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• Half-Title Page
• Title Page
• Copyright Page
• Brief Contents
• Contents
• Preface
• Chapter 1 Introduction
• 1.1 Microeconomics: The Allocation of Scarce Resources
• Trade-offs
• Who Makes the Decisions
• How Prices Determine Allocations
• Application French Bonus-Malus Incentive System
• 1.2 Models
• Application Income Threshold Model and China
• Simplifications by Assumption
• Testing Theories
• Maximizing Subject to Constraints
• Positive Versus Normative
• New Theories
• 1.3 Uses of Microeconomic Models in Your Life and Career
• Summary
• Chapter 2 Supply and Demand
• Challenge Quantities and Prices of Genetically Modified Foods
• 2.1 Demand
• The Demand Function
• Summing Demand Functions
• Application Aggregating Corn Demand Curves
• 2.2 Supply
• The Supply Function
• Summing Supply Functions
• How Government Import Policies Affect Supply Curves
• 2.3 Market Equilibrium
• Finding the Market Equilibrium
• Forces That Drive a Market to Equilibrium
• 2.4 Shocking the Equilibrium: Comparative Statics
• Comparative Statics with Discrete (Large) Changes
• Application the Opioid Epidemic’s Labor Market Effects
• Comparative Statics with Small Changes
• Solved Problem 2.1
• Why the Shapes of Demand and Supply Curves Matter
• 2.5 Elasticities
• Demand Elasticity
• Solved Problem 2.2
• Application The Demand Elasticities for Google Play and Apple Apps
• Solved Problem 2.3
• Supply Elasticity
• Solved Problem 2.4
• Long Run Versus Short Run
• Application Oil Drilling in the Arctic National Wildlife Refuge
• Solved Problem 2.5
• 2.6 Effects of a Sales Tax
• Effects of a Specific Tax on the Equilibrium
• The Same Equilibrium No Matter Who Is Taxed
• Firms and Customers Share the Burden of the Tax
• Solved Problem 2.6
• Application Subsidizing Ethanol
• The Similar Effects of Ad Valorem and Specific Taxes
• 2.7 Quantity Supplied Need Not Equal Quantity Demanded
• Price Ceiling
• Application Venezuelan Price Ceilings and Shortages
• Price Floor
• 2.8 When to Use the Supply-and-Demand Model
• Challenge Solution Quantities and Prices of Genetically Modified Foods
• Summary
• Exercises
• Chapter 3 A Consumer’s Constrained Choice
• Challenge Why Americans Buy E-books and Germans Do Not
• 3.1 Preferences
• Properties of Consumer Preferences
• Application You Can’t Have Too Much Money
• Preference Maps
• Indifference Curves
• Solved Problem 3.1
• 3.2 Utility
• Utility Function
• Willingness to Substitute Between Goods
• Solved Problem 3.2
• Application Mrs Between Recorded Tracks and Live Music
• Curvature of Indifference Curves
• Solved Problem 3.3
• Application Indifference Curves Between Income and Health
• 3.3 Budget Constraint
• 3.4 Constrained Consumer Choice
• Finding an Interior Solution Using Graphs
• Solved Problem 3.4
• Finding an Interior Solution Using Calculus
• Solved Problem 3.5
• Solved Problem 3.6
• Solved Problem 3.7
• Application Utility Maximization for Recorded Tracks and Live Music
• Finding Corner Solutions
• Minimizing Expenditure
• Solved Problem 3.8
• 3.5 Behavioral Economics
• Tests of Transitivity
• Endowment Effect
• Application How You Frame Policy Requirements Matters
• Salience
• Challenge Solution Why Americans Buy E-books and Germans Do Not
• Summary
• Exercises
• Chapter 4 Demand
• Challenge Paying Employees to Relocate
• 4.1 Deriving Demand Curves
• System of Demand Functions
• Graphical Interpretation
• Application Airplane Versus Train Travel
• 4.2 Effects of an Increase in Income
• How Income Changes Shift Demand Curves
• Solved Problem 4.1
• Consumer Theory and Income Elasticities
• Solved Problem 4.2
• Application Fast-Food Engel Curve
• Solved Problem 4.3
• 4.3 Effects of a Price Increase
• Income and Substitution Effects with a Normal Good
• Solved Problem 4.4
• Application Substituting Cannabis for Prescription Drugs
• Solved Problem 4.5
• Income and Substitution Effects with an Inferior Good
• Solved Problem 4.6
• Compensated Demand Curve
• Solved Problem 4.7
• Slutsky Equation
• 4.4 Cost-of-living Adjustment
• Inflation Indexes
• Effects of Inflation Adjustments
• Application Reducing the CPI Substitution Bias
• 4.5 Revealed Preference
• Recovering Preferences
• Substitution Effect
• Challenge Solution Paying Employees to Relocate
• Summary
• Exercises
• Chapter 5 Consumer Welfare and Policy Analysis
• Challenge Per-Hour Versus Lump-Sum Childcare Subsidies
• 5.1 Uncompensated Consumer Welfare
• Willingness to Pay
• An Individual’s Consumer Surplus
• A Market’s Consumer Surplus
• Application A Day with the President of the European Council
• Effect of a Price Change on Consumer Surplus
• Solved Problem 5.1
• 5.2 Compensated Consumer Welfare
• Indifference Curve Analysis
• Application Compensating Variation and Equivalent Variation for Smartphones and Facebook
• Compensated Demand Curves and Consumer Welfare
• Comparing the Three Welfare Measures
• Solved Problem 5.2
• 5.3 Effects of Government Policies on Consumer Welfare
• Quotas
• Food Stamps
• Application Cash, Food, or Vouchers?
• 5.4 Deriving Labor Supply Curves
• Labor-Leisure Choice
• Solved Problem 5.3
• Income and Substitution Effects
• Solved Problem 5.4
• Application Fracking Causes Students to Drop Out
• Solved Problem 5.5
• Shape of the Labor Supply Curve
• Income Tax Rates and the Labor Supply Curve
• Solved Problem 5.6
• Challenge Solution Per-hour Versus Lump-sum Childcare Subsidies
• Summary
• Exercises
• Chapter 6 Firms and Production
• Challenge Labor Productivity During Downturns
• 6.1 The Ownership and Management of Firms
• Private, Public, and Nonprofit Firms
• Application Chinese State-Owned Enterprises
• The Ownership of For-Profit Firms
• The Management of Firms
• What Owners Want
• 6.2 Production
• Production Functions
• Time and the Variability of Inputs
• 6.3 Short-Run Production: One Variable and One Fixed Input
• Solved Problem 6.1
• Interpretation of Graphs
• Solved Problem 6.2
• Law of Diminishing Marginal Returns
• Application Malthus and the Green Revolution
• 6.4 Long-Run Production: Two Variable Inputs
• Isoquants
• Application Self-Driving Trucks
• Substituting Inputs
• Solved Problem 6.3
• Diminishing Marginal Rates of Technical Substitution
• The Elasticity of Substitution
• Solved Problem 6.4
• 6.5 Returns to Scale
• Constant, Increasing, and Decreasing Returns to Scale
• Solved Problem 6.5
• Application Returns to Scale in Various Industries
• Varying Returns to Scale
• 6.6 Productivity and Technical Change
• Relative Productivity
• Innovations
• Application Robots and the Food You Eat
• Application A Good Boss Raises Productivity
• Challenge Solution Labor Productivity during Downturns
• Summary
• Exercises
• Chapter 7 Costs
• Challenge To Automate or not to Automate?
• 7.1 Measuring Costs
• Opportunity Costs
• Application The Opportunity Cost of an MBA
• Solved Problem 7.1
• Opportunity Cost of Capital
• Sunk Costs
• 7.2 Short-Run Costs
• Short-Run Cost Measures
• Application The Sharing Economy and the Short Run
• Solved Problem 7.2
• Short-Run Cost Curves
• Production Functions and the Shape of Cost Curves
• Application Short-run Cost Curves for a Japanese Beer Manufacturer
• Effects of Taxes on Costs
• Short-run Cost Summary
• 7.3 Long-run Costs
• Input Choice
• Solved Problem 7.3
• Solved Problem 7.4
• How Long-run Cost Varies with Output
• Solved Problem 7.5
• Solved Problem 7.6
• The Shape of Long-run Cost Curves
• Application 3D Printing
• Estimating Cost Curves Versus Introspection
• 7.4 Lower Costs in the Long Run
• Long-run Average Cost as the Envelope of Short-run Average Cost Curves
• Application A Beer Manufacturer’s Long-run Cost Curves
• Application Choosing an Inkjet or Laser Printer
• Short-run and Long-run Expansion Paths
• How Learning by Doing Lowers Costs
• Application Solar Power Learning Curves
• 7.5 Cost of Producing Multiple Goods
• Challenge Solution to Automate or Not to Automate?
• Summary
• Exercises
• Chapter 8 Competitive Firms and Markets
• Challenge Deregulating the Norwegian Taxi Market
• 8.1 Perfect Competition
• Price Taking
• Why a Firm’s Demand Curve Is Horizontal
• Perfect Competition in the Chicago Commodity Exchange
• Deviations from Perfect Competition
• Derivation of a Competitive Firm’s Demand Curve
• Solved Problem 8.1
• Why Perfect Competition Is Important
• 8.2 Profit Maximization
• Profit
• Two Steps to Maximizing Profit
• 8.3 Competition in the Short Run
• Short-run Competitive Profit Maximization
• Solved Problem 8.2
• Application Fracking and Shutdowns
• Short-run Firm Supply Curve
• Solved Problem 8.3
• Short-Run Market Supply Curve
• Short-Run Competitive Equilibrium
• Solved Problem 8.4
• 8.4 Competition in the Long Run
• Long-run Competitive Profit Maximization
• Long-run Firm Supply Curve
• Application The Size of Ethanol Processing Plants
• Long-run Market Supply Curve
• Application Industries with High Entry and Exit Rates
• Application Upward-sloping Long-run Supply Curve for Cotton
• Application Reformulated Gasoline Supply Curves
• Solved Problem 8.5
• Long-run Competitive Equilibrium
• Challenge Solution Deregulating the Norwegian Taxi Market
• Summary
• Exercises
• Chapter 9 Properties and Applications of the Competitive Model
• Challenge Liquor Licenses Freeze
• 9.1 Zero Profit for Competitive Firms in the Long Run
• Zero Long-run Profit with Free Entry
• Zero Long-run Profit When Entry Is Limited
• Application What’s a Name Worth?
• The Need to Maximize Profit
• 9.2 Producer Surplus
• Measuring Producer Surplus Using a Supply Curve
• Using Producer Surplus
• Solved Problem 9.1
• 9.3 Competition Maximizes Welfare
• Measuring Welfare
• Why Producing Less Than the Competitive Output Lowers Welfare
• Solved Problem 9.2
• Application The Deadweight Loss of Christmas Presents
• 9.4 Policies That Shift Supply or Demand Curves
• Application Welfare Effects of Delaying 5G Technology
• 9.5 Policies That Create a Wedge Between Supply and Demand Curves
• Welfare Effects of a Sales Tax
• Application The Deadweight Loss from Gas Taxes
• Welfare Effects of a Price Floor
• Solved Problem 9.3
• Application How Big Are Farm Subsidies and Who Gets Them?
• Welfare Effects of a Price Ceiling
• Solved Problem 9.4
• Application The Social Cost of a Natural Gas Price Ceiling
• 9.6 Comparing Both Types of Policies: Trade
• Free Trade Versus a Ban on Imports
• Solved Problem 9.5
• Application Russian Food Ban
• Free Trade Versus a Tariff
• Solved Problem 9.6
• A Tariff Versus a Quota
• Rent Seeking
• Challenge Solution Liquor Licenses Freeze
• Summary
• Exercises
• Chapter 10 General Equilibrium and Economic Welfare
• Challenge Price Ceilings in a Pandemic
• 10.1 General Equilibrium
• Competitive Equilibrium in Two Interrelated Markets
• Application Partial-equilibrium Versus Multimarket-equilibrium Analysis in Corn and Soybean Markets
• Minimum Wages with Incomplete Coverage
• Solved Problem 10.1
• Application Urban Flight
• 10.2 Trading Between Two People
• Endowments
• Mutually Beneficial Trades
• Solved Problem 10.2
• Deriving the Contract Curve
• Solved Problem 10.3
• Bargaining Ability
• 10.3 Competitive Exchange
• Competitive Equilibrium
• Solved Problem 10.4
• The Efficiency of Competition
• Obtaining Any Efficient Allocation Using Competition
• 10.4 Production and Trading
• Comparative Advantage
• Solved Problem 10.5
• Efficient Product Mix
• Competition
• 10.5 Efficiency and Equity
• Role of the Government
• Efficiency
• Equity
• Application Extremely Unequal Wealth
• Efficiency Versus Equity
• Theory of the Second Best
• Challenge Solution Price Ceilings in a Pandemic
• Summary
• Exercises
• Chapter 11 Monopoly and Monopsony
• Challenge Brand-name and Generic Drugs
• 11.1 Monopoly Profit Maximization
• The Necessary Condition for Profit Maximization
• Marginal Revenue and the Demand Curves
• Solved Problem 11.1
• Marginal Revenue Curve and the Price Elasticity of Demand
• Application Amazon Prime Revenue
• An Example of Monopoly Profit Maximization
• Application Apple’s iPad
• Solved Problem 11.2
• Choosing Price or Quantity
• Application Taylor Swift Concert Pricing
• Solved Problem 11.3
• Effects of a Shift of the Demand Curve
• 11.2 Market Power and Welfare
• Market Power and the Shape of the Demand Curve
• The Lerner Index
• Solved Problem 11.4
• Sources of Market Power
• Effect of Market Power on Welfare
• 11.3 Taxes and Monopoly
• Effects of a Specific Tax
• Solved Problem 11.5
• Welfare Effects of Ad Valorem Versus Specific Taxes
• 11.4 Causes of Monopolies
• Cost Advantages
• Solved Problem 11.6
• Government Actions That Create Monopolies
• Application The Botox Patent Monopoly
• 11.5 Government Actions That Reduce Market Power
• Regulating Monopolies
• Solved Problem 11.7
• Application Natural Gas Regulation
• Increasing Competition
• Application Movie Studios Attacked by 3D Printers!
• Solved Problem 11.8
• 11.6 Internet Monopolies: Networks Effects, Behavioral Economics, and Economies of Scale
• Network Externalities
• Application Critical Mass and eBay
• Introductory Prices: A Two-period Monopoly Model
• Two-sided Markets
• Economies of Scale on the Internet
• Disruptive Technologies
• 11.7 Monopsony
• Monopsony Profit Maximization
• Welfare Effects of Monopsony
• Solved Problem 11.9
• Challenge Solution Brand-name and Generic Drug
• Summary
• Exercises
• Chapter 12 Pricing and Advertising
• Challenge Sale Price
• 12.1 Conditions for Price Discrimination
• Why Price Discrimination Pays
• Which Firms Can Price Discriminate
• Application Disneyland Pricing
• Preventing Resale
• Application Preventing Resale of Designer Bags
• Not All Price Differences Are Price Discrimination
• Types of Price Discrimination
• 12.2 Perfect Price Discrimination
• How a Firm Perfectly Price Discriminates
• Solved Problem 12.1
• Perfect Price Discrimination Is Efficient but Harms Some Consumers
• Application Botox and Price Discrimination
• Transaction Costs and Perfect Price Discrimination
• Application Google Uses Bidding for Ads to Price Discriminate
• 12.3 Group Price Discrimination
• Application Tesla Price Discrimination
• Prices and Elasticities
• Application Age Discrimination
• Solved Problem 12.2
• Identifying Groups
• Application Buying Discounts
• Solved Problem 12.3
• Welfare Effects of Group Price Discrimination
• 12.4 Nonlinear Price Discrimination
• 12.5 Two-part Pricing
• Two-part Pricing with Identical Consumers
• Two-part Pricing with Differing Consumers
• Application Pricing iTunes
• 12.6 Tie-In Sales
• Requirement Tie-In Sales
• Application Ties That Bind
• Bundling
• 12.7 Advertising
• Deciding Whether to Advertise
• How Much to Advertise
• Solved Problem 12.4
• Application Super Bowl Commercials
• Challenge Solution Sale Price
• Summary
• Exercises
• Chapter 13 Game Theory
• Challenge Intel and AMD’s Advertising Strategies
• 13.1 Static Games
• Normal-form Games
• Failure to Maximize Joint Profits
• Application Strategic Advertising
• Pricing Games in Two-sided Markets
• Multiple Equilibria
• Solved Problem 13.1
• Mixed Strategies
• Application Boomerang Millennials
• Solved Problem 13.2
• 13.2 Repeated Dynamic Games
• Strategies and Actions in Dynamic Games
• Cooperation in a Repeated Prisoners’ Dilemma Game
• Solved Problem 13.3
• 13.3 Sequential Game
• Game Tree
• Subgame Perfect Nash Equilibrium
• Credibility
• Dynamic Entry Game
• Solved Problem 13.4
• Application Keeping Out Casinos
• Solved Problem 13.5
• 13.4 Auctions
• Elements of Auctions
• Bidding Strategies in Private-value Auctions
• Winner’s Curse
• Application Bidder’s Curse
• 13.5 Behavioral Game Theory
• Application GM’s Ultimatum
• Challenge Solution Intel and AMD’s Advertising Strategies
• Summary
• Exercises
• Chapter 14 Oligopoly and Monopolistic Competition
• Challenge Government Aircraft Subsidies
• 14.1 Market Structures
• 14.2 Cartels
• Why Cartels Form
• Why Cartels Fail
• Laws Against Cartels
• Application Employer “No-poaching” Cartels
• Maintaining Cartels
• Application Cheating on the Maple Syrup Cartel
• Mergers
• Application Airline Mergers
• 14.3 Cournot Oligopoly Model
• The Duopoly Nash-cournot Equilibrium
• The Cournot Model with Many Firms
• Application Mobile Number Portability
• The Cournot Model with Nonidentical Firms
• Solved Problem 14.1
• Application How Do Costs, Price Markups, and Profits Vary Across Airlines?
• Solved Problem 14.2
• Application Differentiating Bottled Water Through Marketing
• 14.4 Stackelberg Oligopoly Model
• Calculus Solution
• Graphical Solution
• Why Moving Sequentially Is Essential
• Strategic Trade Policy: An Application of the Stackelberg Model
• Solved Problem 14.3
• Comparison of Collusive, Nash-cournot, Stackelberg, and Competitive Equilibria
• 14.5 Bertrand Oligopoly Model
• Nash-bertrand Equilibrium with Identical Products
• Nash-bertrand Equilibrium with Differentiated Products
• Application Rising Market Power
• 14.6 Monopolistic Competition
• Application Monopolistically Competitive Food Cart Market in the Philippines
• Monopolistically Competitive Equilibrium
• Fixed Costs and the Number of Firms
• Solved Problem 14.4
• Application Subsidizing the Entry Cost of Dentists
• Challenge Solution Government Aircraft Subsidies
• Summary
• Exercises
• Chapter 15 Factor Markets
• Challenge Does Going to College Pay?
• 15.1 Factor Markets
• A Firm’s Short-run Factor Demand Curve
• Solved Problem 15.1
• A Firm’s Long-run Factor Demand Curves
• Competitive Factor Markets
• Application Black Death Raises Wages
• Solved Problem 15.2
• 15.2 Capital Markets and Investing
• Interest Rates
• Discount Rate
• Stream of Payments
• Application Saving for Retirement
• Investing
• Solved Problem 15.3
• Solved Problem 15.4
• Durability
• Application Durability of Telephone Poles
• Time-varying Discounting
• Application Behavioral Economics: Falling Discount Rates and Self-control
• Capital Markets, Interest Rates, and Investments
• Solved Problem 15.5
• 15.3 Exhaustible Resources
• When to Sell an Exhaustible Resource
• Price of a Scarce Exhaustible Resource
• Application Redwood Trees
• Why Price Might Not Rise
• Challenge Solution Does Going to College Pay?
• Summary
• Exercises
• Chapter 16 Uncertainty
• Challenge BP and Limited Liability
• 16.1 Assessing Risk
• Probability
• Application Risk of a Cyberattack
• Expected Value
• Solved Problem 16.1
• Variance and Standard Deviation
• 16.2 Attitudes Toward Risk
• Expected Utility Theory
• Risk Aversion
• Solved Problem 16.2
• Solved Problem 16.3
• Application Stocks’ Risk Premium
• Risk Neutrality
• Risk Preference
• Application Gambling
• Degree of Risk Aversion
• Solved Problem 16.4
• 16.3 Reducing Risk
• Just Say No
• Obtaining Information
• Diversification
• Application Investing in Your Employer
• Insurance
• Solved Problem 16.5
• Application Flight Insurance
• Application Earthquake Insurance in Japan
• 16.4 Investing Under Uncertainty
• How Investing Depends on Attitudes Toward Risk
• Investing with Uncertainty and Discounting
• Solved Problem 16.6
• 16.5 Behavioral Economics and Uncertainty
• Biased Assessment of Probabilities
• Application Biased Estimates
• Violations of Expected Utility Theory
• Prospect Theory
• Comparing Expected Utility and Prospect Theories
• Challenge Solution BP and Limited Liability
• Summary
• Exercises
• Chapter 17 Rights, Externalities, Rivalry, and Exclusion
• Challenge Trade and Pollution
• 17.1 Externalities
• Application Disney’s Positive Externality
• 17.2 The Inefficiency of Competition with Externalities
• Supply-and-demand Analysis
• Cost-benefit Analysis
• Application Spam: a Negative Externality
• 17.3 Regulating Externalities
• Emissions Standard
• Emissions Fee and Effluent Charge
• Solved Problem 17.1
• Application Why Tax Drivers
• Benefits Versus Costs from Controlling Pollution
• Taxes Versus Standards Under Uncertainty
• 17.4 Market Structure and Externalities
• Monopoly and Externalities
• Monopoly Versus Competitive Welfare with Externalities
• Solved Problem 17.2
• Taxing Externalities in Noncompetitive Markets
• 17.5 Allocating Property Rights to Reduce Externalities
• Coase Theorem
• Application Buying a Town
• Markets for Pollution
• Application Acid Rain Program
• 17.6 Rivalry and Exclusion
• Open-access Common Property
• Application Road Congestion
• Club Goods
• Application Microsoft Word Piracy
• Public Goods
• Solved Problem 17.3
• Application Free Riding on Measles Vaccinations
• Solved Problem 17.4
• Reducing Free Riding
• Application What’s Their Beef?
• Valuing Public Goods
• Challenge Solution Trade and Pollution
• Summary
• Exercises
• Chapter 18 Asymmetric Information
• Challenge Dying to Work
• 18.1 Adverse Selection
• Insurance Markets
• Products of Unknown Quality
• Solved Problem 18.1
• Solved Problem 18.2
• 18.2 Reducing Adverse Selection
• Equalizing Information
• Application Discounts for Data
• Application Adverse Selection and Remanufactured Goods
• Laws to Prevent Opportunism
• 18.3 Price Discrimination Due to False Beliefs About Quality
• Application Reducing Consumers’ Information
• 18.4 Market Power from Price Ignorance
• Tourist-Trap Model
• Solved Problem 18.3
• Advertising and Prices
• 18.5 Problems Arising from Ignorance When Hiring
• Cheap Talk
• Application Cheap Talk in Ebay’s Best Offer Market
• Education as a Signal
• Solved Problem 18.4
• Screening in Hiring
• Challenge Solution Dying to Work
• Summary
• Exercises
• Chapter 19 Contracts and Moral Hazards
• Challenge Clawing Back Bonuses
• 19.1 Principal-agent Problem
• A Model
• Types of Contracts
• Efficiency
• Solved Problem 19.1
• Application Honest Cabbie?
• 19.2 Production Efficiency
• Efficient Contract
• Full Information
• Solved Problem 19.2
• Asymmetric Information
• Application Sing for Your Supper
• 19.3 Trade-off Between Efficiency in Production and in Risk Bearing
• Contracts and Efficiency
• Solved Problem 19.3
• Choosing the Best Contract
• Application Health Insurance and Moral Hazard
• Solved Problem 19.4
• 19.4 Monitoring to Reduce Moral Hazard
• Bonding
• Solved Problem 19.5
• Application Capping Oil and Gas Bankruptcies
• Deferred Payments
• Efficiency Wages
• Application Walmart’s Efficiency Wages
• After-the-fact Monitoring
• 19.5 Contract Choice
• 19.6 Checks on Principals
• Application Layoffs Versus Pay Cuts
• Challenge Solution Clawing Back Bonuses
• Summary
• Exercises
• Calculus Appendix
• Regression Appendix
• Answers to Selected Exercises
• Definitions
• References
• Sources for Applications and Challenges
• Index
• Credits