Course Description for APEC 7150

This course covers four main areas in microeconomic theory, as natural extensions of the analysis of consumer and producer theory previously undertaken in APEC 7130. We begin by studying perfect competition (which is something I wish we would have had time for in the Microeconomic Theory I course). Next, we study consumer choice under uncertainty, addressing the basics of expected utility theory (which leads to the derivation of the all-important expected utility theorem), the measurement of risk aversion, and how the expected utility theorem extends to the world of state-dependent utility, where the consumer cares not only about monetary returns, but also the underlying states of nature that cause them. We then turn our attention to the complication of asymmetric information, in particular the principal-agent framework within which these complications are dealt with. Here we study the two most common asymmetries – hidden action (i.e., moral hazard) and hidden information (i.e., monopolistic screening). We end the course by studying general equilibrium theory. We begin by considering three basic examples of this theory – pure exchange, the one-consumer one-producer economy, and the 2 X 2 production/trade model. Time permitting, we will then tackle the positive theory of general equilibrium, which is concerned with issues such as existence and uniqueness of a competitive, or Walrasian equilibrium.