ITRN 504 Micro Trade

ITRN 504: Microeconomics and Trade Policy

Revised: August 19, 2019

Kenneth A. Reinert

Phone: 703-993-8212
Office: Founders Hall, Room 627
Office hours: Wednesdays 6-7 PM and by appointment
Home page:

Study Guide

Course Description

This course provides an introduction to microeconomics and international trade for the ICP student. In the first part of the course, our main objective is to understand the basic principles of the market system underlying local, national, and international economies. Here we will assess both the desirable properties and the limitations of the market system, as well as the potential roles of government. In the second part of the course, our main objective is to understand the forces behind international trade. Here we will assess the main causes of international trade, their effects, the analysis of trade policies, and the institutions of international trade.

Learning Outcomes

Knowledge and Understanding

Students will understand the basic concepts and terms of microeconomics as they apply to policy analysis.
Students will understand the causes of international trade and the political economy of trade.

Analytical Skills and Abilities

Students will be able to use the supply and demand model for policy analysis, including trade policy analysis, and to calculate elasticities.

Professional Development

Students will be conversant with the basic terms of economic trade policy analysis as used in the profession.

Required Books

Krugman, P. and R. Wells (2015) Microeconomics, 4th edition. Note that we are not using the new, 5th edition to save you some monay. Available in GMU Arlington bookstore and also available in various e-book formats.

Reinert, K.A. (2012) An Introduction to International Economics: New Perspectives on the World Economy, Cambridge University Press. Available in GMU Arlington bookstore and also available in various e-book formats.

Course Requirements and Grading

Midterm exam- 30 percent
Cumulative final exam- 30 percent
Problem sets- 25 percent
Class participation- 15 percent

Course Outline and Readings

Week 1 (August 28): Introduction to Class

PowerPoint Presentation

Reinert, Chapter 1, “Windows on the World Economy.”

Recommended: Update to Reinert, Chapter 1, “Introduction.”

The Economist, “The Oceans: A Sea of Troubles,” 3 January 2009.

The Economist, “The Real Wealth of Nations,” 23 June, 2012.

Week 2 (September 4): Tools of Analysis

Krugman and Wells, Chapter 1, “First Principles.”

Krugman and Wells, Chapter 2, “Economic Models: Tradeoffs and Trade,” including Appendix.

The Economist, “Business and Water: Running Dry,” 21 August, 2008.

Week 3 (September 11): The Supply and Demand Model

Krugman and Wells, Chapter 3, “Supply and Demand.”

Krugman and Wells, Chapter 5, “Price Controls and Quotas.”

The Economist, “Excellence in a Cup,” 27 January 2007.

Supply and Demand Handout

Recommended: Lindblom, Chapter 3, “Market-System Coordination” and The Economist (2016) “Following the Mugabe Model: Spot the Difference,” April 2.

Week 4 (September 18): Elasticities

Krugman and Wells, Chapter 6, “Elasticity.”

Elasticities Handout

Week 5 (September 25): Allocative Efficiency and Taxes

Krugman and Wells, Chapter 4, “Consumer and Producer Surplus.”

Krugman and Wells, Chapter 7, “Taxes.”

The Economist (2010) “Petrol Tax,” September 23.

Karplus, V.J. (2013) “The Case for A Higher Gasoline Tax,” New York Times, February 21.

Bauman, Y. and S.-L. Hsu (2012) “The Most Sensible Tax of All,” New York Times, July 4.

Recommended: Lindblom, Chapter 12, “Too Little, Too Late.”

Week 6 (October 2): The Theory of the Firm 

Krugman and Wells, Chapter 9, “Making Decisions.”

Krugman and Wells, Chapter 11, “Behind the Supply Curve.”

The Economist (2013) “Singapore’s Economy: Bashing the Metal Bashers,”  May 4.

Week 7 (October 9): The Theory of the Firm Continued

Krugman and Wells, Chapter 12, “Perfect Competition and the Supply Curve.”

The Economist (2012) “Small Is Not Beautiful,” March 3.

The Economist (2012) “The Rise of State Capitalism,” January 21.

Week 8 (October 16): Midterm Exam

See study guide link at top of page.

Week 9 (October 23): Market Failure (Monopoly, Externalities, Public Goods)

Krugman and Wells, Chapter 13, “Monopoly.”

Krugman and Wells, Chapter 17, “Externalities.”

Krugman and Wells, Chapter 18, “Public Goods and Common Resources.”

Recommended: Lindblom, Chapter 5, “Enterprise and Corporation.”

Recommended: P. Das and R. Horton (2017) “Pollution, Health and the Planet: Time for Decisive Action,” Lancet.

Recommended: The Economist (2017) “Externalities: Pigouvian Taxes,” August 19.

Week 10 (October 30): International Trade

Reinert, Chapter 2, “Absolute Advantage.”

Reinert, Chapter 3, “Comparative Advantage.”

Reinert, Chapter 4, “Intra-Industry Trade.”

Recommended: Update to Reinert, Chapter 4, “Intra-Industry Trade.”

Week 11 (November 6): Political Economy of Trade and Trade Policy

Reinert, Chapter 5, “The Political Economy of Trade.”

Reinert, Chapter 6, “Trade Policy Analysis.”

Recommended: Update to Reinert, Chapter 6, “Trade Policy Analysis.”

The Economist (2017)  “Politicians Cannot Bring Back Old-Fashioned Factory Jobs,” January 14.

Francois, F. and L.M. Baughman (2018) “Policy Brief: Does Import Protection Save Jobs?” Trade Partnership.

Week 12 (November 30): No Class (ICP Open House)

Week 13 (November 20): The WTO and Preferential Trade Agreements

Reinert, Chapter 7, “The World Trade Organization.”

Reinert, Chapter 8, “Preferential Trade Agreements.”

Laïdi, Z. (2013) “Trade Deals Show Power Politics Is Back,” Financial Times, March 31.

The Economist (2008) “Regional Trade Agreements: A Second-Best Choice,” September 4.

Week 14 (November 27): No Class, Thanksgiving Break

Week 15 (December 4): International Production / Review of Semester

Reinert, Chapter 9, “Foreign Market Entry and International Production.”

Reinert, Chapter 10, “Foreign Direct Investment and Intra-Firm Trade.”

Reinert, Chapter 11, “Managing International Production.”

Week 16 (December 11): Cumulative Final Exam

See study guide link at top of page.

Other Useful Books

Baldwin, R. (2016) The Great Convergence: Information Technology and the New Globalization, Harvard Univesity Press. Just what the title says!

Goldin, I. and K.A. Reinert (2012) Globalization for Development: Meeting New Challenges, Oxford University Press. A review of multiple dimensions of globalization and their relationships to development.

Hoekman, B.M. and M.M. Kostecki (2009) The Political Economy of the World Trading System, Oxford University Press, Oxford. A must-have introduction to the WTO for trade policy analysts.

Levinson, M. (2006) The Box, Princeton University Press. A business history of container shipping and its impacts on the world trading system.

Lindblom, C.E. (2001) The Market System, Yale University Press. A review of market systems from a noted political scientist.

Reinert, K.A. (ed.) (2017) Handbook of Globalisation and Development, Edward Elgar. A comprehensive collection of chapters on all aspects of globalization and their relationship to development.

Reinert, K.A. and R.S. Rajan (eds.) (2009) The Princeton Encyclopedia of the World Economy, Princeton University Press. A useful reference on all aspects of international economics. Available in the Arlington library and in electronic form through the library catalog.

Walter, A. and G. Sen (2009) Analyzing the Global Political Economy, Princeton University Press. A very good introduction to the theory of global political economy.

Some Policies

No texting in class unless in an emergency.

Exams are not “open book” or “open notes.”

There is no “extra work” that can be done for “extra credit.”

Students are responsible for obtaining notes from other class members if they miss a class.

The GMU honor code will be enforced. To be more specific: If I can show that a student cheated on an exam, that student will fail the course.

It is my personal policy not to discriminate among students based on race, ethnicity, religious faith, national origin, gender, sexual orientation, physical ability, or citizenship status.

Academic Accommodation for a Disability

If you are a student with a disability and you need academic accommodations, please see me and contact the Disability Resource Center (DRC) at 703-993-2474.  All academic accommodations must be arranged through the DRC.