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Gwartney, Stroup, Sobel, & MacPhearson: Microeconomics: Private and Public Choice


Gains from Trade

Textbook Chapter: Chapter 2 (Microeconomics)

MobLab Game: Comparative Advantage

Key Teaching Points:

  • The distinction between absolute and comparative advantage.
  • Experience first hand the gains from specialization and trade.
  • Differences in opportunity costs lead to mutually beneficial trade.

Supply and Demand in a Competitive Market

Textbook Chapter: Chapter 3

MobLab Game: Competitive Market

Key Teaching Points:

  • The “invisible hand” of the market: how individual profit maximization leads to competitive market equilibrium.
  • Price discovery: the equilibrium market-clearing price results from the valuations of different buyers and costs of different sellers.
  • Gains from trade (i.e., consumer and producer surplus).
  • Shifts in either supply or demand change equilibrium outcomes.

Government Interventions in Competitive Markets

Textbook Chapter: Chapters 4

MobLab Game: Competitive Market

Key Teaching Points:

  • Government interventions (per-unit taxes, subsidies, price ceilings and floors) alter equilibrium outcomes.
  • Equilibrium outcomes do not depend on whether buyers or sellers pay the tax.
  • The difference between tax incidence and who pays the tax.
  • Relative elasticities determine incidence of a tax or subsidy.
  • Excess supply (price floors) and excess demand (price ceilings).
  • The efficiency implications of government interventions.

Difficult Cases for the Market

Textbook Chapter: Chapter 5

MobLab Game: Linear Public Goods

Key Teaching Points:

  • Highlights the features of public goods: non-rival and non-excludable.
  • Demonstrates the distinction between private and social benefits of public goods.
  • Shows how individual profit maximization leads to the free-rider problem.

MobLab Game: Market for Lemons

Key Teaching Points:

  • Experience in a market with asymmetric information
  • Asymmetric information may lead to adverse selection and market failure

Collective Decision-Making

Textbook Chapter: Chapter 6

MobLab Game: Two-Candidate Election

Key Teaching Points:

  • Understand forces behind the Median Voter Theorem model.
  • Explain clustering by political candidates.
  • Polling-data option allows exploration of policy changes due to new information.

MobLab Game: Multilateral Bargaining (aka “Zombie Democracy”)

Key Teaching Points:

  • Understand coalition formation under majority rule
  • Understand how the position of proposer (selected randomly) provides an advantage in distributing resources through the political process.

Sellers and Incentives

Textbook Chapter: Chapter 9

MobLab Game: Production, Entry & Exit

Key Learning Objectives:

  • Short-run profit maximization involves thinking at the margin.
  • In the long-run equilibrium of a competitive market with identical firms, all firms earn zero economic profits.

MobLab Survey: Mental Accounting: Sunk Costs

Key Learning Objectives:

  • Surplus maximization requires ignoring sunk costs.
  • Easier said than done!

Monopoly & Oligopoly

Textbook Chapter: Chapter 11

MobLab Game: Cournot (with Group Size=1)

Key Teaching Points:

  • Monopolies restrict output in order to increase price.
  • The tension between the quantity price effects of increased output.

MobLab Game: Cournot

Key Teaching Points:

  • The underlying logic of the Cournot model: how market price is determined by aggregate output.
  • The equilibrium outcomes of Cournot competition.
  • Repeat interaction and communication may lead to collusive behavior.

Labor Markets

Textbook Chapter: Chapters 12&13

MobLab Game: Simple Labor Market

Key Teaching Points:

  • When a perfectly competitive market determines wages, the equilibrium wage (per unit of labor) is equal to the value of the marginal product of labor of the last worker hired.
  • By reducing the quantity demanded of labor, a minimum wage decreases employment.
  • By increasing the opportunity cost of supplying labor, unemployment insurance decreases employment.
  • These policies affect structural unemployment and thus an economies’ natural rate of unemployment.

Asset Values and Speculative Bubbles

Textbook Chapter: Chapter 14

MobLab Game: Bubbles and Crashes

Key Teaching Points:

  • Highlights the determinants of an asset’s value: income generated and resale value.
  • Shows how asset bubbles may develop even with complete information.