Microeconomics: When Markets Fail

Instructor: Rebecca Stein

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15 assignments

Taught in English

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There are 5 modules in this course

Perfect markets achieve efficiency: maximizing total surplus generated. But real markets are imperfect. In this course we will explore a set of market imperfections to understand why they fail and to explore possible remedies including as antitrust policy, regulation, government intervention. Examples are taken from everyday life, from goods and services that we all purchase and use. We will apply the theory to current events and policy debates through weekly exercises. These will empower you to be an educated, critical thinker who can understand, analyze and evaluate market outcomes.

In the first part of the course we learnt that if we allow market forces to work we reach an efficient outcome: the maximum benefit that can be generated by a market. The second part of the course explores cases where the markets fail to accomplish our goals. This week sets up the benchmark case of the perfectly competitive market: a model we will modify in the next few weeks. We define Perfect Competition, learn to model it graphically and discuss some key results in terms of long run profits and implications for efficiency.

What's included

20 videos3 assignments1 discussion prompt

20 videosTotal 44 minutes

1.1.0: When Markets Fail: Introduction1 minutePreview module
1.1.1: Defining Profits1 minute
1.1.2: Defining Fixed Costs and Variable Costs2 minutes
1.1.3: Marginal Productivity2 minutes
1.1.4: Marginal Productivity: Definition1 minute
1.1.5: Marginal Cost1 minute
1.1.6: Average Cost2 minutes
1.1.7: Graph of Marginal and Average Cost Curves1 minute
1.2.1: Perfect Competition: Definition5 minutes
1.2.2: Profit Maximization Perfect Competition2 minutes
1.2.3: Profit Maximization: MR=MC3 minutes
1.2.4: Profit Maximizations vs. Making Profits2 minutes
1.2.5: Profit Maximization: The Case of Losses2 minutes
1.2.6: Perfect Competition: The Firm's Supply Curve REPLACE1 minute
1.2.7: Definition of Short Run vs. Long Run1 minute
1.3.1: Perfect Competition: Firm Entry When Profits are Positive2 minutes
1.3.2: Perfect Competition: Firm Entry When Profits are Negative1 minute
1.3.3: Perfect Competition: An Efficient Outcome2 minutes
1.3.4: Perfect Competition: In The Long Run2 minutes
1.3.5: Perfect Competition: An Efficient Outcome Pt 21 minute

3 assignmentsTotal 90 minutes

1.1: Costs and Profits30 minutes
1.2: Perfect Competition: Definition and Output30 minutes
1.3: Perfect Competition: Implications for Efficiency30 minutes

1 discussion promptTotal 10 minutes

Firm and Profit Maximization10 minutes

A monopoly is a case where there is only one firm in the market. We will define and model this case and explain why market power is good for the firm, bad for consumers. We will also show that society as a whole suffers from the lack of competition.

What's included

13 videos2 assignments1 discussion prompt

13 videosTotal 38 minutes

2.1.1 Monopoly: Definition1 minutePreview module
2.1.2: The Monopoly as a Price Setter2 minutes
2.1.3 Marginal Revenue vs Price: Numerical Example2 minutes
2.1.4 Marginal Revenue vs Price: Graphical Example2 minutes
2.1.5 Marginal Revenue vs Price: Example Using Calculus1 minute
2.1.6 Profit Maximization in a Monopoly2 minutes
2.1.7 Profit Maximization in a Monopoly: Numerical Example4 minutes
2.2.1 Monopoly vs Perfect Competition6 minutes
2.2.2 Efficiency loss under a Monopoly2 minutes
2.2.3 Monopoly vs Perfect Competition: Numerical Example5 minutes
2.2.4 Monopoly vs Perfect Competition: Example of Dead Weight Loss2 minutes
2.2.5 Monopoly vs Perfect Competition: Summary1 minute
2.2.6 Why do we allow monoplies?3 minutes

2 assignmentsTotal 38 minutes

2.1: Monopoly definition8 minutes
2.2: Monopoly vs. Perfect Competition Numerical example30 minutes

1 discussion promptTotal 10 minutes

Monopoly in Real Life10 minutes

Monopolies come in various types: one price monopoly, natural monopoly, price discrimination and monopolistic competition. This week we will expand the basic monopoly model to cover these cases and then explore market outcomes in each case. We will also discuss how government may intervene in such cases to benefit society as a whole and increase the surplus generated by the market.

What's included

14 videos3 assignments1 discussion prompt

14 videosTotal 38 minutes

3.1.1 Natural Monopoly: Definition1 minutePreview module
3.1.2 Government Regulation and Antitrust Law2 minutes
3.1.3 Natural Monopoly: Implications for the Average Total Cost3 minutes
3.1.4 Natural Monopoly: Graphical Presentation1 minute
3.1.5 Natural Monopoly: Profit Maximizing Outcome4 minutes
3.1.6 Natural Monopoly: Regulation though Marginal Cost Pricing3 minutes
3.1.7 Natural Monopoly: Regulation though Average Cost Pricing3 minutes
3.2.1 Price Discrimination: Definition3 minutes
3.2.2 Price Discrimination: Graphical Example4 minutes
3.3.1 Monopolistic Competition: Definiton2 minutes
3.3.2 Monopolistic Competition: Core Results1 minute
3.3.3 Monopolistic Competition: Graphical Presentation in the Short Run3 minutes
3.3.4 Monopolistic Competition: Graphical Presentation in the Long Run1 minute
3.3.5 Monopolistic Competition: Mark up and Excess Capacity2 minutes

3 assignmentsTotal 90 minutes

3.1: Natural Monopoly30 minutes
3.2: Price Discriminating Monopoly30 minutes
3.3 Monopolistic Competition30 minutes

1 discussion promptTotal 10 minutes

Different Market Structures and Government Intervention10 minutes

Two classic cases of market failure will be defined and explored: externalities and public goods. We will define each case, demonstrate why the market fails to provide the efficient outcome and suggest interventions through either marked design or regulation.

What's included

20 videos4 assignments1 discussion prompt

20 videosTotal 52 minutes

4.1.1: Externalities: Definition5 minutesPreview module
4.1.2: Externalities: Allocative Efficiency: Refresher1 minute
4.1.3: Negative Externalities: Implications for Efficiency4 minutes
4.1.4: Positive Externalities: Implications for Efficiency3 minutes
4.1.5: The Coase Theorem2 minutes
4.1.6: Interalizing a Negative Externality via a Per Unit Tax2 minutes
4.1.7: Interalizing a Positive Externality via a Per Unit Subsidy1 minute
4.2.1: Externalities: A Numerical Example2 minutes
4.2.2: Interalizing a Negative Externality via Tax: A Numerical Example4 minutes
4.2.3 Government Intervention in the Case of Externalities2 minutes
4.2.4 Externality: Conclusion1 minute
4.3.1 Pure Public Goods: Nonexcludable and Nonrival2 minutes
4.3.2: Examples of Different Types of Goods4 minutes
4.3.3: Implications of Nonexcludability2 minutes
4.3.4: Free Riding1 minute
4.3.5: Implications of Nonrivalness1 minute
4.4.1: The Role of the Government in Providing Public Goods1 minute
4.4.2: Provision of Public Good by the Government2 minutes
4.4.3: Free Riding as a Prisoners' Dilemma3 minutes
4.4.4: Public Goods Conclusion1 minute

4 assignmentsTotal 120 minutes

4.1: Externalities30 minutes
4.2: Solutions to Externalities30 minutes
4.3: Public Goods30 minutes
4.4: Solutions to Public Goods30 minutes

1 discussion promptTotal 10 minutes

Externality and Government Intervention10 minutes

Up to this point we assumed that there is full information in the market. We are now ready to relax this assumption as we introduce the concepts of moral hazard and adverse selection. We learn that asymmetric information may lead to market failure and we discuss some remedies. The last segment in the course is a reminder that besides efficiency, equity is also a criteria we all care about. A short introduction will explore how economist measure poverty and inequality.

What's included

10 videos3 assignments1 discussion prompt

10 videosTotal 55 minutes

5.1.1 Adverse Selection2 minutesPreview module
5.1.2 Adverse Selection: Consequences and Solutions3 minutes
5.1.3 Adverse Selection: A Numerical Example1 minute
5.1.4 Adverse Selection: A Numerical Example with Private Information1 minute
5.1.5 Adverse Selection: Possible Solutions2 minutes
5.1.6 Moral Hazard1 minute
5.1.7 Moral Hazard: Consequences and Solutions2 minutes
5.2.1 Inequality19 minutes
5.2.2 Poverty12 minutes
5.2.3 Income Redistribution7 minutes

3 assignmentsTotal 74 minutes

5.1: Asymmetric Information30 minutes
5.2: Poverty and Inequality14 minutes
Final Exam30 minutes

1 discussion promptTotal 10 minutes

Measuring Poverty10 minutes

Instructor

Instructor ratings

4.8 (104 ratings)

Rebecca Stein

University of Pennsylvania

3 Courses104,855 learners

Offered by

University of Pennsylvania

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Reviewed on Apr 12, 2023

Extremely useful course and material. Thanks a lot. Need to complete the next one also - The power of Markets

Reviewed on Oct 12, 2019

Very educating, interesting, and knowledge gaining. I appreciate for providing this course. Seek many more such modules of the whole economics subject.

Reviewed on Jun 29, 2017

Way of presentation is too good.

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