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AP Microeconomics

2017-2018 School Year (Room B106)

Mr. Alan Stewart (B.A., University of Iowa, 2007)

Contact Info: astewart@ (Please use email as primary means of communication if available)

815-774-7400 ext. 47470 (Joliet West High School Classroom)

Grade Level: 12 Credit: .5 (weighted) Length of Course: One Semester (A/B)

Content: This course is intended to be a rigorous and robust introductory college level equivalent of economics; focusing this year on microeconomics. Students will use and demonstrate a variety of effective learning strategies to garner the necessary insights and information of the Advanced Placement curriculum. The strategies will include online research and collaboration, individual, partner, small and large group work, analytical skills, graphing, inquiry techniques, formal speaking and presentation skills, as well as technical college level writing. Microeconomics is a semester class that will alternate days with AP Government class here at Joliet West on an A/B day schedule for the year.

*Students may be granted college credit depending on the score they receive on the AP exam given in the spring and the policy of the university in which they enroll.

***Exam Day - Friday, May 18th, 2018, 08:00 AM***

Out of Class Time Required: One to two hours per day is likely, in addition to weekly meetings and study sessions.

Out of Class Activities: Students may meet occasionally outside of class to discuss any issues in class; this includes official “AP Review” days. Students will have the opportunity to participate in an entirely online course through a program called: “Coursera”, a Massive Open Online Classroom or “MOOC”, which are completely free, and self-paced classes taught by University professors. If students pass the class, they receive with a certificate by the professor, which can be used on a résumé or as personal experience for college level coursework. This is typically offered as extra credit.

Evaluation Methods: Unit tests (released AP multiple-choice questions), practice AP tests, homework, Do Now’s, AP free response questions, online and in-class discussion, and semester final. It is recommended that the students take the Advanced Placement test for college credit at the end of this course.

Class Grading Scale (Based on 100% total): *Grades are curved using an AP Scale

District Grading Scale: Formative: 20% (See breakdown)

A = 100-90 *Homework, classwork, daily

B = 89-80 Summative: 80% (See breakdown)

C = 79-70 *Unit tests, quizzes, projects

D = 69-60 *AP free response questions

F = 59 and below *Midterm and Final

Expectations of the class:

Teacher Expectations:

✓ Teacher will keep JT Learn site and classroom blog up to date with classroom work and materials covered in class.

✓ Teacher will be prepared for class and have clear expectations.

✓ Teacher will communicate to both parents and students concerning progress in class, as well as upcoming assignments and tests.

✓ Teacher will be available outside of class for student help.

AP Student Expectations:

✓ Students will arrive on time and prepared for class.

✓ Students will follow all classroom rules, school rules, and procedures.

✓ Students will participate in all classroom, online and outside of classroom activities (if possible) and be respectful of others.

✓ Students will be self-directed learners, and are expected to take responsibility for their learning and their actions.

✓ Students should prepare for and expect to take and pass the AP exam.

Parent Expectations:

✓ Parents will contact teacher with any questions, comments, or concerns about the content and material covered in class.

✓ Parents will contact teacher with questions, comments, or concerns about their child.

✓ Parents will be aware of classroom assignments, procedures, and child progress.

Students with Special Needs:

All students who have 504’s or IEP’s will be accommodated as required by law. The teacher is always open and willing to discuss any new strategies or implementations for student improvement with the student, paraprofessional, case manager, special education team, or parent. Any student requiring extra time or help will be given it upon request or notification. Please feel free to come to me with any questions or concerns, and I will do my best to accommodate any students’ needs as possible.

Primary Texts:

Krugman’s Microeconomics for AP*

Adapted from Microeconomics, Second Edition, by Paul Krugman and Robin Wells. Ray, Margaret, and Anderson, David. Worth Publishers/BFW, New York, NY. 2012.

Supplementary Texts:

Favorite Ways to Learn Economics

2nd Edition, Anderson, David and Chasey, James. Thomson South-Western Corp., Worth Publishers, New York, NY. 2012.

Supplemental Resources:

• Albert.I/O

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• EconEdLink

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• Khan Academy

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Important Websites:

*AP Microeconomics Students:

*AP Microeconomics Blog:

*Google Classroom

*Remind 101

Econ Illinois:

Council for Economic Education:

National Center on Education and the Economy:

Drop Deadline and Graduation Requirements:

*Drop day (on your own) is October 20th, 2017

***If you have a 65% or below at SEMESTER we will make the recommendation to your counselors (and parents) that you drop into a regular college prep section of economics and government.

*This is because these two classes are REQUIRED FOR GRADUATION, and we have seen a steady trend of students NOT IMPROVING their grades as time goes on.

MICROECONOMICS UNIT STRUCTURE

(Sections from Krugman, time lengths adjusted as needed)

Unit I: Basic Economic Concepts 2 Weeks

Sections 1 & 3

Assessment: • Unit I test, and practice AP questions

Unit II: The Nature and Function of Product Markets 5 Weeks

Sections 2 & 3

Assessment: • Unit II test, and practice AP questions (graphing emphasis)

Unit III: Theory of the Firm, Production & Costs 4 Weeks

Section 4

Assessment: • Unit III test, and practice AP questions (graphing emphasis)

Unit IV: Competitive Theory & Market Structures 2 Weeks

Sections 5 & 6

Assessment: • Unit IV test, and practice AP questions

Unit V: Factor Markets, Market Failure & the Role of the Government 3 Weeks

Sections 7 & 8

Assessment: •Unit V test, and practice AP questions

TOPICS COVERED IN MICROECONOMICS

Unit I: Basic Economic Concepts

Modules: 1) The Study of Economics

3) The Production Possibilities Curve Model

4) Comparative Advantage and Trade

15) Utility Maximization

40) Public Goods

Topics:

Comparative & Absolute Advantage

Functions & Types of Economic Systems

Incentives

Marginal Analysis

Opportunity Cost

Private Property (Rights) and Incentives

Production Possibilities Curve

Role of choice

Scarcity

Total Utility & Marginal Utility

Trade & Specialization

Utility (maximization)

Unit II: The Nature and Functions of Product Markets

Modules: 5) Supply and Demand: Introduction and Demand

6) Supply and Demand: Supply and Equilibrium

7) Supply and Demand: Changes in Equilibrium

10) Income Effects, Substitution Effects, and Elasticity

11) Interpreting Price Elasticity of Demand

12) Other Elasticity

13) Consumer and Producer Surplus

Topics:

Consumer Choice

Consumer & Producer Surpluses

Determinants of Demand and Supply

Elasticity (price, income, cross-price of demand, price of supply)

Income and Substitution Effects

Market Equilibrium

Supply & Demand Curves (individual and market)

Unit III: Theory of the Firm, Production & Costs

Modules: 16) Defining Profit

17) Profit Maximization

18) The Production Function

19) Firm Costs

20) Long-Run Costs and Economies of Scale

Topics:

Accounting vs. Economic Profit

Allocative Efficiency

Cost minimizing inputs & Productive Efficiency

Economies of Scale

Marginal Product & Diminishing Returns

Production Functions, Costs & Revenues

Profit, Profit Maximization, & Normal Profit

Short & Long Run Costs

Unit IV: Competitive Theory & Market Structures

Modules: 21) Introduction to Market Structure

22) Introduction to Perfect Competition

23) Graphing Perfect Competition

24) Long-Run Outcomes in Perfect Competition

25) Introduction to Monopoly

27) Price Discrimination

28) Introduction to Oligopoly

29) Game Theory

30) Oligopoly in Practice

31) Introduction to Monopolistic Competition

32) Product Differentiation and Advertising

Topics:

Behavior of firms and markets in the short and long run

Imperfect Competition:

• Monopoly (Inefficiency & Price Discrimination)

• Oligopoly (Collusion, Cartels & Game Theory)

• Monopolistic Competition (Advertising, SR & LR)

Perfect Competition

Profit Maximization

Short-run supply and shutdown decisions

Unit V: Factor Markets, Market Failure, & the Role of the Government

Modules: 8) Supply and Demand: Price Controls (Ceilings and floors)

9) Supply and Demand: Quantity Controls

14) Efficiency and Deadweight Loss

26) Monopoly and Public Policy

33) Introduction to Factor Demand

34) The Markets for Land and Capital

35) The Market for Labor

36) The Cost-Minimizing Input Combination

37) Theories of Income Distribution

38) Introduction to Externalities

39) Externalities and Public Policy

40) Public Goods

41) Public Policy to Promote Competition

42) Income Inequality and Income Distribution

Topics:

Distribution & Redistribution of Income

Externalities & Public Goods

Factor Markets and Derived Demand

Hiring Decisions for labor and capital markets

Marginal Revenue Product

Price Ceilings & Floors

Price and Quantity Controls

Public Policy

Tax incidence and deadweight loss

Course Details (from the College Board)

The purpose of an AP course in Microeconomics is to provide a thorough understanding of the principles of economics that apply to the functions of individual decision makers, both consumers and producers, within the larger economic system. It places primary emphasis on the nature and functions of product markets, and includes the study of factor markets and of the role of government in promoting greater efficiency and equity in the economy.

This course covers the following topics:

I. Basic Economic Concepts

The study of microeconomics requires students to understand that, in any economy, the existence of limited resources along with unlimited wants results in the need to make choices. An effective AP course, therefore, begins by introducing the concepts of opportunity costs and trade-offs, and illustrates these concepts by using the production possibilities curve or other analytical examples. The course can then proceed to a consideration of how different types of economies determine which goods and services to produce, how to produce them, and to whom to distribute them. It is also important that students understand why and how specialization and exchange increase the total output of goods and services. Students need to be able to differentiate between absolute and comparative advantage, to identify comparative advantage from differences in output levels and opportunity costs, and to determine the basis under which mutually advantageous trade can take place between countries. Specific examples from actual economic situations can be used to illustrate and reinforce the principles involved. The importance of property rights, the role of incentives in the functioning of free markets, and the principle of marginal analysis should be highlighted.

II. The Nature and Functions of Product Markets

The study of the nature and functions of product markets falls into four broad areas: supply and demand models, consumer choice, production and costs, and theory of the firm.

A well-planned AP course requires an analysis of the determinants of supply and demand and the ways in which changes in these determinants affect equilibrium price and output. In particular, the course helps students make the important distinction between movements along the curves and shifts in the curves. The course also emphasizes the impact of government policies such as price floors and ceilings, excise taxes, tariffs, and quotas on the free market price and quantity exchanged. The concepts of consumer surplus and producer surplus should also be introduced. Students are expected to comprehend and apply the concepts of price, cross-price, income elasticities of demand, and the price elasticity of supply.

The next area covered in the course is the theory of consumer choice. Students should gain an understanding of the basic postulates underlying consumer choice: utility, the law of diminishing marginal utility, and utility-maximizing conditions, and their application in consumer decision-making and in explaining the law of demand. By examining the demand side of the product market, students learn how incomes, prices, and tastes affect consumer purchases. Here it is important that students understand how to derive an individual's demand curve, how individual and market demand curves are related, and how the income and substitution effects determine the shape of the demand curve.

The third area covers production and cost analysis both in the short run and in the long run. This section begins with an introduction of the short-run production function, describing the relationship between the quantity of inputs and the quantity of output. Within the context of the production function, students should understand average and marginal products as well as the law of diminishing marginal returns. Students learn the link between productivity and costs, and examine the relationships among the short-run costs: total, average, and marginal. With an introduction of the concept of cost minimization, this section also includes a discussion of long-run costs and an examination of economies and diseconomies of scale, as well as returns to scale.

The fourth area covers the behavior of firms in different types of market structures. This section begins with the definition of profits and making the distinction between accounting and economic profits, and establishing the profit-maximizing rule, using marginal analysis. In covering perfect competition, the course focuses on determining short-run and long-run equilibrium, both for the profit-maximizing individual firm and for the industry, and on the equilibrium relationships among price, marginal and average revenues, marginal and average costs, and profits. Students should understand the adjustment process to long-run equilibrium.

In considering the market behavior of a monopolist, students identify and examine the sources of monopoly power and understand the relationship between the monopolist's demand curve and its marginal revenue curve. Students learn how the monopoly's total revenue changes along its demand curve as price varies. Having learned the behavior of monopolies and perfect competition, students should compare a monopolist's price, level of output, and profit with those of a firm operating in a perfectly competitive market. By paying particular attention to the concept of allocative efficiency, students learn how and why competitive firms achieve an efficient allocation of resources, whereas monopolists do not. The concept of deadweight loss is a good device to show the efficiency loss due to monopoly. The model of price discrimination provides another dimension of monopoly behavior that students need to learn and understand.

In covering oligopoly, the course stresses the interdependency of firms and their tendency to collude or to form a cartel. With a simple payoff matrix, the basic game-theory model should be used to enhance a student's understanding of the interdependent behavior of firms in an oligopolistic market and identification of dominant strategies.

Finally, the course considers the market structure of monopolistic competition and highlights the importance of product differentiation and the role of advertising in the behavior of firms. The course then proceeds to examine firm behavior in the short run and in the long run, and the existence of excess capacity and its implication for efficiency.

III. Factor Markets

In this section of the course, students also apply the concepts of supply and demand to markets for factors such as labor, capital, and land. Students analyze the concept of derived demand, understand how a factor's marginal product and the marginal revenue of the product affect the demand for the factor, and consider the role of factor prices in the allocation of scarce resources. When the markets for different factors are considered separately, most attention should be given to the labor market, particularly labor supply and wage and employment determination. Although the course may emphasize perfectly competitive labor markets, the effect of deviations from perfect competition, such as minimum wages, unions, monopsonies, and product market monopolies, can also be considered. For the factors of land and capital, students might examine the concept of economic rent and the relationship of the interest rate to the supply and demand for investment funds. By studying the determination of factor prices, students gain an understanding of how the market determines the distribution of income and the sources of income inequality in a market economy.

IV. Market Failure and the Role of Government

It is important for students to understand the arguments for and against government intervention in an otherwise competitive market. Students examine the conditions for economic efficiency, using the marginal social benefit and marginal social cost principle, and the ways in which externalities, public goods, and the market distribution of income create market failures even in perfectly competitive economies. In addition, students are expected to study the effectiveness of government policies such as subsidies, taxes, quantity controls, and public provision of goods and services, which are designed to correct market failures and achieve economic efficiency. It is also important both to emphasize that monopolies can cause market failures when they use their market power to engage in behavior that restrains competition and to examine the government's attempt to solve such problems by using antitrust policy and regulations. Although there is not a generally accepted standard for judging the equity of an economy's income distribution, a well-designed course will incorporate key measures of income distribution (Lorenz curve and Gini coefficient) and examine the impact of government tax policies and transfer programs, both on the distribution of income and on economic efficiency.

About the Exam (from the College Board)

***Exam Day 2018 - Friday, May 18, 08:00 AM***

The exam is approximately two hours and 10 minutes long and has two parts — multiple choice and free response. The multiple choice section is worth two-thirds of the final exam grade and the free response section is worth one-third of the final exam grade.

Section I: Multiple-Choice — 60 questions; 70 minutes

The portion of multiple-choice questions covering each course topic area is:

• Basic Economic Concepts (8%–14%)

• The Nature and Functions of Product Markets (55%–70%)

• Factor Markets (10%–18%)

• Market Failure and the Role of Government (12%–18%)

Total scores on the multiple-choice section are based on the number of questions answered correctly. Points are not deducted for incorrect answers and no points are awarded for unanswered questions.

Section II: Free Response — 3 questions; 60 minutes, which includes a 10 minute reading period

• 1 long essay question

• 2 short essay questions

The essays usually require that you link two or more content areas, analyze an economic situation, and evaluate general microeconomic principles. The best essays demonstrate analytical and organizational skills, and when needed, incorporate diagrams that clarify the analysis. Some questions include graphs that you'll have to interpret while some others ask you to provide the graphs.

Fifty percent of the section score is based on the long essay while each short essay contributes one-quarter to the free-response score.

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