Microeconomics II

Course content

Like Micro I, Micro II builds on many of the topics that were introduced more informally in Principles of Economics in the first year. Compared with the Principles course, the reasoning will be more formalized by the use of theoretical models and precise mathematical tools.

But whereas Micro I gave a basic description of market behavior, equilibrium and efficiency in economies with perfect competition, Micro II complements and nuances this description by identifying some of the phenomena that exist in real economies. In short: A number of market imperfections that by assumption are ruled out in the standard specification of perfectly competitive economies, and which may cause inefficiencies and/or have consequences for the distribution of income.

There will be a discussion of whether it is possible for economic policy to compensate for some of these market failures and thereby to try to ensure efficiency.

Micro II constitutes the methodological basis for later courses in areas such as industrial organization, tax policy and public economics, environmental economics, health economics, etc.

Topics include:

  • The behavior of firms when they have "market power” and themselves can influence the prices at which they sell - as a monopoly, possibly price discriminating
  • Interaction in oligopolies, including Cournot-, Bertrand- and Stackelberg-equilibria and "entry deterrence”
  •  Public goods (defense, education systems, etc..), including Lindahl-equilibria
  • Externalities (environmental impacts, traffic congestion, etc.
  • Situations with asymmetric information, which lead to principal-agent problems, including moral hazard and adverse selection
  • Social welfare, including Rawls and Arrow's Impossibility theorem
  • More recent behavioral economics based on empirical observations that violate the standard neoclassical predictions of behavior in situations of choice
  • Basic game theory, including Nash equilibria and subgame perfect equilibria
  • Distorting effects of taxes and other charges 

BSc programme in Economics - mandatory

Learning outcome

After completing the course, the student should be able to…:


  • in a clear and concise way, present, explain and define the concepts and the models have been studied in the course. This shall include the use of mathematical models, tools and concepts that have been used along the way - a purely verbal presentation is not satisfactory



  • solve problems related to the models that have been studied, in order to demonstrate analytical and mathematical abilities and to demonstrate a concrete understanding of the models and concepts, including precise graphic illustrations of the results. The students are trained for these tasks in the exercise classes, where weekly problem sets provide preparation for the exam questions.

  • calculate solutions to the problems in a mathematically correct way - it is not satisfactory to simply indicate the right method without being able to arithmetically derive the correct result.

  • demonstrate key results and to explain, using logical arguments, whether different statements about the models and their results are true or not.

  • articulate relevant economic intuition.

  • relate the models to, and put them into perspective in terms of, economic policy issues.


  • understand problems of imperfect competition, market failure and the policy tools available in relation thereto, as can be expected of a good economist.

  • easily come to grips with later subjects such as industrial economics, game theory and Micro III.

Lectures, where the curriculum is studied and put into perspective - as far as possible in relation to empirical analysis and current economic policy issues, as well as exercise classes, where topics in the curriculum are studied and exercises are solved.

Related to the exercise classes, there will be approximately 12-13 written assignments to be handed in. Thus there is typically a mandatory assignment due every week. The assignments will be reviewed and discussed in the exercise classes where the solutions are discussed. The review of the assignments will to an especially great extent be carried out with the involvement of the students.

Thomas Nechyba: Microeconomics - An Intuitive Approach with Calculus. Chapters 19, 21-23, 24A, 25, 27-29.

Evan J. Douglas: The Simple Analytics of the Principal-Agent Incentive Contract. The Journal of Economic Education Vol. 20, No. 1 (Winter, 1989), pp. 39-51.

George A. Akerlof: The Market for “Lemons”: Quality Uncertainty and the Market Mechanism. The Quarterly Journal of Economics 84.3 (1970): pp. 488-500.

The course is based on the assumption that students have followed Principles of Economics A and B and Mathematics A and B. It is a great advantage to also have followed Micro I.

2 hours of classes (lectures) every week and 2x2 hours every second week and 2 hours of excercises per week for 14 weeks

Timetable and venue:
To see the time and location of lectures please press the link/links under "Se skema" (See schedule) at the right side of this page (17F means Spring 2017).

You can find the similar information partly in English at
-Select Department: “2200-Økonomisk Institut” (and wait for respond)
-Select Module:: “2200-F17; [Name of course]”
-Select Report Type: List
-Select Period: "Forår/Spring – Week 4-29”
Press: “ View Timetable”

Please be aware regarding exercise classes:
- The schedule of the exercise classes is only a pre-planned schedule and can be changed until just before the teaching begins without the participants accept. If this happens it will be informed in KUnet or can be seen in the app myUCPH and at the above link.
- If too many students have wished a specific class, students will be registered randomly at another class.
- It is not possible to change class after the second registration period has expired.
- If there is not enough registered students or available teachers the exercise classes may be jointed.
- The student is not allowed to participate in an exercise class not registered, because the room has only seats for the amount of registered student.
- The teacher of the exercise class cannot correct assignments from other students than the registered students in the exercise class.
- One exercise classes can be taught in English if international students register the course.

7,5 ECTS
Type of assessment
Written examination, 3 hours under invigilation
at the computers of the University. The exam assignment is given in English and can be answered in English or in Danish. Language must be chosen at the course or exam registration.
Without aids
Marking scale
7-point grading scale
Censorship form
External censorship
100% censorship
Criteria for exam assessment

Students are assessed on the extent to which they master the learning outcome for the course.

To receive the top grade, the student must be able to demonstrate in an excellent manner that he or she has acquired and can make use of the knowledge, skills and competencies listed in the learning outcomes.

Single subject courses (day)

  • Category
  • Hours
  • Lectures
  • 42
  • Class Exercises
  • 28
  • Preparation
  • 133
  • Exam
  • 3
  • English
  • 206