Microeconomics: When Markets Fail

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Microeconomics: When Markets Fail

Instructor: Rebecca Stein

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5 modules

Gain insight into a topic and learn the fundamentals.

1 week to complete

at 10 hours a week

Flexible schedule

Learn at your own pace

5 modules

Gain insight into a topic and learn the fundamentals.

1 week to complete

at 10 hours a week

Flexible schedule

Learn at your own pace

Skills you'll gain

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Assessments

15 assignments

Taught in English

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There are 5 modules in this course

Perfect markets achieve efficiency: maximizing total surplus generated. But real markets are imperfect. In this course we will explore a set of market imperfections to understand why they fail and to explore possible remedies including as antitrust policy, regulation, government intervention. Examples are taken from everyday life, from goods and services that we all purchase and use. We will apply the theory to current events and policy debates through weekly exercises. These will empower you to be an educated, critical thinker who can understand, analyze and evaluate market outcomes.

In the first part of the course we learnt that if we allow market forces to work we reach an efficient outcome: the maximum benefit that can be generated by a market. The second part of the course explores cases where the markets fail to accomplish our goals. This week sets up the benchmark case of the perfectly competitive market: a model we will modify in the next few weeks. We define Perfect Competition, learn to model it graphically and discuss some key results in terms of long run profits and implications for efficiency.

What's included

20 videos3 assignments1 discussion prompt

20 videosTotal 45 minutes

1.1.0: When Markets Fail: Introduction2 minutes
1.1.1: Defining Profits1 minute
1.1.2: Defining Fixed Costs and Variable Costs2 minutes
1.1.3: Marginal Productivity3 minutes
1.1.4: Marginal Productivity: Definition1 minute
1.1.5: Marginal Cost2 minutes
1.1.6: Average Cost2 minutes
1.1.7: Graph of Marginal and Average Cost Curves2 minutes
1.2.1: Perfect Competition: Definition5 minutes
1.2.2: Profit Maximization Perfect Competition2 minutes
1.2.3: Profit Maximization: MR=MC3 minutes
1.2.4: Profit Maximizations vs. Making Profits3 minutes
1.2.5: Profit Maximization: The Case of Losses2 minutes
1.2.6: Perfect Competition: The Firm's Supply Curve REPLACE1 minute
1.2.7: Definition of Short Run vs. Long Run2 minutes
1.3.1: Perfect Competition: Firm Entry When Profits are Positive3 minutes
1.3.2: Perfect Competition: Firm Entry When Profits are Negative2 minutes
1.3.3: Perfect Competition: An Efficient Outcome3 minutes
1.3.4: Perfect Competition: In The Long Run2 minutes
1.3.5: Perfect Competition: An Efficient Outcome Pt 21 minute

3 assignmentsTotal 90 minutes

1.1: Costs and Profits30 minutes
1.2: Perfect Competition: Definition and Output30 minutes
1.3: Perfect Competition: Implications for Efficiency30 minutes

1 discussion promptTotal 10 minutes

Firm and Profit Maximization10 minutes

A monopoly is a case where there is only one firm in the market. We will define and model this case and explain why market power is good for the firm, bad for consumers. We will also show that society as a whole suffers from the lack of competition.

What's included

13 videos2 assignments1 discussion prompt

13 videosTotal 39 minutes

2.1.1 Monopoly: Definition2 minutes
2.1.2: The Monopoly as a Price Setter2 minutes
2.1.3 Marginal Revenue vs Price: Numerical Example3 minutes
2.1.4 Marginal Revenue vs Price: Graphical Example3 minutes
2.1.5 Marginal Revenue vs Price: Example Using Calculus1 minute
2.1.6 Profit Maximization in a Monopoly2 minutes
2.1.7 Profit Maximization in a Monopoly: Numerical Example4 minutes
2.2.1 Monopoly vs Perfect Competition6 minutes
2.2.2 Efficiency loss under a Monopoly3 minutes
2.2.3 Monopoly vs Perfect Competition: Numerical Example6 minutes
2.2.4 Monopoly vs Perfect Competition: Example of Dead Weight Loss3 minutes
2.2.5 Monopoly vs Perfect Competition: Summary2 minutes
2.2.6 Why do we allow monoplies?3 minutes

2 assignmentsTotal 38 minutes

2.1: Monopoly definition8 minutes
2.2: Monopoly vs. Perfect Competition Numerical example30 minutes

1 discussion promptTotal 10 minutes

Monopoly in Real Life10 minutes

Monopolies come in various types: one price monopoly, natural monopoly, price discrimination and monopolistic competition. This week we will expand the basic monopoly model to cover these cases and then explore market outcomes in each case. We will also discuss how government may intervene in such cases to benefit society as a whole and increase the surplus generated by the market.

What's included

14 videos3 assignments1 discussion prompt

14 videosTotal 39 minutes

3.1.1 Natural Monopoly: Definition1 minute
3.1.2 Government Regulation and Antitrust Law2 minutes
3.1.3 Natural Monopoly: Implications for the Average Total Cost3 minutes
3.1.4 Natural Monopoly: Graphical Presentation1 minute
3.1.5 Natural Monopoly: Profit Maximizing Outcome4 minutes
3.1.6 Natural Monopoly: Regulation though Marginal Cost Pricing4 minutes
3.1.7 Natural Monopoly: Regulation though Average Cost Pricing4 minutes
3.2.1 Price Discrimination: Definition4 minutes
3.2.2 Price Discrimination: Graphical Example4 minutes
3.3.1 Monopolistic Competition: Definiton2 minutes
3.3.2 Monopolistic Competition: Core Results2 minutes
3.3.3 Monopolistic Competition: Graphical Presentation in the Short Run3 minutes
3.3.4 Monopolistic Competition: Graphical Presentation in the Long Run2 minutes
3.3.5 Monopolistic Competition: Mark up and Excess Capacity2 minutes

3 assignmentsTotal 90 minutes

3.1: Natural Monopoly30 minutes
3.2: Price Discriminating Monopoly30 minutes
3.3 Monopolistic Competition30 minutes

1 discussion promptTotal 10 minutes

Different Market Structures and Government Intervention10 minutes

Two classic cases of market failure will be defined and explored: externalities and public goods. We will define each case, demonstrate why the market fails to provide the efficient outcome and suggest interventions through either marked design or regulation.

What's included

20 videos4 assignments1 discussion prompt

20 videosTotal 52 minutes

4.1.1: Externalities: Definition5 minutes
4.1.2: Externalities: Allocative Efficiency: Refresher2 minutes
4.1.3: Negative Externalities: Implications for Efficiency5 minutes
4.1.4: Positive Externalities: Implications for Efficiency4 minutes
4.1.5: The Coase Theorem3 minutes
4.1.6: Interalizing a Negative Externality via a Per Unit Tax3 minutes
4.1.7: Interalizing a Positive Externality via a Per Unit Subsidy1 minute
4.2.1: Externalities: A Numerical Example2 minutes
4.2.2: Interalizing a Negative Externality via Tax: A Numerical Example4 minutes
4.2.3 Government Intervention in the Case of Externalities2 minutes
4.2.4 Externality: Conclusion1 minute
4.3.1 Pure Public Goods: Nonexcludable and Nonrival3 minutes
4.3.2: Examples of Different Types of Goods4 minutes
4.3.3: Implications of Nonexcludability3 minutes
4.3.4: Free Riding1 minute
4.3.5: Implications of Nonrivalness2 minutes
4.4.1: The Role of the Government in Providing Public Goods1 minute
4.4.2: Provision of Public Good by the Government2 minutes
4.4.3: Free Riding as a Prisoners' Dilemma3 minutes
4.4.4: Public Goods Conclusion1 minute

4 assignmentsTotal 120 minutes

4.1: Externalities30 minutes
4.2: Solutions to Externalities30 minutes
4.3: Public Goods30 minutes
4.4: Solutions to Public Goods30 minutes

1 discussion promptTotal 10 minutes

Externality and Government Intervention10 minutes

Up to this point we assumed that there is full information in the market. We are now ready to relax this assumption as we introduce the concepts of moral hazard and adverse selection. We learn that asymmetric information may lead to market failure and we discuss some remedies. The last segment in the course is a reminder that besides efficiency, equity is also a criteria we all care about. A short introduction will explore how economist measure poverty and inequality.

What's included

10 videos3 assignments1 discussion prompt

10 videosTotal 56 minutes

5.1.1 Adverse Selection2 minutes
5.1.2 Adverse Selection: Consequences and Solutions4 minutes
5.1.3 Adverse Selection: A Numerical Example2 minutes
5.1.4 Adverse Selection: A Numerical Example with Private Information2 minutes
5.1.5 Adverse Selection: Possible Solutions3 minutes
5.1.6 Moral Hazard2 minutes
5.1.7 Moral Hazard: Consequences and Solutions3 minutes
5.2.1 Inequality19 minutes
5.2.2 Poverty13 minutes
5.2.3 Income Redistribution7 minutes

3 assignmentsTotal 74 minutes

5.1: Asymmetric Information30 minutes
5.2: Poverty and Inequality14 minutes
Final Exam30 minutes

1 discussion promptTotal 10 minutes

Measuring Poverty10 minutes

Instructor

Rebecca Stein

University of Pennsylvania

3 Courses123,784 learners

Offered by

University of Pennsylvania

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