rules for investing - p119
Basis of financial instruments - p120+
Efficient Market theory - p129
Investment guidelines - p132+
Diversification - p134

Chapter 8 - The Power of Organized Interests

Incentives for interest groups - p138
Consumer/Producer Surplus & Taxes - p142
Price Ceilings and Floors - p142
Laissez faire economics - p143
Trade - p144+

Chapter 9 - Keeping Score

**Is not micro, will not be part of this course**

Chapter 10 - The Federal Reserve

**Is not micro, will not be part of this course**

Chapter 11 - Trade and Globalization

Benefits of trade - p187+
Globalization - p189
Economic interdependence - p189+
Absolute & Comparative Advantage - p190+
Losers from trade - p191
Protectionism - p193
Trade raises real income - p195
Tariffs - p195
Cultural Homogenization - p199
Externalities from trade - p200
Sweatshops - p201
Comp Adv of poor countries - p201

Chapter 12 - Development Economics

Wealth & Poverty of nations - p206+
What makes one country wealthy whan another isn't? - p208+
Property Rights - p209

Study Questions: (Feel free to answer here if you'd like some feedback from me and/or peers) :)

1) How has competition affected your life and in what ways? (p37) Are you better or worse off than your parents?

2) Name 5 underground economies created as a result of taxes. (p37)

3) "We know that people seek to make themselves better off, however they may define that. Our best hope for improving the human condition is to understand why we act the way twe do and then plan accordingly. Programs, organizations and systems work better when they get the incentives right." (p42). To predict outcomes in economics, we need to understand human behavior. What are some other "laws" of human behavior (like self-interest) that might help us understand the workings of the economy better?

4) On p56, the author describes government's institutions that "form the tracks on which capitalism runs". Find 5 of these institutions and describe their role in facilitating capitalist rules.

5) What are some other examples of information assymetry? (p85)

6) In a competitive market, there should be no profits. T/F and why?

7) What human capital do you possess?

8) Does our free-market economy make poverty inevitable?

Tuesday, November 06, 2007 students! :)

If you made it here, that means that you got the letter informing you of the need to read a book before class starts in January. This will give us more time to stay on the more difficult material in the class, rather than spending a lot of time at the beginning with unit one (which is only about 10% of the national exam material).

The blog is set up for my AP Micro students to chat and respond to problems that we might not have time for in class. You can also respond to each other.

The links over on the side might be helpful as we go through the semester. The blog will be part of your grade in the class.

I have added some links to give some info on the book. As of today, I still have many books available for chekcout. You may keep them through the national exam in May, but please don't write in them. The book is called "Naked Economics" by Charles Wheelan, and you are expected to have the book read by the time class starts, except for the two chapters on macro stuff...which I can't recall off the top of my head...

I'll post the study guide within a couple of weeks - this can help guide you through what's important to know in the book. You are also welcome to check out my book and see what I have highlighted as important, as well as any notes I've written in there. That might help you focus on important points.

The most important part is getting the information. I am not "tricking" you into reading parts of the book that aren't necessarily important. You'll have a quiz on content the first week of school. It would be virtually impossible for you to read the book the first few days of classes - it's just too much.

Enjoy! I'ts a pretty well-written layperson book that's pretty easy to read for an econ book. Don't get too used to the style...that's not how your text is. :) :)


Tuesday, August 14, 2007


Hey there!

In case anyone's interested, here's the breakdown on the tests:

19 people took it, 16 passed = 84% ----> great job, you guys!


I'm so proud of all of you! See, most of you knew it better than you thought! :) :)

Good luck in the fall, and have a TERRIFIC freshman year -


Tuesday, June 05, 2007

Have a nice summer!

I hope all of you have a terrific summer - full of...well, whatever you are most hoping for! (Money, sleep, travel...whatever looks good to you!)

You were a fun though challenging class, and I think that all of you did much better on the national exam than you thought you did. I knew even when you were still studying and stressing out that, for the most part, you were the best prepared class as a whole that I've had in a long time. :)

If you think of it and have a second, when you find out your scores, come on back here and let me know - otherwise, I don't find out until late August! It kills me! lol But - if you don't want anyone else to know, I completely understand.

Make sure to relax a little bit before you head out to the next phase of your life - and remember, never eat yellow snow. :) :)


Tuesday, May 22, 2007

After the Test!

Hey there!

Okay - here's the project sheet and the checkout sheet. I'm using my book to keep track of who is turning what in (tests, books, etc) - so make sure to get the stuff turned in! :)


The test…is OVER!

Here are your options for the rest of the semester. This will count as your project grade for the 4th quarter, so as I promised, you have the chance to get the grade you want in the course!

1. If you are also taking AP-Calculus, you may put together a web page(s) that would help future students in both classes. The object is to show points of comparison between the two courses, possibly some sample questions, get the info for both texts up there, compare pages, etc. Mr. Johnson and I talked about this last summer as we were looking at comparing the two courses. Since I’m not a Calc-y person and he’s not an Econ-y person, we thought it would be really cool to be able to direct students to a web page(s) that could help them in both classes. This is not a LITTLE thing – it’s a BIG thing. Think of what would have helped you as you went through both classes. Check with Mr. Johnson also – he has info and grade issues for his course. J

2. If you are interested in personal finance issues, there is a contest sponsored by ING Direct dealing with personal finance and children’s literature. gives all of the information, but basically you write a fictional children’s story that teaches a basic lesson about responsible money management. There is one winner per age group (you would fall into the 13-19 age group, so only one winner there), but the winner gets a $1000 savings account from ING Direct and gets their book published and illustrated. Cool, hey? You could work on it in class, turn it in as your project, and send it out to them (before June 30, 2007).

3. If you’re interested in taking a peek at the macroeconomy, you have a third option. You would research the condition of the US economy and “solve” the problems you might find. This would consist of researching information on trends in unemployment, inflation & GDP/production, then determining monetary policy (done by the Federal Reserve) or fiscal policy (done by the president & Congress) to solve the problems you find.

4. Or, a team could build the ultimate in AP Micro web pages. This would include info on the class, links, etc – anything that you would possibly have found useful as we went through the course. Topics would need to be divided by unit. I could give you a disk with all the info you’d have to link to – possibly a flash drive if I can find an open one that I’d be willing to part with (not as likely). But then – any other links you find that could be helpful would be awesome. For you overachievers – what did you find as you went searching for info that could help others in the future?

All options will include a presentation to the class to show what you’ve done and offer peer editing. Those presentations will be on June 4th & 5th.

We have the Academic Computer Lab the following days:
Th May 24th
F May 25th
T May 29th
W May 30th
Th May 31st
F June 1st


And, the checkout procedure:

After the test…
A checklist for you before I will sign exemption sheets.

1. turn in (or pay the fine for):
q Mankiw book,
q mceachern book,
q wheeler book,
q 5 steps to a 5 book.

2. Return tests to me:
q Unit 1 (ch 1-3)
q Unit 2 (ch 4-9)
q Unit 3 (ch 13-18)
q Unit 4 (ch 19-21, 10-12)
q Practice test that says “comprehensive microeconomics final 2007”
q All sheets & scoring sheets for frq practice

3. Fill out & return to the envelope the “what worked & what didn’t” sheet (you don’t need your name on the sheet – just cross your name off the list on the front of the envelope)

If you have a problem with any of those, let me know. That doesn't necessarily mean that you can't be exempt, so stop freaking out on me! :) :)

Thursday, May 17, 2007'd it go?

Hey there! So, how do you feel about the test? We can't talk about specific questions on the exam until the FRQ are released next week, but we can see if you feel good about it!

Thumbs up, medium, or down?

I'm proud of all of you for what you've done - and I know in my heart that you were better prepared than you think you were. :)

Have a fun, relaxing day tomorrow - I'll see you Monday.


Wednesday, May 16, 2007


Accepted shortcuts for AP Micro test (these are the things the exam scorers would recognize and don’t need any other explanation from you):

· Use arrows for direction of movement (up arrow for up, etc)
· P = Price
· Q = Quantity
· D = Demand
· QD = Quantity Demanded
· S = Supply
· QS = Quantity Supplied
· Eq. = Equilibrium
· CS = Consumer Surplus
· PS = Producer Surplus
· DWL = Deadweight Loss
· MC = Marginal Cost
· FC = Fixed Cost
· TC = Total Cost
· VC = Variable Cost
· ATC = Average Total Cost
· AVC = Average Variable Cost
· AFC = Average Fixed Cost
· AR = Average Revenue
· MR = Marginal Revenue

Do NOT use:
· PC for perfect competition (use perf. comp.)
· MC for monopolistic competition (never NEVEREVEREVER – MC is marginal cost, not monopolistic competition) (use mon. comp.)
· M for monopoly (use mon.)
· O for oligopoly (use oli.)

Thursday, May 10, 2007

Review & Prepare!

Here are some sites that I've found with info on micro in general, studying for the AP, tips, tricks, hints, and things that people commonly mess up on. If you've found anything else, post in a comment so others can visit them, too! :) Let the linkfest begin!

General Stuff:

Some adventurous teacher/AP grader put together info on some of the most common mistakes that students make on the national exam that cost them points. Yeah, it's 108 slides, but you could hit some of it to get some ideas, and there's a kind of "table of contents" on the left side: mhtml:!COMMONMISTAKESONTHEAPMICROEXAM_files/frame.htm

AMOSweb, searchable economics database:

Online m/c test for practice:

And the answers:

QUIZtastic on AMOSweb (they capitalize stuff weird) - practice quizzes:

Interactive tutorials:

College level - online info with quizzes, tutorials, lecture notes, etc - loads of great stuff:

Online econ textbooks:

The online economics text that I borrow the animated gif files from - they're all here!

All the graphs you "need" to know, animated gif files, VERY GOOD INFO HERE!
Okay - Basic Concepts:
Micro Graphs, Part I (S & D through PComp):
Micro Graphs, Part II (Mon. through income distrib.):
World Price & Tariff Graphs:

Economics at - lots of info, lots of links, could help with application:

McConnell & Brue textbook site - this is the most often used text for AP Econ, and it has all kinds of info online. If you're not understanding something in Mankiw or McEachern, try here. Plus there's outlines, quizzes, etc.

Book outline notes, but check for micro vs. macro. It's not showing up on this screen, and it's been awhile since I looked at it. Stupid ALC computer. :)

Online quiz sites:

Other Blogs:

These could help with application and general knowledge. Since blogs are constantly changing, I have no specifics on here, but there's a ton of info. Really. <--This is the blog of the guy who wrote our text. :)

Monday, May 07, 2007

Animated gif files -

Derived demand -

Determining the number of workers to hire:


Externalities (ooh, and they're about the environment, too!) :

Test tomorrow! Retests through next Tuesday (yes, before the national exam, but don't make that your ultimate focus - you need this stuff for the national exam, too!)
Dan said...
So the whole degree thing has to do more with the elasticity of the demand than anything else? OK...Another thing, the whole factor market...anything on the AP test is going to be in regards to the supply and demand of labor, or will there be other things besides that on there?
3:37 PM, May 06, 2007

Yes, elasticity of D is a really good way of looking at the degrees of price discrimination.

The info we get on what they will actually put on the AP national exam is a wonderful thing (not) - here is all the info I get from them on what will be on in regards to factor markets:

1. Derived factor demand
2. Marginal revenue product
3. Labor market and firms’ hiring of labor
4. Market distribution of income

Helpful, isn't it? That's all I got. So - S & D of labor (in a large sense, not just a basic sense), how to determine how many people to hire, and inequalities of income.

All of the layouts that I get from the College Board are in your syllabus - if you go towards the back, where I list what chapters to study for each unit, there is a list at the end that says "topics" - that's what I get directly from the College Board on what to cover in the course. Yeah, it's vague. That's what stinks. :)

Friday, May 04, 2007

Questions I missed.... :)

Okay - here are a couple of questions I missed in the last few blogs (I tend to only look at the last one after bad...) :)

Ashley said...
Question: i was looking over the Unit 4 packet and i still dont quite grasph the difference between and factor/product and the nsupply/demand. The factor involves work (hiring for example), while the product involes the selling and buying. correct? How do you determine then whether its the supply or demand role? (Activity 43, lesson one, Part A-second column in that chart)Thanks much!
8:56 PM, April 24, 2007

Factor markets are looking only at things that make product - the factors of production (land, labor, capital, entrepreneurship). Most of what we do with factor markets is in labor. Anything having to do with purchasing a product from a store is a product market. Anything to do with hiring people or making things is a factor market (so therefore, supply really is a factor market, but we see it in the product market with what is produced).

In looking at the S or D of factor markets, you have to think about what is really being bought or sold. If the answer is labor - then it is a factor market. If it's capital, factor market. If it's...peanuts, it's the product market. So with the S & D questions that were in the packet (since I'm sitting in the ALC right now, I don't have the questions right in front of me), they dealt with both kinds and you had to figure out which market it applied to first, and then whether it was S or D, right?

So - if something says that the demand for computers goes up (product market), how does that affect the number of computer salespeople (factor market)? You would have to look at which is affected first (product market), and which part (demand) versus the secondary e/affect (factor market) on demand.

Am I just talking gibberish? Does this make any sense?

rageena said...
Okay, so what is the difference between a 1st, 2nd, and 3rd degree monopoly? (From the powerpoint).
11:21 PM, April 26, 2007

The "degrees" in monopoly are talking about price discrimination. I really didn't hit it because it hasn't been on the FRQ in at least 7 years - but you never know. :)

First degree will charge the highest price possible at each quantity. They are getting the highest possible CS shifted to profit because they are charging the highest possible amount. On the graph, they would be able to discriminate at every point from equilibrium to the demand curve, all the way over - that's why it's all colored in on that graph. This is the "perfect" discrimination because it allows the most profit for the monopolist.

Second degree is very similar to First degree - but falls into "block pricing" and offers the chance for different prices being charged to different people/groups depending on how much they purchase. So - if you buy a lot (like Sam's Club or something), your price will decrease with 2nd degree.

Third degree is the most common. The monopolist can discriminate against buyers on very noticable characteristics, like age (senior citizens discounts) or gender ("girls have no cover charge!"), or location (ever wonder why gas prices are always higher in Johnson Creek than here? It's right off the Interstate).

Wednesday, May 02, 2007

Undecided on how to review... :)

Okay - I've been thinking of changing how I use the review days in class. In the past, I've given free response questions (since we've only looked at one of them so far, although there is a reason for that - most FRQ cover more than one of our units, so we couldn't keep going on them...) - timed the response, graded them overnight, gone over them the next day in class.

Since I don't care whether I take them for a grade or not, and since all of you have at least one more AP exam than this one, I'm seriously thinking of changing that. I could give a FRQ a night for you to look at and attempt, and we could go over it the next day (with the College Board scoring sheet so you know how it would be graded) and then we could review the most important parts there and look at some other FRQ or m/c. No timed writing, in other words, but you'd have to do some on your own at night if you wanted to get the full experience.

Or - we could do FRQ at night with m/c practice during the class period.

Or - we could do FRQ in class with m/c practice as homework.

Or - we could do ...other things, as suggested by you. :) We are down to 10 school days to the national exam and I want to use them as wisely as possible. After the unit 4 test, we are down to 6 school days.

I'm open for any suggestions - this is your test, your college credit. There are WAAAAYYY too many of you, though, sitting there saying "I'm not going to pass the national exam anyway, so it doesn't matter." These tests are NORMED - that means that you only do as well as the others taking the test. STUDY!!! You can do this - you can pass - you can get the credit. You know more than you think you do - you just need to review it so you can recall!

Rah rah rah! There's my cheerleader imitation. That's as good as it gets. ;)

Monday, April 30, 2007

Since it was asked on the blog - just to let you know, I will offer 2 practice exams after school. They will be on Th 5/10 and W 5/16 (that's the day before the test). We will start at 3:15pm.

The Th 5/10 one is a 50 question test. You will have 75 minutes to complete it (that's AP timing for m/c). That would put us at...4:30. I can grade it quickly and we can go over any questions you might have - so plan for 5:00.

The W 5/16 is 25 questions + at least one free response. The timing on the m/c would be 40 minutes, with more time for the free response depending on which one(s) I pick. Then we can review as needed - plan for 5pm, but I can stay later if needed.

Info on the exam: Bring three writing utensils - one blue, one black, one pencil. You can't use pencil on the free response, but you can use two different shades (black/blue, no other colors) to show your shifts, etc on graphs. Absolutely NO calculator is allowed - don't even bring one out at all. :(

Wednesday, April 25, 2007

Here are the dates that are possible for a practice test. We would start at 3:15pm and I would need you here until at least 5pm. This would allow for time to take the test + time to discuss anything you have a question on.

I have no problem with doing this twice - I have enough material to do practice tests. If you can't make it, I can also give you the test and the answer key, but it would be up to you to time yourself and come see me if you have questions.

Please let me know if you CANNOT make one of the following dates. I'll tally up and let you know what the best dates are for as many people as possible.

Th May 10th
F May 11th
M May 14th
T May 15th
W May 16th

Yes, I know you have other AP exams to study for. Actually, the closer to the test date (May 17th) the better, as far as I’m concerned. We could possibly do this two days, too.

Tuesday, April 17, 2007

3 VERY important links!

Hey there -

It's time to start looking things over for review (as well as retests) - as of today, we have 22 school days before the national exam. We have one more unit to finish, and then we will be practicing with free response questions.

That means - much of the review falls on you. You will be getting a review book from the school, but please don't write in it - I made the deal to get the "Naked Economics" books as well as the review books as long as I could use them for a few years. :) You will be charged for the price of a new book if they are damaged.

Also - here are some REALLY helpful links - "all the graphs you need to know": These are basic concepts - ppc's, S & D, etc. Basic S & D through PC Market graphs World price/tariff graphs.

These slides may go into more or less detail than we have in class. Use them as a review tool - they offer the chance to question yourself & give the answer on the next slide. They are EXTREMELY helpful - the guy who does this really does a great job and is very helpful.

This week: Labor markets!

Friday, April 13, 2007

Blog Postings

Wojtek asked for a list of blog posting requirements (the dates). Because we "negotiated" during the Spring Break and when your paper was due, you have the following dates to post an analysis on your own blog:

4/16 (this coming Monday)
5/7 (the last before the national exam)
6/4 (yes, even that last week of classes)

You have two comments due weekly, even on weeks that the analysis blog is due. :)

Since I'm pretty sure most of you won't check this until afterwards: how was the test?

The test average before I have had time to go through and see which questions may not be valid is 26/50 (52%). Icky. The high score(s) were a 68%, the lowest that I see is an 18%. I'm sure those will change as I go through the test.

Remember that first test, when I told you I was ecstatic with a C average, and you didn't believe me? Yeah...

Remember I told you it wasn't enough to know the information, you needed to be able to analyze and apply it? Yeah...

#1-25 on the test were from old AP exams.

Hmm...I haven't posted much here'll actually have to go look at your peers' posts to get your posts in by Monday! :) :)

Have a nice weekend -

Saturday, April 07, 2007

The Economics of Las Vegas...

I have (mostly) recovered from my trip...we got home last on Thursday (bad air traffic into O'Hare, bad traffic out of Chicago) and I pretty much slept all day on Friday. :)

Hopefully, you have had a great Spring Break and are (almost) ready to return to the last month before the national exam! We have a lot of work left to do - your unit test is next Friday, and will be on the four types of markets.

So - anyone want to try the "econ of Vegas"? I'll start:

~buy cheap airline tickets from the monopolistically competitive market of online ticket brokers

Some questions for you to think about:

~Why do people gamble when everyone knows that there is a 90% chance you won't win a single dime? After all, those huge mega-casinos don't get built because they don't make a profit....This could also apply to the lottery - why in the world would people buy lottery tickets when you have a one in 12 million chances to win?

~Why are there so many buffets in Las Vegas? What type of market would this be? I'd bet we had a choice of at least a dozen different breakfast buffets within a 2 mile radius of our hotel. What would make them different? (Isn't breakfast just...breakfast...?)

~Why does everyone drive up the Las Vegas Strip (a 3 mile drive took us 50 minutes on Tuesday afternoon - the same drive was 10 minutes on Tuesday morning) when there's a perfectly good road one block over that is much faster and safer?

~How in the world does Las Vegas support over 15 GIANT casinos (I'm counting the ones with at least 5 restaurants in each), plus hundreds of smaller ones?

Yes, we had fun. I hope you had some down time on your break. I won't be there Monday - see you Tuesday. Enjoy your time in the computer lab. I can safely say it's the last down time you'll have until the end of May. :)

Saturday, March 24, 2007

Hmm...more things to think about!

In my quest (at the moment, it seems impossible) to finish grades by Monday, I totally forgot to post some links and questions for you guys & gals! I know, I know...inexcusable. :) I don't have a better one. I *did* learn, though, that I should know better than to pile on big things (freshmen) at the end of a quarter. I haven't been this swamped at grading time in years.

I know that out of the goodness of your hearts, you'd be willing to let me NOT grade your term papers, but I won't let you sacrifices yourself (selves?) for that. :) :)

Okay - here we go:

Monopoly: Introduction to Monopoly. It starts with info on copyright, trademark, etc that is useful for possible questions on the test. (Price searcher = price taker) This is on MR & D curves and compare PC, M & MC (which we haven't gotten to yet, but shouldn't be too confusing) Monopoly graph

1. Explain why the MR facing a competitive firm differs from the MR facing a monopolist.

2. Even if PC does not exist, why is it important to the study of microeconomics?

3. Why is the demand curve for a monopolist different from the PC demand curve?

4. Singer Diddy has a monopoly over a scarce resource: himself. He is the only person who can produce a Diddy concert. Does this fact imply that the government should regulate the prices of his concerts? Why or why not?

5. Why is the equality of marginal cost and marginal revenue essential for profit maximization in all market structures? Why can price be substituted for MR in the MR=MC rule when an industry is perfectly competitive?

6. Assume that a pure monopolist and a purely competitive firm have the same unit costs. Contrast the two with respect to (a) price, (b) output, (c) profits, and (d) allocation of resources. Since both monopolists and perfectly competitive firms follow the MC = MR rule in maximizing profits, how do you account for the different results? Why might the costs of a PC firm and a monopolist be different? What are the implications of such a cost difference?

Friday, March 16, 2007

Info for Monday

Hey there -

I know all of you were in class on Friday, but just a reminder - any posts you want to make this weekend are extra credit. :)

Papers are due Monday. Remember - use graphs to help you explain your point - cite your sources - make sure you have an intro & conclusion - about 4 pages. I know that sounds simplistic...but half of you didn't turn in a rough draft, so I'm nervous.

You will get a sheet on Monday outlining the things you must, gotta hafta know about PC. Take a look at the outline, the sites listed below, etc. Seriously - you HAVE to know this stuff, and we must move on to the other markets.

Have a nifty weekend - see you Tuesday -

Friday, March 09, 2007

Some things to think about in re: to perfect competition...

It's 4/5th hour, so I'm not positive how far we'll get, so this may be further along than we are in class. :)

1. The licorice industry is competitive. Each firm produces 2 million strings of licorice in a year. The strings have an average total cost of $.20 each, and they sell for $.30.
(a) What is the marginal cost of a string?
(b) Is this industry in long run equilibrium? Why or why not?

2. Bob's lawn mowing service is a profit-maximizing, competitive firm. Bob mows lawns for $27 each. His total cost each day is $280, of which $30 is a fixed cost. He mows 10 lawns a day. What can you say about Bob's short run decision regarding shut down and his long run decision regarding exit from the market?

3. Your best friend's long hours in the chemistry lab have finally paid off - she discovered a secret formula that allows people to do an hour's worth of studying in 5 minutes. So far, she's sold 200 doses, and faces the following ATC schedule: (Q--ATC) 199 -- $199, 200 -- $200, 201 -- $201. If a new customer offers to pay your friend $300 for one dose should she make one more? Explain.

I'm off to read rough drafts! I should be able to hand a couple back today that were emailed to me earlier this week - otherwise, my goal is to have them back to you on Monday. We'll see how that goes...then, you have a week to rewrite - they're due on M 3/19. :) (Wow, the 3rd quarter ends that Friday after that, already!)

Costs/Perfect Competition

Here is the link to a ppt on perfect competition. It's in html format, so everyone should be able to access it. And no, I didn't write it.

Second - some more links for your economics enjoyment -

Profit Maximization MR/MC stuff:

And part II to that: This will become more important as we get into the other three types of markets. for basic cost information. There are teacher instructions in the bottom frame that explain what's going on. More costs stuff Costs & Shutdown rule explicit vs implicit costs short run vs long run Long run ATC Types of competition Spectrum of competition

There are a lot more, this guy has tons of info. But...I think that's enough to start with. :)

Note: He does separate oligopoly & cartel, which are together in your book.


Friday, March 02, 2007


Consider the following costs for a pizzaria. They go in order of Q in dozens/TC/VC

a. What is the fixed cost? how do you know?

b. What is the marginal cost per dozen pizzas using TC? What is the marginal cost per dozen pizzas using VC? What is the relationship between the two?

Tuesday, February 27, 2007

Okay - some info for you -

Price ceilings & floors:

Taxes & elasticity:

Tariff graph:

Agree or disagree, and why?
1. If the government taxes land, wealthy landowners will pass the tax on to their poorer renters.
2. A tax that has no deadweight loss cannot raise any revenue for the government.
3. If the government taxes apartment buildings, wealthy landlords will pass the tax on to their poorer renters.
4. A tax that raises no revenue for the government cannot have any deadweight loss.

Suppose the government raises $100 million through a $0.01 tax on widgets, and another $100 million through a $0.10 tax on gadgets. If the government doubled the tax rate on widgets and eliminated the tax on gadgets, would it raise more, less, or the same amount of money as before?

Monday, February 26, 2007


Don't you hate it when you just get a kick in the head that you are SO FAR BEHIND on everything that it could take days to get caught up?

Ah, well. I forgot to post stuff on elasticity on Thursday before I left. We were in an intense discussion on what should be taught in US exciting! After that scintillating conversation, I was too tired to think...I even forgot to take my grading home with me!

A good question from Keri:
"Alright, I keep trying to think of things that are either inelastic or elastic, straightforward one or the other, but in so many differnt cases I think of different scenarios in which case they could be both. First of all, can people name different things that are alwasy elastic and always inelastic? Second of all, on the AP test will it be really straightforward whether the items they are talking about are one or the other, or will I sit there and think about it too much? I mean, a car is inelastic if you need it to get to work and you live far away from work, but elastic when you are looking at a luxury car....there are alwasy so many variables to consider"

My quick answer: Yes, you will overthink it, because that's what Keri's do. But - on the national exam they will try to be as explicit as possible, so work on reading only what's in the question. Elasticity can (and is) a personal thing - what's elastic for me may not be for you. If it says, "assume that cars are an elastic good"...make sure you do! :) Any other comments from others?

Okay - some things on elasticity:

1. If demand is elastic and price is raised, what happens to total revenue? How can you prove this?

2. Why is industry supply more elastic in the long run than in the short run?

3. If price were increased from $40 to $42 and quantity demanded fell from 50 to 45, calculate elasticity, state whether demand is elastic, unit elastic, or inelastic; and find out how much total revenue was when price was $40 and $42.

(Okay, so those are simple. Or rather, they should be simple)
Let me find some brain stumpers... umm..

4. Other thing equal, an increase in the number of buyers for a product or service will increase demand. Baby diapers and retirement villages are two products designed for different population groups. The US Census Bureau website, , provides population pyramids (graphs that show the distribution of population by age and sex) for countries for the current year, 2025, and 2050. View the population pyramids for Mexico, Japan, and the US. Which country will have the greatest percentage increase in demand for baby diapers in the year 2050? For retirement villages? Which country do you think will have the greatest absolute increase in demand for baby diapers? For retirement villages?

**this is a question I used to use as an internet assignment. Remember, you must find the *PERCENTAGE CHANGE* in demand for baby diapers and retirement villages, then the *ABSOLUTE CHANGE* afterwards. There is a difference. Can you get one of the answers?

5. Joe loves Mello Yello and will spend $10 per week on it no matter the price. What is his price elasticity of demand for Mello Yello?

6. In an effort to 'support' the price of some agricultural goods, the Dept of Agriculture pays farmers a subsidy in cash for every acre that they leave unplanted. The Agriculture Department argues that the subsidy increases the 'cost' of planting and that it will reduce supply and increase the price of competitively produced agricultural goods. Critics argue that because the subsidy is a payment to farmers, it will reduce costs and lead to lower prices. What argument is correct? Is this a price ceiling or a price floor in action? Explain.

7. Lovers of classical music persuade Congress to impose a price ceiling of $40 per ticket. Does this policy get more or fewer people to attend classical music concerts?

8. The government has decided that the free-market price of cheese is too low. If the government imposes a binding price floor in the cheese market, what would that do to the price and quantity of cheese sold? Is there a surplus or a shortage?

Pick & choose, answer one, a few, or all. The more you work on answering, the better you will understand it.

Friday, February 16, 2007

Unit 2 Online Quizzes

If you didn't catch the email or comment post, you can continue the online quizzes through 2/26. The 2/19 was set when we had the test on 2/20 - since that is pushed back, so is the due date for the online quizzes.

So...2/26. :)


Thursday, February 15, 2007


Can anyone explain why these sold for $1300?



Here is some info on elasticity: (animated gif file) (38 minute video file, a lecture from another teacher) (interactive tutorial)

Some questions for thought:

1. When would you want to own a business that sells price-elastic products? Why?

2. The rent for apartments in New York City has been rising sharply. Demand for apartments in New York City has also been rising sharply. This is hard to explain, because the law of demand says that higher prices should lead to lower quantity demanded. Do you agree or disagree? (and, as always, explain)

3. Taxicab fares in most cities are regulated. Several years ago, cab drivers in Boston obtained permission to raise their fares 10%, and they anticipated that revenues would increase by about 10% as a result. They were disappointed, however. When the commissioner granted the 10% increase, revenues increased by only about 5%. What can you infer about the elasticity of demand for taxicab drivers? What were cab drivers assuming about the elasticity of demand? (You may not be able to answer this one without looking up other ways to determine elasticity in your book) :)

Tuesday, February 13, 2007

Supply & Demand Together -

Some links: (no gifs this time) (ALWAYS remember that wikis can be easily changed by anyone and read carefully!) (interactive)
Very worthy of discussion, from Ellen:

>alright i have a question.. i was discussing this with a fellow classmate earlier and i was just >wondering if its possible to live without having economics involved. we were saying even if you >live out in the woods in a secluded area in a cardboard box you can't get away from economics >(assuming you aren't starving yourself) because if you go looking for berries or something, well >there is still supply and demand involved.. so is it possible?


Friday, February 09, 2007

S & D info

Hey there -

Just some questions to get you thinking about S & D, and some links to more animated gif files.

1) Some people will pay a higher price for brand-name goods. For example, some people buy Rolls Royces and Rolex watches to impress others. Does knowingly paying higher prices for certain items just to be a “snob” violate the law of demand?

2) Predict what will be the direction of change for either supply or demand (and in what market) in the following situations:
a. Several new companies enter the home computer industry.
b. Consumers suddenly decide that large cars are unfashionable.
c. The US Surgeon General issues a report that tomatoes prevent colds.
d. Frost threatens to damage the coffee crop, and consumers expect the price to rise sharply in the future.
e. The price of tea falls. What is the effect on the coffee market?
f. The price of sugar rises. What is the effect on the coffee market?
g. Tobacco lobbyists convince Congress to remove the tax paid by sellers on each carton of cigarettes.
h. A new type of robot is invented that will pick peaches.
i. Nintendo anticipates that the future price of games will fall much lower than the current price.

3) When Exxon moved away from its location at the northeast corner of Wright and Green Streets, Shell, operating on the southwest corner of Wright and Green, promptly raised its prices. Is this coincidence? Explain.

4) Why are we relatively insensitive to price changes affecting low-priced goods such as bubble gum? (determinants of supply) (shifting curves)

Have a nice weekend - sorry I freaked some of you out about the application questions - no worries, we'll talk about them next week. Enjoy your relatively homework-free (from me) weekend! :)

Ohh - almost forgot - if you feel I missed comments for the blog grading, zip me an email. I have a system now, and it's going to work great, but it was a little confusing setting it up, so I may have missed some people on accident. Remember - your comments should be meaningful and amazing! ha!


Thursday, February 08, 2007

Ha! Links!

Hey there -

On the sidebar, I posted links to everyone's blog (at least, everyone that's made a blog up). Your weekly posts/queries can go on anyone's blog. If you comment on an old post (meaning not the current week), please let me know by email or a note in the basket so that I can credit you with your comment. Remember, just saying "cool" isnt' enough - analysis is much better for your brain.

I'm almost done with the grading for the first 2 blog weeks - I think I have a system now. :) Updated grades will be posted by Monday at the latest - but more than likely tomorrow for you guys.

I'll also post some supply links and some discussion questions before I leave tomorrow.


Wednesday, February 07, 2007

Interesting blogs!

There are some great posts out there from your peers (as I plow through the grading!). If you have time, you should go take a look at what some people have said!

Remember - if you leave comments on OLD posts, let me know so you can get credit for your comments. I'll read through current weeks, but I won't go back to old posts unless you leave a note in the basket or email me.

Economics of Sports

Just in case some of you are interested. :) There's a growing field in Econ now, dealing with the Econ of Sports. I took a seminar in it a few years ago - very interesting.

Before you read any of this (if you're interested) - which sport pays the highest: football, baseball, basketball, or hockey?

An article to think about:

And a blog:

And, if you really feel like reading college-level material, a professional article:

No, it's not really what we're on, although as it was pointed out, some of it is supply & demand. It's an interesting topic, though. Salaries are paid for a reason. :)

Monday, February 05, 2007

Monday Night -

News 3 out of Madison says we have a 2 hour delay tomorrow. More than likely, this means that 1st & 2nd hour won't meet - at least, that's what's happened in the past with late starts.

I can give 15-20 minutes in class to finalize info on your Food Court stuff. After that, we can have it due later in the week, but I can't give any more time. We need to get started on S & D, especially after losing today.

Super Bowl - interesting ideas on the commercials! I liked the slapping one, myself.

What about players? Why do football players (or any professional sports person, for that matter) get paid so much? and no, it has very little to do with supply & demand.

Hope y'all stayed warm - at least our car started. The truck decided it would rather be elsewhere and stayed in non-starting dream land. :)

Sunday, February 04, 2007

Economics of the Super Bowl...

We're still really early in the semester, so there's not a lot of economic theory that we've talked about, but anyone want to give it a try?

I can start - why do businesses pay $3 million+ for a 30-second commercial that is never shown again other than during the Super Bowl?


So...will we have school tomorrow? It's supposed to be mighty cold...

Wednesday, January 31, 2007

Intro to Supply & Demand

Here's some links to help you get started on S & D: (demand - animated gif) (substitution & income effect - animated gif) (determinants of demand - animated gif) (determinants of supply - animated gif)

Food court simulation - due Friday unless you need until Monday. It's up to the sub, really. You need to do the math-y stuff, and determine as a group which 5 restaurants you'd chose, and why.

Enjoy your weekend! :)


Tuesday, January 30, 2007

Unit One Test

Test average = 73%

High score = 92%
Low score = 48%

Median score = 73% (weird, that it's the same as the average, hey?)

I am pleased. I know that many of you aren't, and that's cool. This was NOT a test that you should have left thinking, "Oh, I aced that one. How much easier could she have made it?"

Retests will be available after next Monday. There is one person that has to test, and you will receive the scan sheet (with answers) and your test booklet on Friday. You'll have the weekend to look it over, and we'll talk about it on Monday. After that, you may retest to your heart's desire; I will take the highest score you get.

There are two on the scan sheet that were graded incorrectly; I put the wrong answers on the key (that's why doing the analysis of seeing which questions were most wrong helps so much - if 18/20 get it wrong, then it's the question, not the test-taker...). Those are corrected on your scan sheet if you got the extra points. Also, there were two questions with answers that were ambiguous; although I thought they were clear, after seeing results and what people put, they were written badly. Those were taken out of the count.

I'll show you scores tomorrow. :)

Have a nice night - good job!


Monday, January 29, 2007

Okay, I lied...

one more.

Here are some links that might help you. The guy who wrote these has taught AP econ for many years and put these together for his students. If they help, terrific. If not, ignore. :)
They are animated gifs, so you have to have the ability to view those. (PPC's - animated) (economic systems) (terms)

Okay - now I'm really going home.


Food for thought...

Some answers to your questions...or maybe just more questions to your questions to lead you in the right direction to find your own answers...or questions to your questions to make you questions my question to make you think about your answers...

Hmm. I think I just confused myself.

Anywho -

Questions on ppc’s that you asked (sorry, I didn't write down who asked what questions):

i have a question: in class, a point outside the production possibilities curve was inefficient because it was an over use of resources, but according to the chapter, hte point is infeasible because it cannot be reached with the scarce anount of resources available. i'm wondering, which is it? or can it be either?

Me: (Because purple is cool...)

A point outside can be reached for short periods of time. For example - a person can work 80 hour workweeks if they are uber-workers, but most people couldn't handle that for short periods of time. As pointed out, it's an example to show an opposite to under-utilization of resouces. You can also reach that with trade.

Question, the production curve, can you really over utilize the resources? Would you not have the curve along the maximum amount of usage to show maximum production? Or is this another curve?

Me: If you are doing aggresive strip-mining, you are overusing resources. Or...cutting down rainforests (or any forest) without replanting. Or forcing overtime. Or...anything that makes it so that you are being inefficient as you use the resources. It can be a judgment call - what might seem like overuse to you might not seem like it to others. If it were on the national exam, they would make it very clear that they considered it inefficient.

Another curve would be finding and/or using new resources. Drilling in the Alaskan wildlife refuge, technology advances, discovering how to access the oil reserves in the Gulf of Mexico, a large population explosion - all will move the curve out. The opposite - a large population destruction (war, famine, holocaust), a government that forbids the use of resources or technology - would move the curve in.

dan,in response to your first question, i don't really think the point beyond the curve is actually realistic. Any country wouldn't have enough resources to exceed effeciency, or the points along the curve. Perphaps economists put this point on the graph as a contrast to the underutilzation of resources (which is possible)

Me: Right - but it IS fully accessible with trade. You can easily consume beyond your PPC with trade with someone else who specializes in production.

I am also posting to get my little address out there as well. But while I am here I would like to make a question. I understand that civil war can cause capital and consumer goods production to decrease, but I always thought that war was supposed to be good for the economy. Sure, there are going to be less people making things, but there is also going to be a higher demand for products, especially machinery. So couldn't a civil war also increase the production? Or is that only a war between nations?

Me: Interesting! A war is good for the economy in the sense that it sets people to work on government goods even if consumer goods are rationed or not necessary. So, it increases GDP (what's being produced), increases employment rates, and usually helps level off inflation (this is all macro stuff, so we won't be getting into it too much). What' s really important to remember here is that this is assuming (a) that we are talking about a relatively stable government, (b) this almost never happens in the case of a dictator, and (c) this is almost always in the case of a market or mixed (socialist) economy.

If you think to the US civil war, it causes a problem. Want a history lesson? Mr. Schwedrsky will tell you that I'm a Civil War buff and a Southern sympathizer, to boot. :) The South was much less developed economically at the time of the Civil War, and this caused problems. All heavy machinery was in the North. So - I would say that the Northern economy flourished while the Southern economy plodded along. (Not to mention that there was no stable currency, no recorded GDP, etc....) Anyway - in general, (my opinion, nothing to back this up but knowledge of economic theory...I dont' feel like researching it right now...) - because civil war today encompasses total war - as in, it hits all sectors of a country, economic, social, political - I think that it would not help an economy. Most modern warfare involves guerrilla tactics, so they have to be supplied somewhere - most guerrilla armies are supplied from non-domestic sources. Because terrorist attacks and bombings are usually done on economic centers, that would hurt it more.

So - a long answer to your short question. A civil war could increase production, but I dont' think that's a hard and fast rule. How's that for being indecisive?

Other questions you had:

My second question is about market intervention. How does effiency and equity contribute to market intervention?

Me: Efficiency is the idea of using all resources to their best and full capacity. Equity answers the question - is that fair?

So, if we use all of our resources to "make people better off", and in Congress' opinion that means that they will make sure that the government guarantees a minimum living wage of $20,000 a year, that might be efficient. Is it fair? What incentive does that give to work? If you knew that no matter what you did, the government would guarantee that you received a wage equal to up to $20,0000...well, lots of people would stop working. That was the problem with welfare. There was no incentive to get off of it. Now, in WI, there is - W-2 (Wisconsin Works) sets it up so you can only stay on welfare for x number of months before you have to show that you are looking for/training for a job.

Market intervention - the government will often look at efficiency (mostly the right-leaning), while at the same time trying to determine equity (mostly the left-leaning). But - in determining equity...should every one be equal? Should you make the same as a high school student that I make as a person with a masters' degree? Should I make the same as a doctor, or as Tiger Woods, or even as Scotty Nguyen, the great Texas Hold 'em player? :)

In a market economy, we must look at equity because markets are not fair. They don't favor one person over another, but they do allow for equality in the sense that we all have the same options. I can buy or not buy. I can spend or save. I can go to Vegas in April or I can use that money to pay off some bills. There are incentives to do different things. Is it fair that I'm going to Vegas when some of you can't even get money to go to Madison? I don't know. Is it efficient? I'm not sure. But - we all have that chance with a market economy.

Did that make any sense?

And finally, one last question:

So, Mrs. McDaniel... What is the most sucessful type of economy?

Me: I'm going to be difficult here and depends on what you determine as "success". If success is that government stays out of your lives, then market would be your answer. If success is making the most money possible, regardless of others, then market would be your answer. If success is being able to go to college for free, mixed/socialism would be your answer. If you are concerned with equity (all being equal), then command is your answer.

I'm difficult, I know. Success is a relative term. I think history has proven that there cannot be a command economy that works efficiently. There are people in Russia who would love to see communism return, because at least under communism, they had food. They had a job. They didn't have to worry about where basic necessities were coming from. The movement from command to market economies is brutal.

I think markets have proven to work. I also see great value in mixed/socialist economies, but that is very unlikely to shift here in the US - even though the idea of free college and healthcare might appeal to some, the taking of such a huge percent of our incomes is VERY unpopular. People complain over the government taking 30%...imagine if they took 70% - or 80%. Yikes!

I've talked enough. I'm going home. :)

This is an example of how your personal blogs should look...

(this is not an example of what your responses should be...)
(I'll write more later today about your questions on PPC's, etc)

Blog example:

Is it time for a new, New Deal?

Author Pat Regnier talks about the New Economy (the “Anxiety Economy”) and how, although we may have more toys & gadgets than ever, we as a society are still having a problem paying our bills, saving for retirement & the kids’ college tuition, and are living paycheck to paycheck. He suggests that the new Democratic Congress should install programs to help people out, similar to FDR’s “New Deal” to get out of the Depression.

Personally, I think this guy is a nutcase. The economy is in much superior condition to anything we saw in the 1930’s. People need education, not handouts. This ties to discussions on the class blog dealing with the question of opportunity cost and competition (from the Naked Economics book). A few people wrote in asking if we were better off than our parents, and what that has to do with competition. Perhaps competition has helped to cause some of the problems listed in the article – how many credit cards does one person need, even if they are offering free stuff or special rates? How many iPods does a person need, or TV’s, or…anything? Does competition encourage us to spend our money rather than save, which can cause the decrease in the US savings rate? (Did you know that some economists say that the US now has the lowest savings rate in the world? As a percentage of disposable income, we now save about –2%. Yes, that’s a minus. In comparison, Japan has a savings rate of about 18%, and China’s is over 30%. What’s up with that?)

Friday, January 26, 2007


There is a more detailed explanation on increasing/decreasing/constant OC in regards to PPC's in the last post. A question was posted there.

I made a boo-boo - you need 2 posts per week. Yes, they can be questions. No problem. It's a basis for discussion. Feel free to answer someone's question if no one has yet.

Avoid "yeah" answers - giving info that isn't there yet is much better. Or expanding in general.

Fun, fun! Test on Tuesday -