INFORMATION FOR INSTRUCTORS

I created the problems in this package to help my principles and intermediate level students in microeconomics at Michigan State University get practice working with the standard models of micro theory. The problems offered on this site can serve an intermediate level course course, but I use a subset of them for my principles course. At MSU we don't ordinarily do consumer behavior, or analysis of isoquants in the principles course. So for principles I just omit problem sets 11-14 and 28-32.

Pick a section to go to:

### Quick summary by topic

Production possibility curves are handled in a basic way in set 1. This is very basic stuff, and is a useful kick-off for a course that does production possibilities at the start.

Supply, demand, equilibrium prices and elasicity are covered in sets 2 through 6. This is very basic stuff, so is good for all students. Arc elasticity only -- no discussion of point elasticity.

Production and cost are covered in sets 11 through 17. Topics vary from very simple to complex. Problem sets 11 through 13 do production functions and isoquants and go through cost minimization in detail. If you don't do isoquants in your course, use only sets 15 through 17. Set 14 does cost minimization without isoquants. It's an interesting and intuitive approach, and I urge you to try it.

Competitive firms and markets are dealt with in sets 18 to 23. Simple profit maximization for the firm is done first. Competitive markets in the short- and long-run follow.

Monopoly is handled in problem sets 24 through 27. After two sets on monopoly, there's another one natural monopoly, and a simple excursion into price discrimination. There's a fair amount of emphasis on marginal cost pricing as the "best" pricing rule in the sets on monopoly.

Consumer behavior is covered in problem sets 28 through 32. Set 28 has a particularly interesting trick that allows students to manually rotate a utility function to see indifference curves and total utility curves. Income and substitution effects are handled in set 31.

Input markets get treatment in four problem sets. Competitive labor demand and competitive labor markets are done in sets 37 and 38. Present value and the internal rate of return are done in sets 33 and 34. There's a bunch of examples from lotteries to business investment. Students get a chance to evaluate the rate of return on their own college education.

Consumer and producer surplus are developed in sets 7 through 9. There are applications to taxes and international trade. These are particularly good if you use the Mankiw text.

If you cover the theory of comparative advantage, take a look at problem sets 35 and 36. Set 35 sets out the basic analysis of the theory and demonstrates the gains from specialization and trade. Set 36 allows you and the students to take great advantage of the randomization scheme in the problem sets to get a near infinite variety cases of absolute and comparative advantage to cement understanding of these concepts. Remember that set 9 is a nice addition to a section on international trade, but you will will want to prescribe set 7 as well to develop the concepts of consumer and producer surplus.

Externalities get a brief treatment in set 10.

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### Features worth noting

The current form of the problems incorporates some interesting features that you may find useful in your own courses.

1) There are thirty-seven problem sets covering most of the important topics in a microtheory course. Check the download page for a list of topics, or see the summary above. Each set includes a spreadsheet that has an interactive graphical display in which you can change parameters and see the curves shift.

2) Each set also includes from 12 to about 20 built-in questions to answer using the spreadsheet. A built-in answer sheet gives instant feedback on the correctness of entered answers. (For numerical answers, there is an allowable range of about plus or minus one percent.) I require my students to get all of the answers correct in order to get credit for a problem set. It's a mastery learning system of sorts.

3) The spreadsheets are pretty well protected against tampering, with a variety of password protections, and cryptographic tricks to make it harder for students to hack the problems than to do the work. But we learn as we go on, and so do they. When a student prints an answer sheet, the sheet will contain a printed code to help provide unique ID. (Send me e-mail if you would like the encryption algorithm. There's a different one for each of the thirty-four problem sets.)

4) The parameters in the functions that control the graphical displays are randomized. And there are two operating modes, that I call "practice" and "test taking". In the practice mode the computer clock time sets the seed in a random number generator. This results in a different version of the problem set each time you use it. Great for using in class for illustration!

In test taking mode the student is prompted to enter his or her name, and a student number. The last four digits of the student number set the seed in the random number generator, giving a maximum of 10,000 versions of each problem set. Thus, students can cooperate on how to get the answers to the questions, but each student must solve his or her own problems, because the answers will vary from student to student. Because you get the exact same problems (both questions and answers) each time you enter the same student number, you can provide very specific help to students. A very nice feature for students needing assistance.

5) Make sure you and your students know how the use the equation solving feature of Excel called Goal Seek. Help in its use can be found elsewhere on these pages. Goal Seek will find the value of a variable that makes the value of a function equal to some number. For example, you can use Goal Seek to find the price that makes excess demand in a market equal to zero. Or the output of a firm that will make marginal cost minus marginal revenue equal to zero. While trial and error is fine for some things, Goal Seek is invaluable in getting through these problem sets.

6) I currently use Greg Mankiw's principles text (micro split). That's what accounts for the problem sets on consumer and producer surplus, and the welfare implications of taxes and trade. It also accounts for my putting the consumer behavior problems near the end. I don't use them in a principles course.

7) The spreadsheets now incorporate an electronic hand-in feature that saves an answer sheet as a file. With this feature students can turn in answers to a secure server, or as e-mail attachments. Lots less paper to handle.

8) Students seem to get a lot more out of doing Problems in Microeconomics if they know there will be exam questions based directly on the problem sets. Click here for some sample questions.

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### Feedback, etc.

These problems have been developed over a period of years and have been used by thousands of students at Michigan State University. In Fall 1997 I developed a special offering of the micro principles course in which these problems made up about 20 percent of the total work in the course. Doing the problems is the second most popular course activity outside of class, topped only by a series of practice problems that the students use to prepare for exams.

I'm very interested in having your comments on these problems as practice exercises for your students, and/or your use of the problems in class as a supplement in lecture. At Michigan State we have many computer/projector equipped technology classrooms, and have used these problems in class to show how the different models work. Comments via e-mail are welcome.

Please report bugs and other problems to me. If you have ideas for revisions of existing problem sets, or new ones that might be created, let me know.

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### Known bugs and/or problems

The Excel workbooks won't open properly in Internet Explorer. You must be using Firefox or another one of the Mozilla family of browsers (Mozilla, Firefox, or Netscape) to open the Excel files! If you insist on using Internet Explorer, take this link for a work around.

There may be some minor formatting problems on some of the answer sheets, but they don't affect usability.

Answers that are very small numbers can cause a problem on some answer sheets, because you can't display enough decimal places to fall within the plus-or-minus one percent range of the answer. I think I've swatted all of these, but maybe one or two have slipped through.

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### Hard Copy

This is not a commercial website, so I cannot offer here to sell you or your students hard copies of the printed portion of these problems. (It's copyright material, so it's illegal for you to make the copies yourself, or have a local bookstore do it.) It's certain that having students buy the entire packet is better than having to print each one out at the time they are assigned, however. If you send me e-mail on this subject, I can give you further information about availability.

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