Concepts For Micro Theory

Supply and Demand

• demand vs. quantity demanded
• supply vs. quantity supplied
• movements along vs. shifts of S & D
• price ceiling, price floor
• economic shortage/surplus
• market & individuals' demand curves
• horizontal summation
• specific tax
• tax incidence
• elasticity of demand and supply
• willingness and consumer surplus
• variable costs as area under mc
• competition max. surplus + profit
• deadweight loss of taxation

Consumer Theory

• consumption bundle
• preferences
• budget line
• indifference curve
• properties of indiff. curves
• slope down
• don't cross
• "moon" shaped
• tangency of budget line & indiff curve
• normal vs. inferior goods
• complementary vs. substitute goods
• derivation of demand curves
• endowment

Farm Programs

• deficiency payments/target price program
• loan program (CCC)
• payments not based on output
• food stamp program
• surplus and profit
• dead weight loss

The Firm

• Cost Curves and Profit Maximizing Output
• economic profits vs. business profit
• opportunity cost
• cost function, C(Q)
• marginal cost
• fixed vs. variable costs
• c = vc + fc
• ac = avc +afc
• producer's supply curve
• mc above avc
• why does p = mc?
• increasing, decreasing and constant costs
• u-shaped costs diagram
• short-run vs. long-run supply
• long-run competitive equilibrium
• profits are zero
• p = mc
• S = D

Deriving Cost Curves from Isoquants

• production function
• returns to scale
• isoquant
• isocost means equal expenditure
• tangency gives chosen inputs
• derive cost curve
• derive (conditional) factor demand
• show TBES on a diagram

Monopoly

• maginal revenue
• marginal revenue for competitive firm is price
• causes of monopoly
• profit-maximizing P & Q for monopoly
• barriers to entry
• why MR=MC gives max profit
• What's Wrong With Monopoly
• deadweight loss of monopoly
• regulation of public utility

Market Failure and Welfare

• Willingness to Pay
• Surplus
• Deadweight loss
• Competition maximizes profits plus surplus
• allocation
• Pareto efficiency
• efficiency versus income distribution
• Pareto preferred
• Public Good
• A Competitive Equilibrium is a Pareto Optimum

Pollution

• Technology Based Effluent Standard
  • isoquant diagram
  • price that achieves same level of pollution
• Major Water/Land/Air legislation and programs
• Clean Air Act.
• National Goals
• State Plans to meet goals; stricter standards in dirtier places
• Technology Based Effluent Standards --TBES--(Best Practicable, Available, Conventional Technology)
• Point Source--TBES for new sources, existing sources in dirty areas, toxics
• Non-point Source--rules for cars but not yet for trucks, trains, and boats
• RECLAIM
• Bubbles and Other trading Schemes
• 1972 Water Pollution Control Act Amendments
• Mandated TBES
• Large increase in federal subsidy for sewage treatment
• 1977 Clean Water Act--regulated toxic discharge
• Fed's don't set standards like they do for air
• Hazardous and Toxic Substances
• Pesticides--registered and permitted
• Resource Conservation and Recovery Act
• Manifest--tracking of waste
• Proper disposal
• CERCLA--Superfund
• Fund to pay for cleanup of old wastes
• Ability to sue for Natural Resource Damages
• You Touched It, You're Responsible

• Taxes vs. Standards: who gets the money/efficiency
• Right amount of pollution: Between firms, between firms and consumers.
• Diagram read from both sides
• price of clean air/water is too low
• results in too much of polluting input (isoquant diagram)
• results in too much output
  • private marginal cost understates social mc

• (Not in 00) Property rights in Water
• Appropriative: first in use, first in right
• Equal sharing
• Need for trade to get efficient allocations
• Major Legislation in Forestry
• RPA: planning
• Mult. Use Sustained Yield: concept of sustained
• Nat. Forest Management Act: non-declining flow
• Endangered Species Act: The Owl Rules
• Change in emphasis on goals through the legislation

• Coase Theorem
• is pollution independent of assignment of property rights
• transaction costs
• with high enough transactions costs it could be best to let the polluter pollute
• The smoker and asthmatic: does income matter?
• do property rights attenuate pollution

• (not in '00) Environmental Kuznets Curve
• Why does pollution first increase then decrease with income?

• (Not in '00) International Issues
• Do Industries Move to Lax Regulatory Climates?
• Control of CFC's--seems to be successful
• Control of CO2
• Emission determined by Pop. GDP/Pop Energy/GDP CO2/Energy
• Recently(????) recognized as issue
• SO2 increase and then decreases in GDP/cap. Why?
• (Not in '00) Debt for Nature Swap:  Role of Debt priced below Face Value