1) "I'm Xth on the waitlist. Can you do anything? Will I
get in?"
No, unfortunately, I have been taken out of the
loop. I don't know whether you will get in or not--if you are 1st
or 2nd for a recitation with an unpopular time (e.g. 8 am on Friday), you
are very likely to get in. The control is by recitation, not by the
overall class, so there are many people who are 1st and 2nd waitlisted.
We have a very difficult registration system; there are in principle better
systems, but so many students are involved that any system seems beset
with problems.
2) "When is the first midterm going to be? I have to be out of
town on for the days of X to Y."
The first midterm will be very close to half-way
through the semester. About a week and a half before that time, I
will offer several possible dates to the class...we will vote on those
dates, dropping less popular dates, until there is a winner. In this
way, we can get the best chance of getting the "socially-optimal test date."
However, this approach does not, as an example of a voting problem for
"public goods," reflect the "intensity of want." That is, if one
date wins with a 51% to 49% of the vote, it is possible that the "wrong"
date might have been selected, because those who don't get their date might
possibly "care" more than those who do. If the vote spread is very
large (it often is), it is likely that we will pick the best date, though
one cannot ever be totally certain.
3) "What is my assignment this week?"
I have little in the way of formal assignments...your
recitation instructors are likely to be giving you something much more
specific than you will ever get from me. It is generally desirable
to be reading a bit ahead of where I am in class. In the beginning
few lectures, you might feel somewhat adrift--just read the introductory
material (the things prior to Demand and Supply) in the book and in the
handouts; you will be fine. As the course proceeds, it will become
clearer and clearer where we are...the syllabus keys the organization to
the book chapters and the handouts are also quite similar to the book chapters.
If you are really confused, e-mail me and I'll tell you where you should
be on both the reading of the book and the handouts.
4) "Is there an Economics Club, that has social activities?"
Yes, in fact, there are generally several activities
in planning stages or underway...if you are enjoying the class, why not
drop in on those two events and check it out!
5) "What would be an example of a Kaldor to Pareto efficient projects
conversion?"
The inspection/maintenance system of car auto exhaust
might be an example. It hurts the poor more than the rich, but probably
has net benefits to society as a whole. If enough other money were
given to the poor (e.g. through an income tax reduction), you could make
them better off, too. That is, if there are dollar B > C overall
for the program, then you can take away some of the dollar benefits from
those who receive them and give those dollars to those who pay the costs
and have something left over.
For example, suppose the "winners" benefit $800
while those paying the costs ("losers") pay $600 and there are 200 people
in our society, one hundred each of winners and losers. The losers,
without compensation, lose $6 each, while the winners win $8 each, so the
project has more total benefits than costs (Kaldor Efficient). But,
we can't know whether it makes people better off collectively because we
don't know how much each group values a dollar. If, however, the
winners pay $700 to the losers, everybody is better off with the policy
(each person now has a net benefit of $1, from the $600 cost investment)--it
is converted, by the dollar transfers, from being Kaldor Efficient to being
Pareto Efficient.
6) "What is the difference between supply and quantity? I thought
I was clear on the matter but in class today I realized I was not clear
when you related an example with coffee. The example was when both
curves shifted: If coffee was proven healthy, yet there was a frost
in Columbia what would happen? If demand for coffee went up, and
supply went down the price would go up but we do not know what would happen
to the quantity. Now if supply went down, wouldn't quantity go down
too?"
Your confusion stems from the slopes of the curves
in this case...you are subconsciously thinking of a vertical supply curve
for coffee that is shifting leftward (somewhat understandable in the case
of a frost that reduces the coffee crop). But, at higher prices there
will be more coffee taken from inventories from other years, more care
will be given to the beans that survive the frost and so on...so there
is an upward-slope to the supply curve--hence if the demand increases enough,
there might be more or less coffee supplied--even though the frost killed
a lot of this year's crop. [Green coffee beans store for a long time--only
after they are, in varying amounts, roasted are they more "fragile"].
You raise a good question, though, which suggests
that you are actively working to figure the material out--you'll do fine!
To better see what YOU were thinking, draw the coffee market with the vertical
supply curve shifting leftward due to the frost. Then quantity does
unambiguously fall, and price just rises by more (due to the demand increase)
than it would due to the supply reduction alone. This case is confusing
because people tend to think of perishable crops (e.g. lettuce) that are
supplied in fairly vertical amounts that just vary according to conditions
that year. To avoid such confusions, this is why I recommend that
you just assume the "normal" shaped D (downward sloping) and S (upward
sloping) curves!
7) "The first midterm is now over...how do I know how I did?"
I have posted (by the last six digits of your student
ID number) your scores outside my office on the wall (NW corner, 2nd floor
of the Economics Bldg). Also written on that posting is how many
points to add to your score. How many points get added depends on
the difficulty of the exam, and varies from exam to exam...it is generally
a "good thing" if the test is more difficult, since it is easier for more
people who do well on a difficult exam to get out of the final (missing
a few on a hard exam allows people to go well over 100 points, while an
easy exam is limited to that number, and a careless answer puts you at
96 or so). See syllabus for further information on the elaborate
grading system.
8) "Where are the exam and correct answers posted?"
Usually I allow students to keep their exams so
that they can know how they answered each question (assuming that they
indicated on their test what they answered, prior to transferring it to
the scantron). I post the correct answers on the web immediately
after the exams are completed. It will be useful to be sure you understand
why each correct answer is correct and why none of the other possible answers
are correct; this will enable you to do better on the final. Good
luck!
9) "When will the second midterm take place?"
It will be approximately in the second to last week
of the course...this forces those who are destined to get out of the final
to learn a much higher percentage of the material.
10)"Hi....I've been reviewing past exams and have some questions (below).
Yikes, some of the questions are
confusing. Are you going to make this one exceptionally hard?"
All tests seem hard to some people and easy
to others! :)
"1. Spring '98 exam: #13. Suppose a monopolist sells
4 units of output at a price of $5 but must lower price to $4 to sell 5
units. Suppose that monopolist is price discriminator and purchasers
of the first 4 units are unaware of the price cut necessary to sell the
additional unit. What is the marginal revenue form selling the 5th
unit and would the profit-maximizing monopolist do this? The answer
is $4 and price discriminator should lower the price and sell one more
unit only if the MC of producing one more unit is less than $4. I
don't understand why it's $4???"
Any producer will would sell something as
long as the marginal benefit of doing that is greater than or equal to
the marginal cost of doing that (because they want to make themselves as
well off as possible). The marginal benefit for the price discriminator
is $4 (since she doesn't have to lower the $5 price to those paying $5,
in order to sell the extra unit)...this is then compared to the marginal
cost of supplying another unit; as long as the marginal cost (all the variable
costs that increase when output rises) is less than or equal to $4, the
firm will want to produce the unit.
"2. Also, when you talk about producing being "worthwhile financially"
do you always have to include implicit and explicit costs? Because
it seems tobe that producing could not be worthwhile in the short run but
in thelong run it could be."
Actually you have it reversed--in the short
run, only variable costs must be covered to stay in business (i.e. the
marginal costs are what matter to production decisions and the revenue
need only cover the variable costs for the firm to continue producing),
while in the long run all costs must be covered. Yes, it is all costs
(explicit and implicit) that matter in the preceding sentence.
"3. #17 on sum98 exam: If a monopolist is to be regulated
such that the price it charges equal its marginal cost, then: The
total amount produced by the monopolist must increase and society as a
whole will be better off. Why would the monopolist want to produce
more because P is not greater than MC? He would be losing money."
He might be losing money, unless he is subsidized,
if he is a "natural monopoly," but not necessarily otherwise. The
regulation also requires (and this might be unclear) that the monopolist
serve all who wish to buy at the regulated price...e.g. they can't restrict
how much electricity you use. We did not talk about regulation of
monopolies in class this semester, though, so such questions will not be
on the test! [breathe a sigh of relief! :) ]
"4. # 18 sum98: How can a firm's fixed costs be zero in
the long run? I thought that fixed costs approach zero but never
reach zero??"
The long run is a planning horizon, over which
*all* costs are variable. Once you have actually built whatever number
and size of plants you choose, fixed costs exist. There are always
fixed costs "in the real world" of existing plants...that is why we emphasize
the short-run so much--we are always in "some" short-run; but in the long-run
we can be in a different short-run! So, returning to your question,
when you are planning on what number and size of plants to have (a long-run
decision) all of your inputs are variable; there are no "fixed costs"...until
you actually build the plants.
"5. When P is greater than MC the monopoly might not increase
output.
Why is this so??"
Because P could be greater than MC, but marginal
revenue (MR)--which is what is relevant to the monopolist, and to be compared
to MC--could be *below* MC.