Managerial Economics and Public Policy

BMGT 681 - Fall, 2000

Professor Robert Windle Professor Joseph Bailey

3429 Van Munching Hall 3419 Van Munching Hall

Phone: 405-2187 Phone: 405-2174

Email: rwindle@rhsmith.umd.edu Email: jbailey@rhsmith.umd.edu

Office Hours: MW 2:00 - 3:00 Office Hours: MW 11:00 - 12:00

or by appointment or by appointment

Course Objective

This course is intended to provide the student with a basic introduction to the microeconomics of the firm. The emphasis will be on the firm decision making process. And how that process influences firm performance. Firm performance can have many dimensions, although this course will primarily concern itself with profitability. The course is roughly divided into three sections. The first two sections examine the market environment of the firm. The first section introduces the basic microeconomic principles that firms utilize in making business decisions, including supply, demand, elasticities, costs, productivity, and pricing. The second section will examine the industry environment that the firm faces. In this section the concepts of market structure, market conduct and market performance will be discussed. The third section of the course will focus on the public policy process, the second mechanism (besides the market) through which the community at large influences business. In particular we will examine various market failures that justify government intervention in the market. In addition we will look at how public policy is created and the role that business can play.

The "managerial" in the course title is taken quite seriously, with primary attention given to applications. This is accomplished primarily by the use of a text which emphasizes the managerial applications of economic concepts and the use of cases. The cases provide practice in applying economic concepts to firm decision making.

Course Requirements

Midterm Exam: 30%

Final Exam: 35%

Problem Set #1: 5%

Problem Set #2: 5%

Problem Set #3: 5%

Case Report #1: 10%

Case Report #2: 10%

Letter grades will not be assigned to work, only numerical grades. At the end of the semester all numerical grades will be summed based on the percentages stated above. Approximately the top 25-40 percent of students will receive an A. Most of the remaining students will receive the grade of B. Grades of C, D and F will be assigned to those students whose performance is appreciably below the class average.

Tests and Final Exam

There will be one midterm exam and a final exam. The midterm will occur on Monday, October 2. The midterm will be based on material covered through the previous Monday’s class. The course constantly builds upon material covered earlier in the course. This means that the final exam is inevitably cumulative. Although the final exam will focus on material covered since the midterm, there will necessarily be material on the final exam that was covered prior to the midterm.

It is important that your schedules permit you to be free on exam dates. Absence from any exam will result in a grade of zero, unless cleared in advance with the instructor.

Groups

The problem sets and case reports will be completed as group projects. Students should form groups of four or five in the first week to work on these group assignments. You may continue to participate in the groups that were created for the Business Foundations ELM or you may feel free to form new groups. If anyone has a problem in getting attached to a group please let the professor know. Groups will be finalized by Wednesday, September 13 at the latest.

Problem Sets

There are three problem sets included in the course packet. Problem set #1 is due on Monday, September 18. Problem set #2 is due on Monday, September 25. Problem set #3 is due on Monday, October 16. Graded problem sets will be returned on the following Wednesday. The problem sets will be completed as group projects.

Case Reports

Each group is required to submit two case reports. These case reports are due on Monday, October 9 and Thursday, October 19. Case reports must be turned in before the class in which the case is discussed. No late reports will be accepted. Each case includes a series of discussion questions. These questions should form the basis for your case report. Groups should address all case questions, as well as any additional issues that the group feels are relevant. In answering the discussion questions groups should link the case with the theories and models covered in the course. Reports will be evaluated on their use of course materials and on the insight provided concerning the case. Students should feel free to utilize outside information and references in their reports. Organization, analysis, and writing style will also enter into the evaluation. The reports must be typewritten, double spaced and no more than ten pages long. The ten page limit applies to text. Figures, charts, tables and references will not count towards the ten page limit. The font size chosen should be no smaller than 12 point.

Groups are required to work independently.

Required Materials

1) Microeconomics by Jeffrey M. Perloff, Addison-Wesley, 1999.

2) BMGT 681 Course Packet. (Produced by Media Express) Includes problem sets,

supplemental readings, case studies and case questions.

Course Feedback

At the conclusion of the course you will be requested to provide feedback to the instructor regarding various aspects of the course. While this is useful, it obviously comes too late in the semester to correct any problems that are occurring during the semester. In order to address your concerns during the semester, we encourage you to provide feedback throughout the course, either written or oral.

Academic Dishonesty

Students found to be cheating will be referred to the University Honors Council for disciplinary action. Cheating includes, but is not limited to, copying on exams, plagiarizing material from published sources or from current or former Smith School students, submitting someone else’s work as your own, or helping other students to cheat. If you have any question regarding what is permissable, please contact the professor for guidance.

Schedule

9/6

Introduction

Perloff: Chapter 1.

Course Packet: Note on Market Definition

9/11

Supply and Demand

Perloff: Chapter 2.

9/13

Applying the Supply-and-Demand Model

Perloff: Chapter 3.

9/18

Problem Set #1 due.

Theory of the Firm

Perloff: Chapter 6.1, 6.2, 6.3, 7.1, 7.2, 7.4

9/20

Problem Set #1 returned

Competitive Firms and Markets

Perloff: Chapter 8

9/25

Problem Set #2 due.

Competitive Firms and Markets

Perloff: Chapter 9.1, 9.2, 9.3, 9.4

9/27

Return Problem Set #2.

Monopoly

Perloff: Chapter 11.

10/2

Midterm Exam

10/4

Oligopoly and Game Theory

Perloff: Chapter 13.1, 13.2,13.3

Structural Analysis of Industries

Course Packet: Note on the Structural Analysis of Industries

10/9

Case #1 Report due

Course Packet: Coming Soon: A Theater Near You

Pricing

Perloff: Chapter 12.1, 12.2, 12.3, 12.4, 12.5

10/11

Strategy

Perloff: Chapter 14.1, 14.2, 14.3

Course Packet: Antitrust and Competitive Strategy in the 1990s

10/16

Problem Set # 3 due.

Externalities, Commons, and Public Goods

Perloff: Chapter 18.

10/18

Return Problem Set #3.

Asymmetric Information

Perloff: Chapter 19.1, 19.2, 19.3, 19.4, 19.5

10/19

Case #2 Report due

Course Packet: Open Source Code material