Microeconomics [Twelfth edition] 9780133872293, 129209463X, 9781292094632, 0133872297

Table of contents :
Cover......Page 1
Title Page......Page 6
Copyright Page......Page 7
ABOUT THE AUTHOR......Page 9
PREFACE......Page 26
Acknowledgments......Page 33
Contents......Page 14
CHAPTER 1 WHAT IS ECONOMICS?......Page 40
Definition of Economics......Page 41
What, How, and For Whom?......Page 42
Do Choices Made in the Pursuit of Self-Interest also Promote the Social Interest?......Page 44
Cost: What You Must Give Up......Page 48
Choices Respond to Incentives......Page 49
Economist as Policy Adviser......Page 50
Graphing Data......Page 54
Scatter Diagrams......Page 55
Variables That Move in the Same Direction......Page 57
Variables That Move in Opposite Directions......Page 58
Variables That Have a Maximum or a Minimum......Page 59
Variables That Are Unrelated......Page 60
The Slope of a Straight Line......Page 61
The Slope of a Curved Line......Page 62
Ceteris Paribus......Page 63
When Other Things Change......Page 64
MATHEMATICAL NOTE: Equations of Straight Lines......Page 65
AT ISSUE......Page 47
ECONOMICS IN THE NEWS......Page 45
CHAPTER 2 THE ECONOMIC PROBLEM......Page 70
Production Possibilities Frontier......Page 71
Opportunity Cost......Page 72
The PPF and Marginal Cost......Page 74
Preferences and Marginal Benefit......Page 75
Allocative Efficiency......Page 76
The Cost of Economic Growth......Page 77
ECONOMICS IN ACTION......Page 78
Comparative Advantage and Absolute Advantage......Page 79
Achieving the Gains from Trade......Page 81
Circular Flows Through Markets......Page 83
Coordinating Decisions......Page 84
ECONOMICS IN THE NEWS......Page 73
PART ONE: WRAP-UP: Understanding the Scope of Economics: Your Economic Revolution......Page 92
Talking with: Esther Duflo......Page 93
CHAPTER 3 DEMAND AND SUPPLY......Page 94
Markets and Prices......Page 95
Demand Curve and Demand Schedule......Page 96
A Change in Demand......Page 97
A Change in the Quantity Demanded Versus a Change in Demand......Page 99
Supply Curve and Supply Schedule......Page 101
A Change in Supply......Page 102
A Change in the Quantity Supplied Versus a Change in Supply......Page 103
Price as a Regulator......Page 105
Price Adjustments......Page 106
A Decrease in Demand......Page 107
A Decrease in Supply......Page 109
Changes in Both Demand and Supply......Page 111
MATHEMATICAL NOTE: Demand, Supply, and Equilibrium......Page 115
ECONOMICS IN THE NEWS......Page 108
CHAPTER 4 ELASTICITY......Page 122
Calculating Price Elasticity of Demand......Page 123
Inelastic and Elastic Demand......Page 124
The Factors that Influence the Elasticity of Demand......Page 125
Elasticity Along a Linear Demand Curve......Page 126
Total Revenue and Elasticity......Page 127
ECONOMICS IN THE NEWS......Page 129
Income Elasticity of Demand......Page 130
Cross Elasticity of Demand......Page 131
Calculating the Elasticity of Supply......Page 133
The Factors That Influence the Elasticity of Supply......Page 134
ECONOMICS IN ACTION......Page 128
CHAPTER 5 EFFICIENCY AND EQUITY......Page 144
First-Come, First-Served......Page 145
Force......Page 146
Individual Demand and Market Demand......Page 147
Supply and Marginal Cost......Page 148
Individual Supply and Market Supply......Page 149
Producer Surplus......Page 150
Efficiency of Competitive Equilibrium......Page 151
Sources of Market Failure......Page 153
Alternatives to the Market......Page 154
It’s Not Fair if the Result Isn’t Fair......Page 155
Case Study: A Generator Shortage in a Natural Disaster......Page 157
ECONOMICS IN ACTION......Page 152
AT ISSUE......Page 158
ECONOMICS IN THE NEWS......Page 159
CHAPTER 6 GOVERNMENT ACTIONS IN MARKETS......Page 166
A Black Market......Page 167
Inefficiency of a Rent Ceiling......Page 168
ECONOMICS IN ACTION......Page 169
Is the Minimum Wage Fair?......Page 170
AT ISSUE......Page 171
A Tax on Sellers......Page 172
Equivalence of Tax on Buyers and Sellers......Page 173
Tax Incidence and Elasticity of Demand......Page 174
Tax Incidence and Elasticity of Supply......Page 175
Taxes and Efficiency......Page 176
Taxes and Fairness......Page 177
Production Quotas......Page 178
Subsidies......Page 179
A Market for an Illegal Drug......Page 181
Legalizing and Taxing Drugs......Page 182
ECONOMICS IN THE NEWS......Page 183
CHAPTER 7 GLOBAL MARKETS IN ACTION......Page 190
ECONOMICS IN ACTION......Page 191
Why the United States Imports T-Shirts......Page 192
Why the United States Exports Airplanes......Page 193
Gains and Losses from Imports......Page 194
Gains for All......Page 195
Tariffs......Page 196
Import Quotas......Page 199
Export Subsidies......Page 202
Allows Us to Compete with Cheap Foreign Labor......Page 203
Reduces Offshore Outsourcing that Sends Good U.S. Jobs to Other Countries......Page 204
AT ISSUE......Page 205
Compensating Losers......Page 206
ECONOMICS IN THE NEWS......Page 201
PART TWO: WRAP-UP: Understanding How Markets Work: The Amazing Market......Page 214
Talking with: Susan Athey......Page 215
CHAPTER 8 UTILITY AND DEMAND......Page 216
Consumption Possibilities......Page 217
Preferences......Page 218
A Spreadsheet Solution......Page 220
Choosing at the Margin......Page 221
Revealing Preferences......Page 223
A Fall in the Price of a Movie......Page 224
A Rise in the Price of Soda......Page 226
A Rise in Income......Page 227
The Paradox of Value......Page 228
ECONOMICS IN ACTION......Page 229
Behavioral Economics......Page 231
Controversy......Page 232
ECONOMICS IN THE NEWS......Page 233
CHAPTER 9 POSSIBILITIES, PREFERENCES, AND CHOICES......Page 240
Budget Line......Page 241
Budget Equation......Page 242
Preferences and Indifference Curves......Page 244
Marginal Rate of Substitution......Page 245
Degree of Substitutability......Page 246
Best Affordable Choice......Page 247
A Change in Price......Page 248
A Change in Income......Page 250
Substitution Effect and Income Effect......Page 251
ECONOMICS IN ACTION......Page 249
ECONOMICS IN THE NEWS......Page 253
PART THREE: WRAP-UP: Understanding Households’ Choices: Making the Most of Life......Page 260
Talking with: Steven D. Levitt......Page 261
CHAPTER 10 ORGANIZING PRODUCTION......Page 262
A Firm’s Opportunity Cost of Production......Page 263
The Firm’s Decisions......Page 264
The Firm’s Constraints......Page 265
Economic Efficiency......Page 266
Coping with the Principal–Agent Problem......Page 268
ECONOMICS IN THE NEWS......Page 269
Pros and Cons of Different Types of Firms......Page 270
Markets and the competitive Environment......Page 272
Measures of Concentration......Page 273
Limitations of a Concentration Measure......Page 275
Why Firms?......Page 277
ECONOMICS IN ACTION......Page 271
CHAPTER 11 OUTPUT AND COSTS......Page 286
The Long Run......Page 287
Product Curves......Page 288
Marginal Product Curve......Page 289
ECONOMICS IN ACTION......Page 291
Total Cost......Page 292
Why the Average Total Cost Curve Is U-Shaped......Page 293
ECONOMICS IN THE NEWS......Page 295
Shifts in the Cost Curves......Page 297
Short-Run Cost and Long-Run Cost......Page 299
Economies and Diseconomies of Scale......Page 301
CHAPTER 12 PERFECT COMPETITION......Page 310
Economic Profit and Revenue......Page 311
The Firm’s Decisions......Page 312
The Firm’s Output Decision......Page 313
Marginal Analysis and the Supply Decision......Page 314
Temporary Shutdown Decision......Page 315
The Firm’s Supply Curve......Page 316
Market Supply in the Short Run......Page 317
Profits and Losses in the Short Run......Page 318
Three Possible Short-Run Outcomes......Page 319
ECONOMICS IN ACTION......Page 320
A Closer Look at Exit......Page 321
Long-Run Equilibrium......Page 322
An Increase in Demand......Page 323
ECONOMICS IN THE NEWS......Page 324
Technological Advances Change Supply......Page 325
Choices, Equilibrium, and Efficiency......Page 327
CHAPTER 13 MONOPOLY......Page 336
How Monopoly Arises......Page 337
ECONOMICS IN ACTION......Page 338
Price and Marginal Revenue......Page 339
Marginal Revenue and Elasticity......Page 340
Price and Output Decision......Page 341
Comparing Price and Output......Page 343
Efficiency Comparison......Page 344
Rent-Seeking Equilibrium......Page 345
Two Ways of Price Discriminating......Page 346
A Price-Discriminating Airline......Page 347
Efficiency and Rent Seeking with Price Discrimination......Page 350
Efficient Regulation of a Natural Monopoly......Page 352
Second-Best Regulation of a Natural Monopoly......Page 353
ECONOMICS IN THE NEWS......Page 351
CHAPTER 14 MONOPOLISTIC COMPETITION......Page 362
Competing on Quality, Price, and Marketing......Page 363
ECONOMICS IN ACTION......Page 364
Profit Maximizing Might Be Loss Minimizing......Page 365
Long Run: Zero Economic Profit......Page 366
Monopolistic Competition and Perfect Competition......Page 367
Is Monopolistic Competition Efficient?......Page 368
Advertising......Page 369
Using Advertising to Signal Quality......Page 371
Efficiency of Advertising and Brand Names......Page 372
ECONOMICS IN THE NEWS......Page 373
CHAPTER 15 OLIGOPOLY......Page 380
Barriers to Entry......Page 381
ECONOMICS IN ACTION......Page 382
The Prisoners’ Dilemma......Page 383
An Oligopoly Price-Fixing Game......Page 385
A Game of Chicken......Page 390
A Repeated Duopoly Game......Page 391
A Sequential Entry Game in a Contestable Market......Page 393
The Antitrust Laws......Page 395
Three Antitrust Policy Debates......Page 396
Mergers and Acquisitions......Page 398
ECONOMICS IN THE NEWS......Page 392
PART FOUR: WRAP-UP: Understanding Firms and Markets: Managing Change and Limiting Market Power......Page 406
Talking with: Thomas Hubbard......Page 407
CHAPTER 16 PUBLIC CHOICES, PUBLIC GOODS, AND HEALTHCARE......Page 408
ECONOMICS IN ACTION......Page 409
Political Equilibrium......Page 410
The Things Our Governments Buy......Page 411
Marginal Social Benefit from a Public Good......Page 413
Efficient Public Provision......Page 414
Inefficient Public Overprovision......Page 416
Healthcare Market Failure......Page 417
Alternative Public Choice Solutions......Page 418
Vouchers a Better Solution?......Page 422
AT ISSUE......Page 421
ECONOMICS IN THE NEWS......Page 423
CHAPTER 17 EXTERNALITIES......Page 430
Positive Consumption Externalities......Page 431
Private, External, and Social Cost......Page 433
Establish Property Rights......Page 434
Mandate Clean Technology......Page 435
Tax or Cap and Price Pollution......Page 436
Coping with Global Externalities......Page 439
Unsustainable Use of a Common Resource......Page 440
Inefficient Use of a Common Resource......Page 441
Achieving an Efficient Outcome......Page 443
Private Benefits and Social Benefits......Page 445
Illustrating an Efficient Outcome......Page 446
Bureaucratic Inefficiency and Government Failure......Page 447
ECONOMICS IN ACTION......Page 432
AT ISSUE......Page 438
ECONOMICS IN THE NEWS......Page 449
PART FIVE: WRAP-UP: Understanding Market Failure and Government: We, the People......Page 456
Talking with: Caroline M. Hoxby......Page 457
CHAPTER 18 MARKETS FOR FACTORS OF PRODUCTION......Page 458
Entrepreneurship......Page 459
A Firm’s Demand for Labor......Page 460
A Firm’s Demand for Labor Curve......Page 461
Changes in a Firm’s Demand for Labor......Page 462
A Competitive Labor Market......Page 463
ECONOMICS IN ACTION......Page 465
A Labor Market with a Union......Page 467
Land Rental Markets......Page 471
Nonrenewable Natural Resource Markets......Page 472
MATHEMATICAL NOTE: Present Value and Discounting......Page 477
AT ISSUE......Page 469
ECONOMICS IN THE NEWS......Page 466
CHAPTER 19 ECONOMIC INEQUALITY......Page 484
The Distribution of Income......Page 485
The Income Lorenz Curve......Page 486
Wealth or Income?......Page 487
Trends in Inequality......Page 488
Poverty......Page 490
Income Distributions in Selected Countries......Page 492
Global Inequality and Its Trends......Page 493
Human Capital......Page 494
Discrimination......Page 495
Contests Among Superstars......Page 496
Unequal Wealth......Page 497
Subsidized Services......Page 498
The Big Tradeoff......Page 499
ECONOMICS IN ACTION......Page 489
ECONOMICS IN THE NEWS......Page 501
CHAPTER 20 UNCERTAINTY AND INFORMATION......Page 508
Utility of Wealth......Page 509
Expected Utility......Page 510
Making a Choice with Uncertainty......Page 511
Insurance Markets......Page 512
A Graphical Analysis of Insurance......Page 513
ECONOMICS IN ACTION......Page 514
The Market for Used Cars......Page 515
The Market for Loans......Page 518
Monopoly in Markets that Cope with Uncertainty......Page 519
Uncertainty, Information, and the Invisible Hand......Page 520
ECONOMICS IN THE NEW......Page 521
PART SIX: WRAP-UP: Understanding Factor Markets, Inequality, and Uncertainty: For Whom?......Page 528
Talking with: Raj Chetty......Page 529
C......Page 530
E......Page 531
L......Page 532
M......Page 533
P......Page 534
S......Page 535
W......Page 536
C......Page 538
E......Page 539
F......Page 540
I......Page 541
L......Page 542
M......Page 543
P......Page 544
R......Page 545
S......Page 546
V......Page 547
Z......Page 548
Credits......Page 550