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.