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Trade-offs and Comparative Advantage

Textbook Chapter: Chapters 3 & 18 (Microeconomics & Macroeconomics)

MobLab Game: Comparative Advantage

Key Learning Objectives:

  • 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.

Demand, Supply and Equilibrium

Textbook Chapter: Chapter 4 (Microeconomics & Macroeconomics)

MobLab Game: Competitive Market

Key Learning Objectives:

  • 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: Chapter 6 (Microeconomics)

MobLab Game: Competitive Market

Key Learning Objectives:

  • 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.

Perfect Competition

Textbook Chapter: Chapter 9 (Microeconomics)

MobLab Game: Production, Entry & Exit

Key Learning Objectives:

  • Short-run profit maximization involves thinking at the margin.
  • In the long-run equilibrium of a constant-cost industry with identical firms, all firms earn zero economic profits.

Monopoly Pricing

Textbook Chapter: Chapter 10 (Microeconomics)

MobLab Game: Cournot (with Group Size=1)

Key Learning Objectives:

  • Monopolies restrict output in order to increase price.
  • The tension between the quantity price effects of increased output.

Oligopoly & Game Theory

Textbook Chapter: Chapter 12 (Microeconomics)

MobLab Game: Prisoner’s Dilemma

Key Learning Objectives:

  • Key features of games: payoff matrices, best responses and dominant strategies.
  • Identification of the Nash equilibrium.
  • The (sometimes) conflicting incentives of cooperation and self-interest.
  • Repeated play may lead to more cooperative outcomes.

Asymmetric Information (Adverse Selection)

Textbook Chapter: Chapter 14 (Microeconomics)

MobLab Game: Market for Lemons

Key Learning Objectives:

  • Experience in a market with asymmetric information.
  • Asymmetric information may lead to adverse selection and market failure.

Public Goods

Textbook Chapter: Chapter 15 (Microeconomics)

MobLab Game: Public Good: Discrete (Threshold)

Key Learning Objectives:

  • 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.

Negative Externalities

Textbook Chapter: Chapter 16 (Microeconomics)

MobLab Game: Externalities w/Policy Interventions

Key Learning Objectives:

  • With externalities, the equilibrium of a competitive market without interventions is inefficient.
  • By reducing transactions, a tax can increase efficiency (total surplus) in a market with a negative externality.
  • Marketable permits for an activity generating a negative externality leads to efficiently reducing that activity.

Unemployment

Textbook Chapter: Chapter 6 & 7 (Macroeconomics)

MobLab Game: Simple Labor Market

Key Teaching Points:

  • Employment levels are determined by both the supply and demand of labor.
  • Policies such as a minimum wage or unemployment insurance affect structural unemployment.

Financial Markets

Textbook Chapter: Chapter 12 (Macroeconomics)

MobLab Game: Bank Run

Key Learning Objectives:

  • Highlights the underlying concept of fractional banking.
  • Demonstrates the trade-off between profit and risk, and shows how bank runs may arise.
  • Policy interventions, such as deposit insurance, can reduce the possibility of bank runs.
  1. Microeconomics and Macroeconomics, both “Principles, Applications and Tools,” both 8th editions.