UNEC

SABAH

Course Title: Microeconomics

By: Zamin Babashov

Course Description;
The course mainly focuses on the behaviors of individuals and firms and how they depend on
limited resources.Microeconomics will introduce you to the economics way of thinking. We
will start with concepts such as scarcity, opportunity costs, tradeoffs, marginal costs, and
gains from trade. We will study how individual economic agents make rational decisions, and
then focus on market outcomes in several market structures. Particular attention will be paid
to the welfare analysis of these market structures, as well as the effect of government policy
on welfare.
Learning goals;
The students will leave this course with a better understanding of the economic way
ofthinking when approaching the difficult decisions that must be made every day.
Aftercompleting this course, students should have developed a range of skills enabling them
tounderstand economic concepts and use those concepts to analyze specific questions.
Evaluation

Weight Description
1 20% In-class seminar activity
2 30% Midterm
3 50% Final exam

Required materials
Main textbook:
“Principles of Microeconomics” sixth edition, 2012, by N. Gregory Mankiw,
“Principles of Microeconomics”, tenth edition, 2012, by C. Karl, F. Ray and O. Sharon
Cheating and Plagiarism
You are responsible for understanding UNEC policies on academic integrity. Not knowing
the rules, misunderstanding the rules, running out of time, submitting the wrong draft, or
being overwhelmed with multiple demands are not acceptable excuses. There are no excuses
for failure to uphold academic integrity.

Course Outline

Session Topics
Introduction
1
The Market Forces of Supply and Demand
2
Elasticity and Its Application
3
Elasticity and Its Application
4
The Theory of Consumer Choice
5
Cost, revenue and profit; Cost theory
6
Firms in Competitive Markets; Perfect Competition
7
Monopoly
8
Monopoly
9
Monopolistic Competition
10
Monopolistic Competition
11

12 Oligopoly

13 Public Goods and Common Resources

14 The Markets for the Factors of Production

15 The Markets for the Factors of Production

*Study materials for each lecture is uploaded to the student cabinet.

Evaluation criteria:
91 – 100 grades excellent A
81 – 90 grades very good B
71 – 80 grades good C
61 – 70 grades sufficient D
51 – 60 grades satisfactory E
<51 grades unsufficient F

Exam questions

s/s Mövzu Sualınçətinliksəviyyəsi Sualın çəkisi Suallar

1 1 2 10 What are the two subfields into
which economics is divided?
Explain what each subfield studies.
2 1 1 5 Should an economic model describe
reality exactly? Why do economists
make assumptions?
3 1 1 5 What is the difference between a
positive and a normative statement?
Give an example of each.
4 1 2 10 Classify the following topics as
relating to microeconomics or
macroeconomics.
a. a family’s decision about how
much income to save
b. the effect of government
regulations on auto emissions
c. the impact of higher national
saving on economic growth
d. a firm’s decision about how
many workers to hire
e. the relationship between the
inflation rate and changes in the
quantity of money
5 1 3 20 Imagine a society that produces
military goods and consumer goods,
which we’ll call “guns” and
“butter.”
a. Draw a production possibilities
frontier for guns and butter. Using
the concept of opportunity cost,
explain why it most likely has a
bowed-out shape.
b. Show a point that is impossible
for the economy to achieve. Show a
point that is feasible but inefficient.
c. Imagine that the society has two
political parties, called the Hawks
(who want a strong military) and
 the Doves (who want a smaller
military). Show a point on your
production possibilities frontier that
the Hawksmight choose and a point
the Doves might choose.
6 2 2 10 What are the demand schedule and
the demand curve, and how are they
related? Why does the demand
curve slope downward? A graphical
explanation is required.
7 2 2 10 What are the supply schedule and
the supply curve, and how are they
related? Why does the supply curve
slope upward? A graphical
explanation is required.
8 2 2 10 Define the equilibrium of a market.
Describe the forces that move a
market toward its
equilibrium. A graphical
explanation is required.
9 2 1 5 Popeye’s income declines, and as a
result, he buys more spinach. Is
spinach an inferior ora normal
good? What happens to Popeye’s
demandcurve for spinach?
10 2 3 20 Does a change in producers’
technology lead toa movement
along the supply curve or a shift in
the supply curve? Does a change in
price lead toa movement along the
supply curve or a shift in the supply
curve? A graphical explanation is
required.
11 2 3 20 Does a change in consumers’ tastes
lead to a movement along the
demand curve or a shift in the
demand curve? Does a change in
price leadto a movement along the
demand curve or a shift in the
demand curve? A graphical
explanation is required.
12 2 1 5 Explain the following statements
using supply-and-demand diagrams.
“When a cold snap hits Florida, the
price of orange juice rises in
supermarkets throughout the
country.” A graphical explanation is
required.
13 3 1 5 Define the price elasticity of
demand and the income elasticity of
demand.
14 3 3 20 Cups of coffee and donuts are
 complements. Both have inelastic
demand. A hurricane destroys half
the coffee bean crop. Use
appropriately labeled diagrams to
answer the following questions.
a. What happens to the price of
coffee beans?
b. What happens to the price of a
cup of coffee? What happens to
total expenditure on cups of coffee?
c. What happens to the price of
donuts? What happens to total
expenditure on donuts?
15 3 1 5 List and explain the four
determinants of the price elasticity
of demand discussed in the chapter.
16 3 2 10 A price change causes the quantity
demanded of a good to decrease by
30 percent, while the total revenue
of that good increases by 15
percent. Is the demandcurve elastic
or inelastic? Explain.
17 3 2 10 A numerical question about the
chapter.
18 3 2 10 A numerical question about the
chapter.
19 3 3 20 A numerical question about the
chapter.
20 3 1 5 How is the price elasticity of supply
calculated? Explainwhat it
measures.
21 4 2 10 A numerical question about the
chapter.
22 4 1 5 A numerical question about the
chapter.
23 4 3 20 A numerical question about the
chapter.
24 4 2 10 A numerical question about the
chapter.
25 4 1 5 Pick a point on an indifference
curve for wine and cheese, and
show the marginal rate of
substitution. Whatdoes the marginal
rate of substitution tell us?
26 4 1 5 Draw a consumer’s indifference
curves for wine and cheese.
Describe and explain four
properties of these indifference
curves.
27 4 2 10 A numerical question.
28 4 1 5 Can an increase in the price of
cheese possibly induce a consumer
 to buy more cheese? Explain.
29 6 3 20 Consider a small bakery business
that produces and sells a variety of
bread and pastries. Analyze and
discuss the bakery's production and
cost structure. Include a breakdown
of fixed and variable costs and
explain how the firm's production
level impacts its costs. Suggest
cost-minimizing strategies for the
bakery.
30 6 1 5 Explain the difference between
explicit costs and implicit costs in
the context of a firm's cost structure.
Provide examples to illustrate these
concepts.
31 6 1 5 Distinguish between short-run and
long-run cost functions for a firm.
How do these differ, and what role
does the concept of the firm's
production scale play in these
distinctions?
32 6 2 10 Imagine a small software
development company. The firm is
currently operating with rising costs
as it expands its product offerings.
Given the cost and revenue data for
the company, analyze the profit-
maximizing level of output and
price for its software products.
Discuss any factors that might limit
the company's ability to maximize
profit in the long run.
33 6 1 5 What is the relationship between a
firm’s total revenue, profit, and total
cost?
34 6 2 10 A numerical question about the
chapter.
35 6 2 10 Some states exclude necessities,
such as food and clothing, from
their sales tax. Other states do not.
Discuss the merits of this exclusion.
Consider both efficiency and equity.
36 5 1 5 Explain the difference between a
firm’s revenue and its profit. Which
do firms maximize?
37 5 3 20 Imagine a small farm that grows
and sells organic vegetables in a
perfectly competitive market.
Analyze the strategies this farm
should employ to maximize profit
in the short run and long run.
 Discuss the role of price-taking
behavior, product homogeneity, and
the firm's ability to enter or exit the
market.
38 5 2 10 Under what conditions will a firm
shut down temporarily? Explain.
39 5 2 10 Under what conditions will a firm
exit a market? Explain
40 5 2 10 Explain the concepts of short-run
and long-run equilibrium for a firm
in perfect competition. How do
price and output change in the short
run and long run, and what
adjustments do firms make to
achieve equilibrium in both
timeframes?
41 5 2 10 Many small boats are made of
fiberglass, which is derived from
crude oil. Suppose that the price of
oil rises.
a. Using diagrams, show what
happens to the cost curves of an
individual boat-making firm and to
the market supply curve.
b. What happens to the profits of
boat makers in the short run? What
happens to the number of boat
makers in the long run?
42 7 1 5 What is meant by a competitive
firm?
43 7 1 5 Explain the main characteristics of a
monopoly, including the absence of
close substitutes, significant barriers
to entry, and the firm's ability to set
the price. How does a monopoly's
pricing power differ from that of a
perfectly competitive firm?
44 7 2 10 Define price discrimination and
discuss the various forms of price
discrimination that a monopoly can
employ. Provide examples of
industries where price
discrimination is commonly used
and explain the economic rationale
behind it.
45 7 2 10 Explain the main characteristics of a
monopoly, including the absence of
close substitutes, significant barriers
to entry, and the firm's ability to set
the price. How does a monopoly's
pricing power differ from that of a
perfectly competitive firm?
46 7 2 10 Consider a natural monopoly, such
as a public utility providing
electricity or water. Analyze the
challenges of regulating such a
monopoly to prevent abuse of
market power while ensuring
affordable access for consumers.
Discuss the pros and cons of
different regulatory approaches.
47 7 2 10 Compare and contrast the pricing
and output decisions of a monopoly
with those of a firm in perfect
competition. How do these
differences arise, and what are the
implications for consumer welfare
and economic efficiency?
48 7 3 20 Investigate the relationship between
monopoly power and innovation in
the pharmaceutical industry. How
does the grant of patents to
pharmaceutical companies impact
their ability to set high prices and
invest in research and development?
Discuss the trade-offs between
incentivizing innovation and
ensuring affordability.
49 8 2 10 Describe the three attributes of
monopolistic competition. How is
monopolistic competition like
monopoly? How is it like perfect
competition?
50 8 1 5 Explain Monopolistic versus Perfect
Competition
51 8 1 5 Explain two benefits that might
arise from the existence of brand
names.
52 8 3 20 How might advertising reduce
economic
well-being? How might advertising
increase
economic well-being?
53 8 2 10 Draw a diagram depicting a firm
that is making a profit in a
monopolistically competitive
market. Now show what happens to
this firm as new firms enter the
industry
54 8 1 5 Why monopolistic competition is
between Monopoly and Perfect
Competition
55 8 2 10 Draw a diagram of the long-run
equilibrium in a monopolistically
 competitive market. How is price
related to average total cost? How is
price related to marginal cost?
56 9 2 10 What is the prisoners’ dilemma, and
what does it have to do with
oligopoly?
57 9 1 5 What kinds of behavior do the
antitrust laws
prohibit?
58 9 3 20 Give two examples other than
oligopoly that
show how the prisoners’ dilemma
helps to
explain behavior.
59 9 1 5 How the Size of an Oligopoly
Affects
the Market Outcome
60 9 2 10 What is dominant strategy. Explain
your answer
61 9 2 10 If a group of sellers could form a
cartel,
what quantity and price would they
try
to set?
62 9 3 20 What is resale price maintenance,
and why is it controversial?
63 10 1 5 Explain what is meant by a good
being
“excludable.” Explain what is
meant by a good being “rival in
consumption.” Is a slice of pizza
excludable? Is it rival in
consumption?
64 10 1 5 Define and give an example of a
public good. Can the private market
provide this good on its own?
Explain.
65 10 2 10 Many transportation systems, such
as the Washington, D.C., Metro
(subway), charge higher fares
during rush hours than during the
rest of the day. Whymightthey do
this?
66 10 1 5 Define and give an example of a
common resource. Without
government intervention, will
people use this good too much or
too little? Why?
67 10 3 20 Wireless, high-speed Internet is
provided for free in the airport of
the city of Communityville.
 1. At first, only a few people
use the service. What type
of a good is this and why?
2. Eventually, as more people
find out about the service
and start using it, the speed
of the connection begins to
fall. Now what type of a
good is the wireless Internet
service?

68 10 1 5 What is cost–benefit analysis of

public goods? Why is it important?
Why is it hard?
69 11 3 20 A numerical question about the
chapter.
70 11 1 5 Give two examples of events that
could shift the demand for labor,
and explain why they do so
71 11 2 10 Explain how a firm’s production
function is related to its marginal
product of labor, how a firm’s
marginal product of labor is related
to the value of its marginal product,
and how a firm’s value of marginal
product is related to its demand for
labor
72 11 1 5 Give two examples of events that
could shift the supply of labor, and
explain why they do so.
73 11 2 10 If the population of the United
States suddenly grew because of a
large immigration, what would
happen to wages? What would
happen to the rents earned by the
owners of land and capital?
74 11 3 20 A numerical question about the
chapter.
75 11 2 10 Explain how the wage can adjust to
balance the supply and demand for
labor while simultaneously equaling
the value of the marginal product of
labor.