Efnisyfirlit

• Title Page
• Copyright Page
• About the Authors
• Contents
• Preface
• PART 1 Introduction and Key Principles
• 1 Introduction: What Is Economics?
• What Is Economics?
• Positive versus Normative Analysis
• The Three Key Economic Questions: What, How, and Who?
• Economic Models
• Economic Analysis and Modern Problems
• Economic View of Traffic Congestion
• Economic View of Poverty in Africa
• Economic View of the Current World Recession
• The Economic Way of Thinking
• Use Assumptions to Simplify
• Isolate Variables—Ceteris Paribus
• Think at the Margin
• Rational People Respond to Incentives
• APPLICATION 1 Incentives to Buy Hybrid Vehicles
• Example: London Addresses Its Congestion Problem
• APPLICATION 2 Housing Prices in Cuba
• Preview of Coming Attractions: Macroeconomics
• Using Macroeconomics to Understand Why Economies Grow
• Using Macroeconomics to Understand Economic Fluctuations
• Using Macroeconomics to Make Informed Business Decisions
• Preview of Coming Attractions: Microeconomics
• Using Microeconomics to Understand Markets and Predict Changes
• Using Microeconomics to Make Personal and Managerial Decisions
• Using Microeconomics to Evaluate Public Policies
• SUMMARY
• KEY TERMS
• EXERCISES
• APPENDIX: Using Graphs and Percentages
• USING GRAPHS
• COMPUTING PERCENTAGE CHANGES AND USING EQUATIONS
• APPLICATION 3 The Perils of Percentages
• 2 The Key Principles of Economics
• The Principle of Opportunity Cost
• The Cost of College
• The Cost of Military Spending
• Opportunity Cost and the Production Possibilities Curve
• APPLICATION 1 Don’t Forget the Costs of Time and Invested Funds
• The Marginal Principle
• How Many Movie Sequels?
• Renting College Facilities
• Automobile Emissions Standards
• Driving Speed and Safety
• APPLICATION 2 How Fast to Sail?
• The Principle of Voluntary Exchange
• Exchange and Markets
• Online Games and Market Exchange
• APPLICATION 3 Rory McIlroy and Weed-Wacking
• The Principle of Diminishing Returns
• APPLICATION 4 Fertilizer and Crop Yields
• The Real-Nominal Principle
• The Design of Public Programs
• The Value of the Minimum Wage
• APPLICATION 5 Repaying Student Loans
• SUMMARY
• KEY TERMS
• EXERCISES
• ECONOMIC EXPERIMENT
• 3 Exchange and Markets
• Comparative Advantage and Exchange
• Specialization and the Gains from Trade
• Comparative Advantage versus Absolute Advantage
• The Division of Labor and Exchange
• Comparative Advantage and International Trade
• Outsourcing
• APPLICATION 1 Absolute Disadvantage and Comparative Advantage in Latvia
• Markets
• Virtues of Markets
• The Role of Entrepreneurs
• Example of the Emergence of Markets: POW Camps
• APPLICATION 2 The Market for Meteorites
• Market Failure and the Role of Government
• Government Enforces the Rules of Exchange
• Government Can Reduce Economic Uncertainty
• APPLICATION 3 Property Rights and Urban Slums
• SUMMARY
• KEY TERMS
• EXERCISES 88
• 4 Demand, Supply, and Market Equilibrium
• The Demand Curve
• The Individual Demand Curve and the Law of Demand
• From Individual Demand to Market Demand
• APPLICATION 1 The Law of Demand for Young Smokers
• The Supply Curve
• The Individual Supply Curve and the Law of Supply
• Why Is the Individual Supply Curve Positively Sloped?
• From Individual Supply to Market Supply
• Why Is the Market Supply Curve Positively Sloped?
• APPLICATION 2 Law of Supply and Woolympics
• Market Equilibrium: Bringing Demand and Supply Together
• Excess Demand Causes the Price to Rise
• Excess Supply Causes the Price to Drop
• APPLICATION 3 Shrinking Wine Lakes
• Market Effects of Changes in Demand
• Change in Quantity Demanded versus Change in Demand
• Increases in Demand Shift the Demand Curve
• Decreases in Demand Shift the Demand Curve
• A Decrease in Demand Decreases the Equilibrium Price
• APPLICATION 4 Chinese Demand and Pecan Prices
• Market Effects of Changes in Supply
• Change in Quantity Supplied versus Change in Supply
• Increases in Supply Shift the Supply Curve
• An Increase in Supply Decreases the Equilibrium Price
• Decreases in Supply Shift the Supply Curve
• A Decrease in Supply Increases the Equilibrium Price
• Simultaneous Changes in Demand and Supply
• APPLICATION 5 The Harmattan and the Price of Chocolate
• Predicting and Explaining Market Changes
• APPLICATION 6 Why Lower Drug Prices?
• SUMMARY
• KEY TERMS
• EXERCISES
• ECONOMIC EXPERIMENT
• PART 2 The Basic Concepts in Macroeconomics
• 5 Measuring a Nation’s Production and Income
• The “Flip” Sides of Macroeconomic Activity: Production and Income
• The Circular Flow of Production and Income
• APPLICATION 1 Using Value Added to Measure the True Size of Walmart
• The Production Approach: Measuring a Nation’s Macroeconomic Activity Using Gross Domestic Product
• The Components of GDP
• Putting It All Together: The GDP Equation
• APPLICATION 2 Comparing Recoveries From Recessions
• The Income Approach: Measuring a Nation’s Macroeconomic Activity Using National Income
• Measuring National Income
• Measuring National Income through Value Added
• An Expanded Circular Flow
• APPLICATION 3 The Links Between Self-Reported Happiness and GDP
• A Closer Examination of Nominal and Real GDP
• Measuring Real versus Nominal GDP
• How to Use the GDP Deflator
• Fluctuations in GDP
• GDP as a Measure of Welfare
• Shortcomings of GDP as a Measure of Welfare
• SUMMARY
• KEY TERMS
• EXERCISES
• 6 Unemployment and Inflation
• Examining Unemployment
• How Is Unemployment Defined and Measured?
• Alternative Measures of Unemployment and Why They Are Important
• Who Are the Unemployed?
• APPLICATION 1 Declining Labor Force Participation
• Categories of Unemployment
• Types of Unemployment: Cyclical, Frictional, and Structural
• The Natural Rate of Unemployment
• APPLICATION 2 Less Unemployment Insurance, More Employment?
• The Costs of Unemployment
• APPLICATION 3 Social Norms, Unemployment, And Perceived Happiness
• The Consumer Price Index and the Cost of Living
• The CPI versus the Chain Index for GDP
• APPLICATION 4 The Introduction of Cell Phones and the Bias in the CPI
• Problems in Measuring Changes in Prices
• Inflation
• Historical U.S. Inflation Rates
• The Perils of Deflation
• The Costs of Inflation
• Anticipated Inflation
• Unanticipated Inflation
• SUMMARY
• KEY TERMS
• EXERCISES
• PART 3 The Economy in the Long Run
• 7 The Economy at Full Employment
• Wage and Price Flexibility and Full Employment
• The Production Function
• Wages and the Demand and Supply for Labor
• Labor Market Equilibrium
• Changes in Demand and Supply
• APPLICATION 1 The Black Death and Living Standards in Old England
• Labor Market Equilibrium and Full Employment
• Using the Full-Employment Model
• Taxes and Potential Output
• Real Business Cycle Theory
• APPLICATION 2 Do European Soccer Stars Change Clubs to Reduce Their Tax-es?
• APPLICATION 3 Government Policies and Savings Rates
• Dividing Output among Competing Demands for GDP at Full Employment
• International Comparisons
• Crowding Out in a Closed Economy
• Crowding Out in an Open Economy
• Crowding In
• SUMMARY
• KEY TERMS
• EXERCISES
• 8 Why Do Economies Grow?
• Economic Growth Rates
• Measuring Economic Growth
• Comparing the Growth Rates of Various Countries
• Are Poor Countries Catching Up?
• APPLICATION 1 Global Warming, Rich Countries, and Poor Countries
• APPLICATION 2 Behavioral Incentives in Development
• Capital Deepening
• Saving and Investment
• How Do Population Growth, Government, and Trade Affect Capital Deepening?
• The Key Role of Technological Progress
• How Do We Measure Technological Progress?
• Using Growth Accounting
• APPLICATION 3 Sources of Growth in China and India
• APPLICATION 4 The End of Growth?
• What Causes Technological Progress?
• Research and Development Funding
• Monopolies That Spur Innovation
• The Scale of the Market
• Induced Innovations
• Education, Human Capital, and the Accumulation of Knowledge
• New Growth Theory
• APPLICATION 5 The Role of Political Factors in Economic Growth
• APPLICATION 6 Culture, Evolution, and Economic Growth
• A Key Governmental Role: Providing the Correct Incentives and Property Rights
• APPLICATION 7 Lack of Property Rights Hinders Growth In Peru
• SUMMARY
• KEY TERMS
• EXERCISES 203
• APPENDIX: A Model of Capital Deepening
• PART 4 Economic Fluctuations and Fiscal Policy
• 9 Aggregate Demand and Aggregate Supply
• Sticky Prices and Their Macroeconomic Consequences
• Flexible and Sticky Prices
• How Demand Determines Output in the Short Run
• APPLICATION 1 Measuring Price Stickiness in Consumer Markets
• Understanding Aggregate Demand
• What Is the Aggregate Demand Curve?
• The Components of Aggregate Demand
• Why the Aggregate Demand Curve Slopes Downward
• Shifts in the Aggregate Demand Curve
• How the Multiplier Makes the Shift Bigger
• APPLICATION 2 Two Approaches to Determining the Causes of Reces-sions
• Understanding Aggregate Supply
• The Long-Run Aggregate Supply Curve
• The Short-Run Aggregate Supply Curve
• Supply Shocks
• APPLICATION 3 Oil Price Declines and the U.S. Economy
• From the Short Run to the Long Run
• SUMMARY
• KEY TERMS
• EXERCISES
• 10 Fiscal Policy
• The Role of Fiscal Policy
• Fiscal Policy and Aggregate Demand
• The Fiscal Multiplier
• The Limits to Stabilization Policy
• APPLICATION 1 Increasing Life Expectancy and Aging Populations Spur Costs of Entitlement Programs
• The Federal Budget
• Federal Spending
• Federal Revenues
• The Federal Deficit and Fiscal Policy
• Automatic Stabilizers
• Are Deficits Bad?
• APPLICATION 2 The Confucius Curve?
• Fiscal Policy in U.S. History
• The Depression Era
• The Kennedy Administration
• The Vietnam War Era
• The Reagan Administration
• The Clinton and George W. Bush Administrations
• APPLICATION 3 How Effective was the 2009 Stimulus?
• SUMMARY
• KEY TERMS
• EXERCISES
• 11 The Income-Expenditure Model
• A Simple Income-Expenditure Model
• Equilibrium Output
• Adjusting to Equilibrium Output
• The Consumption Function
• Consumer Spending and Income
• Changes in the Consumption Function
• APPLICATION 1 Falling Home Prices, the Wealth Effect, and Decreased Con-sumer Spending
• Equilibrium Output and the Consumption Function
• Saving and Investment
• Understanding the Multiplier
• APPLICATION 2 Multipliers in Good Times and Bad
• Government Spending and Taxation
• Fiscal Multipliers
• Using Fiscal Multipliers
• Understanding Automatic Stabilizers
• APPLICATION 3 The Broken Window Fallacy and Keynesian Economics
• Exports and Imports
• APPLICATION 4 The Locomotive Effect: How Foreign Demand Affects a Coun-try’s Output
• The Income-Expenditure Model and the Aggregate Demand Curve
• SUMMARY
• KEY TERMS
• EXERCISES
• ECONOMIC EXPERIMENT
• APPENDIX: Formulas for Equilibrium Income and the Multiplier
• 12 Investment and Financial Markets
• An Investment: A Plunge into the Unknown
• APPLICATION 1 Energy Price Uncertainty Reduces Investment Spending
• Evaluating the Future
• Understanding Present Value
• Real and Nominal Interest Rates
• APPLICATION 2 The Value of an Annuity
• Understanding Investment Decisions
• Investment and the Stock Market
• APPLICATION 3 Underwater Homeowners and Debt Forgiveness
• How Financial Intermediaries Facilitate Investment
• When Financial Intermediaries Malfunction
• APPLICATION 4 Securitization: The Good, The Bad, and The Ugly
• SUMMARY
• KEY TERMS
• EXERCISES
• ECONOMIC EXPERIMENT
• PART 5 Money, Banking, and Monetary Policy
• 13 Money and the Banking System
• What Is Money?
• Three Properties of Money
• Measuring Money in the U.S. Economy
• APPLICATION 1 Cash as a Sign of Trust
• How Banks Create Money
• A Bank’s Balance Sheet: Where the Money Comes from and Where It Goes
• How Banks Create Money
• How the Money Multiplier Works
• How the Money Multiplier Works in Reverse
• APPLICATION 2 The Growth In Excess Reserves
• A Banker’s Bank: The Federal Reserve
• Functions of the Federal Reserve
• The Structure of the Federal Reserve
• The Independence of the Federal Reserve
• What the Federal Reserve Does during a Financial Crisis
• APPLICATION 3 Stress Tests for the Financial System
• APPLICATION 4 Coping with the Financial Chaos Caused by the Mortgage Crisis
• SUMMARY
• KEY TERMS
• EXERCISES
• ECONOMIC EXPERIMENT
• APPENDIX: Formula For Deposit Creation
• 14 The Federal Reserve and Monetary Policy
• The Money Market
• The Demand for Money
• APPLICATION 1 Quantitative Easing and the Fed’s Balance Sheet
• How the Federal Reserve Can Change the Money Supply
• Open Market Operations
• Other Tools of the Fed
• APPLICATION 2 Did Fed Policy Cause the Commodity Boom?
• How Interest Rates Are Determined: Combining the Demand and Supply of Money
• Interest Rates and Bond Prices
• APPLICATION 3 The Effectiveness of Committees
• Interest Rates and How They Change Investment and Output (GDP)
• Monetary Policy and International Trade
• Monetary Policy Challenges for the Fed
• Lags in Monetary Policy
• Influencing Market Expectations: From the Federal Funds Rate to Interest Rates on Long-Term Bonds
• SUMMARY
• KEY TERMS
• EXERCISES
• PART 6 INFLATION, UNEMPLOYMENT, AND ECONOMIC POLICY
• 15 Modern Macroeconomics: From the Short Run to the Long Run
• Linking the Short Run and the Long Run
• The Difference between the Short and Long Run
• Wages and Prices and Their Adjustment over Time
• APPLICATION 1 Secular Stagnation?
• How Wage and Price Changes Move the Economy Naturally Back to Full Employment
• Returning to Full Employment from a Recession
• Returning to Full Employment from a Boom
• Economic Policy and the Speed of Adjustment
• Liquidity Traps or Zero Lower Bound
• Political Business Cycles
• APPLICATION 2 Elections, Political Parties, and Voter Expectations
• The Economics Behind the Adjustment Process
• The Long-Run Neutrality of Money
• Crowding Out in the Long Run
• APPLICATION 3 Increasing Health-Care Expenditures and Crowding Out
• Classical Economics in Historical Perspective
• Say’s Law
• Keynesian and Classical Debates
• SUMMARY
• KEY TERMS
• EXERCISES
• 16 The Dynamics of Inflation and Unemployment
• Money Growth, Inflation, and Interest Rates
• Inflation in a Steady State
• How Changes in the Growth Rate of Money Affect the Steady State
• APPLICATION 1 Shifts in the Natural Rate of Unemployment
• Understanding the Expectations Phillips Curve: The Relationship between Unemployment and Inflation
• Are the Public’s Expectations about Inflation Rational?
• U.S. Inflation and Unemployment in the 1980s
• Shifts in the Natural Rate of Unemployment in the 1990s
• APPLICATION 2 Estimating the Natural Real Interest Rate
• How the Credibility of a Nation’s Central Bank Affects Inflation
• APPLICATION 3 The Ends of Hyperinflations
• Inflation and the Velocity of Money
• Hyperinflation
• How Budget Deficits Lead to Hyperinflation
• SUMMARY
• KEY TERMS
• EXERCISES
• ECONOMIC EXPERIMENT
• 17 Macroeconomic Policy Debates
• Should We Balance the Federal Budget?
• The Budget in Recent Decades
• Five Debates about Deficits
• APPLICATION 1 Creating The U.S. Federal Fiscal System Through Debt Policy
• Should the Fed Target Both Inflation and Employment?
• Two Debates about Targeting
• APPLICATION 2 Would a Policy Rule Have Prevented the Housing Boom?
• Should We Tax Consumption Rather than Income?
• Two Debates about Consumption Taxation
• APPLICATION 3 Is A Vat in Our Future?
• SUMMARY
• KEY TERMS
• EXERCISES
• PART 7 The International Economy
• 18 International Trade and Public Policy
• Benefits from Specialization and Trade
• Production Possibilities Curve
• Comparative Advantage and the Terms of Trade
• The Consumption Possibilities Curve
• How Free Trade Affects Employment
• Protectionist Policies
• Import Bans
• Quotas and Voluntary Export Restraints
• Responses to Protectionist Policies
• APPLICATION 1 The Impact of Tariffs on the Poor
• What Are the Rationales for Protectionist Policies?
• To Shield Workers from Foreign Competition
• To Nurture Infant Industries until They Mature
• To Help Domestic Firms Establish Monopolies in World Markets
• APPLICATION 2 Chinese Imports and Local Economies
• A Brief History of International Tariff and Trade Agreements
• Recent Policy Debates and Trade Agreements
• Are Foreign Producers Dumping Their Products?
• APPLICATION 3 Does Losing in the WTO Really Matter?
• Do Trade Laws Inhibit Environmental Protection?
• APPLICATION 4 How American are American Cars?
• Do Outsourcing and Trade Cause Income Inequality?
• Why Do People Protest Free Trade?
• SUMMARY
• KEY TERMS
• EXERCISES
• 19 The World of International Finance
• How Exchange Rates Are Determined
• What Are Exchange Rates?
• How Demand and Supply Determine Exchange Rates
• Changes in Demand or Supply
• Real Exchange Rates and Purchasing Power Parity
• APPLICATION 1 Big Macs in Switzerland
• The Current Account, the Financial Account, and the Capital Account
• Rules for Calculating the Current, Financial, and Capital Accounts
• APPLICATION 2 Tax Havens and Global Imbalances
• Fixed and Flexible Exchange Rates
• Fixing the Exchange Rate
• Fixed versus Flexible Exchange Rates
• The U.S. Experience with Fixed and Flexible Exchange Rates
• Exchange Rate Systems Today
• Managing Financial Crises
• APPLICATION 3 A Troubled Euro
• APPLICATION 4 The Argentine Financial Crisis
• SUMMARY
• KEY TERMS
• EXERCISES
• ECONOMIC EXPERIMENT
• PART 8 A Closer Look at Demand and Supply
• 20 Elasticity: A Measure of Responsiveness
• The Price Elasticity of Demand
• Computing Percentage Changes and Elasticities
• Price Elasticity and the Demand Curve
• Elasticity and the Availability of Substitutes
• Other Determinants of the Price Elasticity of Demand
• APPLICATION 1 A Closer Look at the Elasticity of Demand for Gasoline
• Using Price Elasticity
• Predicting Changes in Quantity
• Price Elasticity and Total Revenue
• Using Elasticity to Predict the Revenue Effects of Price Changes
• APPLICATION 2 Vanity Plates and the Elasticity of Demand
• Elasticity and Total Revenue for a Linear Demand Curve
• Price Elasticity along a Linear Demand Curve
• APPLICATION 3 Drones and the Lower Half of a Linear Demand Curve
• Elasticity and Total Revenue for a Linear Demand Curve
• Other Elasticities of Demand
• Income Elasticity of Demand
• Cross-Price Elasticity of Demand
• APPLICATION 4 I can Find that Elasticity in Four Clicks!
• The Price Elasticity of Supply
• What Determines the Price Elasticity of Supply?
• The Role of Time: Short-Run versus Long-Run Supply Elasticity
• Extreme Cases: Perfectly Inelastic Supply and Perfectly Elastic Supply
• APPLICATION 5 The Short-Run and Long-Run Elasticity of Supply of Coffee
• Predicting Changes in Quantity Supplied
• Using Elasticities to Predict Changes in Prices
• The Price Effects of a Change in Demand
• The Price Effects of a Change in Supply
• APPLICATION 6 A Broken Pipeline and the Price of Gasoline
• SUMMARY
• KEY TERMS
• EXERCISES
• 21 Market Efficiency and Government Intervention
• Consumer Surplus and Producer Surplus
• The Demand Curve and Consumer Surplus
• The Supply Curve and Producer Surplus
• APPLICATION 1 Consumer Surplus of Internet Service
• Market Equilibrium and Efficiency
• Total Surplus Is Lower with a Price below the Equilibrium Price
• Total Surplus Is Lower with a Price above the Equilibrium Price
• Efficiency and the Invisible Hand
• Government Intervention in Efficient Markets
• APPLICATION 2 Rent Control and Mismatches
• Controlling Prices—Maximum and Minimum Prices
• Setting Maximum Prices
• Rent Control
• APPLICATION 3 Price Controls and the Shrinking Candy Bar
• Setting Minimum Prices
• Controlling Quantities—Licensing and Import Restrictions
• Taxi Medallions
• Licensing and Market Efficiency
• Winners and Losers from Licensing
• Import Restrictions
• APPLICATION 4 The Cost of Protecting a Lumber Job
• Who Really Pays Taxes?
• Tax Shifting: Forward and Backward
• Tax Shifting and the Price Elasticity of Demand
• Cigarette Taxes and Tobacco Land
• The Luxury Boat Tax and Boat Workers
• Tax Burden and Deadweight Loss
• APPLICATION 5 Response to a Luxury Tax
• SUMMARY
• KEY TERMS
• EXERCISES
• ECONOMIC EXPERIMENT
• 22 Consumer Choice: Utility Theory and Insights from Neuroscience
• Traditional Consumer Choice: Utility Theory
• Consumer Constraints: The Budget Line
• Total and Marginal Utility
• The Marginal Principle and the Equimarginal Rule
• Conditions for Utility Maximization
• APPLICATION 1 Measuring Diminishing Marginal Utility
• The Law of Demand and the Individual Demand Curve
• Effect of a Decrease in Price
• Income and Substitution Effects of a Decrease in Price
• The Individual Demand Curve
• The Neuroscience of Consumer Choice
• APPLICATION 2 A Revenue-Neutral Gasoline Tax
• The Neuroscience of Benefit Valuation
• The Neuroscience of Cost Valuation
• The Wisdom of Gut Feelings
• Cognition and Choice
• Predicting Consumer Choice
• Fuel for Cognition
• APPLICATION 3 Coke versus Pepsi in the Prefrontal Cortex
• Consumer Decisions: Insights from Neuroscience
• Dietary Choice: Donut versus Apple
• Present Bias: Spending versus Saving
• Present Bias and Credit Cards
• Present Bias and Smoking
• Gambling as a Consumer Good
• APPLICATION 4 Taxing Cigarettes to Offset Present Bias
• SUMMARY
• EXERCISES
• APPENDIX: Mental Shortcuts and Consumer Puzzles
• MENTAL ACCOUNTING AND BUNDLING
• ANCHORING
• THE DECOY EFFECT
• THE APPEAL OF PERCENTAGE CHANGES
• SUMMARY
• PART 9 Market Structures and Pricing
• 23 Production Technology and Cost
• Economic Cost and Economic Profit
• APPLICATION 1 Opportunity Cost and Entrepreneurship
• A Firm with a Fixed Production Facility: Short-Run Costs
• Production and Marginal Product
• Short-Run Total Cost
• Short-Run Average Costs
• Short-Run Marginal Cost
• The Relationship between Marginal Cost and Average Cost
• APPLICATION 2 The Rising Marginal Cost of Crude Oil
• Production and Cost in the Long Run
• Expansion and Replication
• Reducing Output with Indivisible Inputs
• Scaling Down and Labor Specialization
• Economies of Scale
• Diseconomies of Scale
• Actual Long-Run Average-Cost Curves
• Short-Run versus Long-Run Average Cost
• APPLICATION 3 Indivisible Inputs and the Cost of Fake Killer Whales
• Examples of Production Cost
• Scale Economies in Wind Power
• The Average Cost of a Music Video
• Solar versus Nuclear: The Crossover
• SUMMARY
• KEY TERMS
• EXERCISES
• 24 Perfect Competition
• Preview of the Four Market Structures
• APPLICATION 1 Wireless Women in Pakistan
• The Firm’s Short-Run Output Decision
• The Total Approach: Computing Total Revenue and Total Cost
• The Marginal Approach
• Economic Profit and the Break-Even Price
• APPLICATION 2 The Break-Even Price for Switchgrass, a Feedstock For Biofuel
• The Firm’s Shut-Down Decision
• Total Revenue, Variable Cost, and the Shut-Down Decision
• The Shut-Down Price
• Fixed Costs and Sunk Costs
• APPLICATION 3 Straddling the Zinc Cost Curve
• Short-Run Supply Curves
• The Firm’s Short-Run Supply Curve
• The Short-Run Market Supply Curve
• Market Equilibrium
• APPLICATION 4 Short-Run Supply Curve for Cargo
• The Long-Run Supply Curve for an Increasing-Cost Industry
• Production Cost and Industry Size
• Drawing the Long-Run Market Supply Curve
• Examples of Increasing-Cost Industries: Sugar and Apartments
• APPLICATION 5 Chinese Coffee Growers Obey the Law of Supply
• Short-Run and Long-Run Effects of Changes in Demand
• The Short-Run Response to an Increase in Demand
• The Long-Run Response to an Increase in Demand
• APPLICATION 6 The Upward Jump and Downward Slide of Blueberry Prices
• Long-Run Supply for a Constant-Cost Industry
• Long-Run Supply Curve for a Constant-Cost Industry
• Hurricane Andrew and the Price of Ice
• APPLICATION 7 Economic Detective and the Case of Margarine Prices
• SUMMARY
• KEY TERMS
• EXERCISES
• 25 Monopoly and Price Discrimination
• The Monopolist’s Output Decision
• Total Revenue and Marginal Revenue
• A Formula for Marginal Revenue
• Using the Marginal Principle
• APPLICATION 1 Marginal Revenue From a Baseball Fan
• The Social Cost of Monopoly
• Deadweight Loss from Monopoly
• Rent Seeking: Using Resources to Get Monopoly Power
• Monopoly and Public Policy
• APPLICATION 2 Rent Seeking for Tribal Casinos
• Patents and Monopoly Power
• Incentives for Innovation
• Trade-Offs from Patents
• APPLICATION 3 Bribing the Makers of Generic Drugs
• Price Discrimination
• Senior Discounts in Restaurants
• Price Discrimination and the Elasticity of Demand
• Examples: Movie Admission versus Popcorn, and Hardback versus Paperback Books
• APPLICATION 4 Why does Movie Popcorn Cost so Much?
• SUMMARY
• KEY TERMS
• EXERCISES
• ECONOMIC EXPERIMENT
• 26 Market Entry and Monopolistic Competition
• The Effects of Market Entry
• Entry Squeezes Profits from Three Sides
• Examples of Entry: Car Stereos, Trucking, and Tires
• APPLICATION 1 Satellite versus Cable
• Monopolistic Competition
• When Entry Stops: Long-Run Equilibrium
• Differentiation by Location
• APPLICATION 2 Opening a Motel
• Trade-Offs with Entry and Monopolistic Competition
• Average Cost and Variety
• Monopolistic Competition versus Perfect Competition
• APPLICATION 3 Happy Hour Pricing
• Advertising for Product Differentiation
• APPLICATION 4 Picture of Man versus Picture of Woman
• SUMMARY
• KEY TERMS
• EXERCISES
• ECONOMIC EXPERIMENT
• 27 Oligopoly and Strategic Behavior
• Cartel Pricing and the Duopolists’ Dilemma
• Price Fixing and the Game Tree
• Equilibrium of the Price-Fixing Game
• Nash Equilibrium
• APPLICATION 1 Failure of the Salt Cartel
• Overcoming the Duopolists’ Dilemma
• Low-Price Guarantees
• Repeated Pricing Games with Retaliation for Underpricing
• Price Fixing and the Law
• Price Leadership
• APPLICATION 2 Low-Price Guarantee Increases Tire Prices
• Simultaneous Decision Making and the Payoff Matrix
• Simultaneous Price-Fixing Game
• The Prisoners’ Dilemma
• APPLICATION 3 Cheating on the Final Exam: The Cheaters’ Dilemma
• The Insecure Monopolist and Entry Deterrence
• Entry Deterrence and Limit Pricing
• Examples: Aluminum and Campus Bookstores
• Entry Deterrence and Contestable Markets
• When Is the Passive Approach Better?
• APPLICATION 4 Microsoft as an Insecure Monopolist
• The Advertisers’ Dilemma
• APPLICATION 5 Got Milk?
• SUMMARY
• KEY TERMS
• EXERCISES
• ECONOMIC EXPERIMENT
• 28 Controlling Market Power: Antitrust and Regulation
• Natural Monopoly
• Picking an Output Level
• Will a Second Firm Enter?
• Price Controls for a Natural Monopoly
• APPLICATION 1 Public versus Private Waterworks
• APPLICATION 2 Satellite Radio as a Natural Monopoly
• Antitrust Policy
• Breaking Up Monopolies
• Blocking Mergers
• Merger Remedy for Wonder Bread
• Regulating Business Practices
• A Brief History of U.S. Antitrust Policy
• APPLICATION 3 Merger of Pennzoil and Quaker State
• APPLICATION 4 Merger of Office Depot and OfficeMax
• SUMMARY
• KEY TERMS
• EXERCISES
• PART 10 Externalities and Information
• 29 Imperfect Information: Adverse Selection and Moral Hazard
• Adverse Selection for Buyers: The Lemons Problem
• Uninformed Buyers and Knowledgeable Sellers
• Equilibrium with All Low-Quality Goods
• A Thin Market: Equilibrium with Some High-Quality Goods
• APPLICATION 1 Are Baseball Pitchers Like Used Cars?
• Evidence of the Lemons Problem
• Responding to the Lemons Problem
• Buyers Invest in Information
• Consumer Satisfaction Scores from ValueStar and eBay
• Guarantees and Lemons Laws
• APPLICATION 2 Regulation of the California Kiwifruit Market
• Adverse Selection for Sellers: Insurance
• Health Insurance
• Equilibrium with All High-Cost Consumers
• Responding to Adverse Selection in Insurance: Group Insurance
• The Uninsured
• Other Types of Insurance
• APPLICATION 3 Genetic Discrimination
• Insurance and Moral Hazard
• Insurance Companies and Moral Hazard
• Deposit Insurance for Savings and Loans
• APPLICATION 4 Car Insurance and Risky Driving
• The Economics of Consumer Search
• Search and the Marginal Principle
• Reservation Prices and Searching Strategy
• The Effects of Opportunity Cost and Product Prices on Search Effort
• APPLICATION 5 Income and Consumer Search
• SUMMARY
• KEY TERMS
• EXERCISES
• ECONOMIC EXPERIMENT
• 30 Public Goods and Public Choice
• External Benefits and Public Goods
• Public Goods and the Free-Rider Problem
• Overcoming the Free-Rider Problem
• APPLICATION 1 Clearing Space Debris
• APPLICATION 2 Global Weather Observation
• Private Goods with External Benefits
• External Benefits from Education
• External Benefits and the Marginal Principle
• Other Private Goods That Generate External Benefits
• APPLICATION 3 External Benefits from Lojack
• APPLICATION 4 The Private and External Benefit of Trees
• Public Choice and the Median Voter
• Voting and the Median-Voter Rule
• The Median Voter and the Median Location
• Alternative Models of Government: Self-Interest and Special Interests
• Which Theory Is Correct?
• APPLICATION 5 The Median Voter in the NBA
• SUMMARY
• KEY TERMS
• EXERCISES
• ECONOMIC EXPERIMENT
• 31 External Costs and Environmental Policy
• The Optimal Level of Pollution
• Using the Marginal Principle
• Example: The Optimal Level of Water Pollution
• Coase Bargaining
• APPLICATION 1 Reducing Methane Emissions
• Taxing Pollution
• A Firm’s Response to a Pollution Tax
• The Market Effects of a Pollution Tax
• Example: A Carbon Tax
• APPLICATION 2 Washing Carbon Out of the Air
• Traditional Regulation
• Uniform Abatement with Permits
• Command and Control
• Market Effects of Pollution Regulations
• Lesson from Dear Abby: Options for Pollution Abatement
• APPLICATION 3 Options for Reducing CO2 Emissions From International Shipping
• Marketable Pollution Permits
• Voluntary Exchange and Marketable Permits
• Supply, Demand, and the Price of Marketable Permits
• APPLICATION 4 Weather and the Price of Pollution Permits
• External Costs from Automobiles
• External Costs from Pollution
• External Costs from Congestion
• External Costs from Collisions
• APPLICATION 5 Young Drivers and Collisions
• SUMMARY
• KEY TERMS
• EXERCISES
• ECONOMIC EXPERIMENT
• PART 11 The Labor Market and Income Distribution
• 32 The Labor Market and the Distribution of Income
• The Demand for Labor
• Labor Demand by an Individual Firm in the Short Run
• Market Demand for Labor in the Short Run
• Labor Demand in the Long Run
• Short-Run versus Long-Run Demand
• APPLICATION 1 Marginal Revenue Product in Major League Baseball
• The Supply of Labor
• The Individual Labor-Supply Decision: How Many Hours?
• An Example of Income and Substitution Effects
• The Market Supply Curve for Labor
• APPLICATION 2 Cabbies Respond to an Increase in the Wage
• Labor Market Equilibrium
• Changes in Demand and Supply
• The Market Effects of the Minimum Wage
• Why Do Wages Differ across Occupations?
• The Gender Pay Gap
• Racial Discrimination
• Why Do College Graduates Earn Higher Wages?
• Labor Unions and Wages
• APPLICATION 3 The Beauty Premium
• The Distribution of Income
• Income Distribution in 2007
• Recent Changes in the Distribution of Income
• APPLICATION 4 Trade-Offs From Immigration
• Public Policy and the Distribution of Income
• Effects of Tax and Transfer Policies on the Distribution of Income
• Poverty and Public Policy
• The Earned Income Tax Credit
• APPLICATION 5 Expanding the EITC
• SUMMARY
• KEY TERMS
• EXERCISES
• Glossary
• Photo Credits
• Index