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• Half Title
• Title Page
• Copyright
• Dedication
• About the Authors
• Brief Contents
• Contents
• Preface
• Acknowledgments
• Global Edition Acknowledgments
• Microeconomics: Flexibility Chart
• Part I: Introduction to Economics
• Chapter 1: The Principles and Practice of Economics
• 1.1 The Scope of Economics
• Economic Agents and Economic Resources
• Definition of Economics
• Positive Economics and Normative Economics
• Microeconomics and Macroeconomics
• 1.2 Three Principles of Economics
• 1.3 The First Principle of Economics: Optimization
• Trade-offs and Budget Constraints
• Opportunity Cost
• Cost-Benefit Analysis
• Evidence-Based Economics: Is Facebook free?
• 1.4 The Second Principle of Economics: Equilibrium
• The Free-Rider Problem
• 1.5 The Third Principle of Economics: Empiricism
• 1.6 Is Economics Good for You?
• Summary
• Key Terms
• Questions
• Evidence-Based Economics Problems
• Problems
• Chapter 2: Economic Science: Using Data and Models to Understand the World
• 2.1 The Scientific Method
• Models and Data
• An Economic Model
• Evidence-Based Economics: How much more does a worker with a 4-year college degree earn compared to
• Means and Medians
• Argument by Anecdote
• 2.2 Causation and Correlation
• The Red Ad Blues
• Causation Versus Correlation
• Choice & Consequence: Spend Now and Pay Later?
• Experimental Economics and Natural Experiments
• Evidence-Based Economics: What is the return to education?
• 2.3 Economic Questions and Answers
• Summary
• Key Terms
• Questions
• Evidence-Based Economics Problems
• Problems
• Appendix: Constructing and Interpreting Charts and Graphs
• A Study about Incentives
• Experimental Design
• Describing Variables
• Cause and Effect
• Appendix Key Terms
• Appendix Problems
• Chapter 3: Optimization: Trying to Do the Best You Can
• 3.1 Optimization: Trying to Choose the Best Feasible Option
• Choice & Consequence: Do People Actually Choose the Best Feasible Option?
• 3.2 Optimization Application: Renting the Optimal Apartment
• Before and After Comparisons
• 3.3 Optimization Using Marginal Analysis
• Marginal Cost
• Evidence-Based Economics: How does location affect the rental cost of housing?
• Summary
• Key Terms
• Questions
• Evidence-Based Economics Problems
• Problems
• Chapter 4: Demand, Supply, and Equilibrium
• 4.1 Markets
• Competitive Markets
• 4.2 How Do Buyers Behave?
• Demand Curves
• Willingness to Pay
• From Individual Demand Curves to Aggregated Demand Curves
• Building the Market Demand Curve
• Shifting the Demand Curve
• Evidence-Based Economics: How much more gasoline would people buy if its price were lower?
• 4.3 How Do Sellers Behave?
• Supply Curves
• Willingness to Accept
• From the Individual Supply Curve to the Market Supply Curve
• Shifting the Supply Curve
• 4.4 Supply and Demand in Equilibrium
• Curve Shifting in Competitive Equilibrium
• Letting The Data Speak: Technological Breakthroughs Drive Down the Equilibrium Price of Oil
• Letting The Data Speak: The Day Oil Became Garbage
• 4.5 What Would Happen If the Government Tried to Dictate the Price of Gasoline?
• Choice & Consequence: The Unintended Consequences of Fixing Market Prices
• Summary
• Key Terms
• Questions
• Evidence-Based Economics Problems
• Problems
• Part II: Foundations of Microeconomics
• Chapter 5: Consumers and Incentives
• 5.1 The Buyer’s Problem
• What You Like
• Prices of Goods and Services
• How Much Money You Have to Spend
• Choice & Consequence: Absolutes Versus Percentages
• 5.2 Putting It All Together
• Price Changes
• Letting The Data Speak: Does $6 + $1 Always = $7?
• Income Changes
• 5.3 From the Buyer’s Problem to the Demand Curve
• 5.4 Consumer Surplus
• An Empty Feeling: Loss in Consumer Surplus When Price Increases
• Evidence-Based Economics: Would a smoker quit the habit for $100 per month?
• 5.5 Demand Elasticities
• The Price Elasticity of Demand
• The Cross-Price Elasticity of Demand
• The Income Elasticity of Demand
• Letting The Data Speak: Should McDonald’s Be Interested in Elasticities?
• Summary
• Key Terms
• Questions
• Evidence-Based Economics Problems
• Problems
• Appendix: Representing Preferences with Indifference Curves: Another Use of the Budget Constraint
• Appendix Questions
• Appendix Key Terms
• Chapter 6: Sellers and Incentives
• 6.1 Sellers in a Perfectly Competitive Market
• 6.2 The Seller’s Problem
• Making the Goods: How Inputs Are Turned into Outputs
• The Cost of Doing Business: Introducing Cost Curves
• The Rewards of Doing Business: Introducing Revenue Curves
• Putting It All Together: Using the Three Components to Do the Best You Can
• Choice & Consequence: Maximizing Total Profit, Not Per-Unit Profit
• 6.3 From the Seller’s Problem to the Supply Curve
• Price Elasticity of Supply
• Shutdown
• Choice & Consequence: Marginal Decision Makers Ignore Sunk Costs
• 6.4 Producer Surplus
• 6.5 From the Short Run to the Long Run
• Long-Run Supply Curve
• Choice & Consequence: Visiting a Car Manufacturing Plant
• 6.6 From the Firm to the Market: Long-Run Competitive Equilibrium
• Firm Entry
• Firm Exit
• Zero Profits in the Long Run
• Economic Profit Versus Accounting Profit
• Letting The Data Speak: The Effect of Uber Driver Entry in the Long Run
• Evidence-Based Economics: How would an ethanol subsidy affect ethanol producers?
• Summary
• Key Terms
• Questions
• Evidence-Based Economics Problems
• Problems
• Appendix: When Firms Have Different Cost Structures
• Chapter 7: Perfect Competition and the Invisible Hand
• 7.1 Perfect Competition and Efficiency
• Social Surplus
• Pareto Efficiency
• 7.2 Extending the Reach of the Invisible Hand: From the Individual to the Firm
• 7.3 Extending the Reach of the Invisible Hand: Allocation of Resources Across Industries
• Letting The Data Speak: Adam Smith Visits the White House
• 7.4 Prices Guide the Invisible Hand
• Deadweight Loss
• Evidence-Based Economics: Do companies like Uber make use of the invisible hand?
• The Command Economy
• Choice & Consequence: FEMA and Walmart After Katrina
• The Central Planner
• Choice & Consequence: Command and Control at Kmart
• 7.5 Equity and Efficiency
• Evidence-Based Economics: Can markets composed of only self-interested people maximize the overall w
• Summary
• Key Terms
• Questions
• Evidence-Based Economics Problems
• Problems
• Chapter 8: Trade
• 8.1 The Production Possibilities Curve
• Calculating Opportunity Cost
• 8.2 The Basis for Trade: Comparative Advantage
• Specialization
• Absolute Advantage
• Choice & Consequence: An Experiment on Comparative Advantage
• The Price of the Trade
• 8.3 Trade Between States
• Choice & Consequence: Should LeBron James Paint His Own House?
• Economy-Wide PPC
• Comparative Advantage and Specialization Among States
• 8.4 Trade Between Countries
• Determinants of Trade Between Countries
• Exporting Nations: Winners and Losers
• Letting The Data Speak: Fair Trade Products
• Importing Nations: Winners and Losers
• Where Do World Prices Come From?
• Determinants of a Country’s Comparative Advantage
• 8.5 Arguments Against Free Trade
• National Security Concerns
• Fear of Globalization
• Environmental and Resource Concerns
• Infant Industry Arguments
• The Effects of Tariffs
• Choice & Consequence: Tariffs Affect Trade Between Firms
• Evidence-Based Economics: Will free trade cause you to lose your job?
• Summary
• Key Terms
• Questions
• Evidence-Based Economics Problems
• Problems
• Chapter 9: Externalities and Public Goods
• 9.1 Externalities
• A “Broken” Invisible Hand: Negative Externalities
• A “Broken” Invisible Hand: Positive Externalities
• Pecuniary Externalities
• Choice & Consequence: Coronavirus Vaccination: Positive Externalities in Spots You Never Imagined
• 9.2 Private Solutions to Externalities
• Private Solution: Bargaining
• The Coase Theorem
• Private Solution: Doing the Right Thing
• 9.3 Government Solutions to Externalities
• Government Regulation: Command-and-Control Policies
• Evidence-Based Economics: How did the government lower the number of earthquakes in Oklahoma?
• Government Regulation: Market-Based Approaches
• Corrective Taxes
• Corrective Subsidies
• Letting The Data Speak: How to Value Externalities
• Letting The Data Speak: Pay as You Throw: Consumers Create Negative Externalities Too!
• 9.4 Public Goods
• Government Provision of Public Goods
• Choice & Consequence: The Free-Rider’s Dilemma
• Private Provision of Public Goods
• 9.5 Common Pool Resource Goods
• Choice & Consequence: Tragedy of the Commons
• Choice & Consequence: The Race to Fish
• Evidence-Based Economics: How can the Queen of England lower her commute time to Wembley Stadium?
• Summary
• Key Terms
• Questions
• Evidence-Based Economics Problems
• Problems
• Chapter 10: The Government in the Economy: Taxation and Regulation
• 10.1 Taxation and Government Spending in the United States
• Where Does the Money Come From?
• Why Does the Government Tax and Spend?
• Choice & Consequence: The Government Budget Constraint
• Letting The Data Speak: Understanding Federal Income Tax Brackets
• Letting The Data Speak: Reducing Inequality the Scandinavian Way
• Taxation: Tax Incidence and Deadweight Losses
• Choice & Consequence: The Deadweight Loss Depends on the Tax
• 10.2 Regulation
• Direct Regulation
• 10.3 Government Failures
• The Direct Costs of Bureaucracies
• Corruption
• Underground Economy
• Choice & Consequence: Can Market Regulation Save Rhinos from Extinction?
• 10.4 Equity Versus Efficiency
• 10.5 Consumer Sovereignty and Paternalism
• The Debate
• Evidence-Based Economics: What is the optimal size of government?
• Letting The Data Speak: The Efficiency of Government Versus Privately Run Expeditions
• Choice & Consequence: Taxation and Innovation
• Summary
• Key Terms
• Questions
• Evidence-Based Economics Problems
• Problems
• Chapter 11: Markets for Factors of Production
• 11.1 The Competitive Labor Market
• The Demand for Labor
• 11.2 The Supply of Labor: Your Labor- Leisure Trade-Off
• Labor Market Equilibrium: Supply Meets Demand
• Labor Demand Shifters
• Choice & Consequence: Producing Web Sites and Computer Programs
• Letting the Data Speak: “Get Your Hot Dogs Here!”
• Factors That Shift Labor Supply
• Letting The Data Speak: Do Wages Really Go Down If Labor Supply Increases?
• 11.3 Wage Inequality
• Differences in Human Capital
• Differences in Compensating Wage Differentials
• Choice & Consequence: Paying for Worker Training
• Discrimination in the Job Market
• Changes in Wage Inequality over Time
• Choice & Consequence: Compensating Wage Differentials
• Letting The Data Speak: Broadband and Inequality
• 11.4 The Market for Other Factors of Production: Physical Capital and Land
• Letting The Data Speak: The Top 1 Percent Share and Capital Income
• Evidence-Based Economics: Is there discrimination in the labor market?
• Summary
• Key Terms
• Questions
• Evidence-Based Economics Problems
• Problems
• Appendix: Monopsony in the Labor Market
• Part III: Market Structure
• Chapter 12: Monopoly
• 12.1 Introducing a New Market Structure
• 12.2 Sources of Market Power
• Legal Market Power
• Natural Market Power
• Control of Key Resources
• Choice & Consequence: Barriers to Entry Lurk Everywhere
• Economies of Scale
• 12.3 The Monopolist’s Problem
• Revenue Curves
• Price, Marginal Revenue, and Total Revenue
• 12.4 Choosing the Optimal Quantity and Price
• Producing the Optimal Quantity
• Setting the Optimal Price
• How a Monopolist Calculates Profits
• Does a Monopoly Have a Supply Curve?
• 12.5 The “Broken” Invisible Hand: The Cost of Monopoly
• 12.6 Restoring Efficiency
• Three Degrees of Price Discrimination
• Letting The Data Speak: Third-Degree Price Discrimination in Action
• 12.7 Government Policy Toward Monopoly
• The Microsoft Case
• Price Regulation
• Evidence-Based Economics: Can a monopoly ever be good for society?
• Summary
• Key Terms
• Questions
• Evidence-Based Economics Problems
• Problems
• Chapter 13: Game Theory and Strategic Play
• 13.1 Simultaneous-Move Games
• Best Responses and the Prisoners’ Dilemma
• Dominant Strategies and Dominant Strategy Equilibrium
• Games without Dominant Strategies
• 13.2 Nash Equilibrium
• Finding a Nash Equilibrium
• Choice & Consequence: Work or Surf?
• 13.3 Applications of Nash Equilibria
• Tragedy of the Commons Revisited
• Zero-Sum Games
• 13.4 How Do People Actually Play Such Games?
• Game Theory in Penalty Kicks
• Evidence-Based Economics: Is there value in putting yourself in someone else’s shoes?
• 13.5 Extensive-Form Games
• Backward Induction
• First-Mover Advantage, Commitment, and Vengeance
• Evidence-Based Economics: Is there value in putting yourself in someone else’s shoes in extensive-fo
• Choice & Consequence: There Is More to Life Than Money
• Summary
• Key Terms
• Questions
• Evidence-Based Economics Problems
• Problems
• Chapter 14: Oligopoly and Monopolistic Competition
• 14.1 Two More Market Structures
• 14.2 Oligopoly
• The Oligopolist’s Problem
• Oligopoly Model with Homogeneous Products
• Doing the Best You Can: How Should You Price to Maximize Profits?
• Oligopoly Model with Differentiated Products
• Letting The Data Speak: Airline Price Wars
• Collusion: Another Way to Keep Prices High
• Letting The Data Speak: Apple Versus Samsung
• Letting The Data Speak: To Cheat or Not to Cheat: That Is the Question
• Choice & Consequence: Collusion in Practice
• 14.3 Monopolistic Competition
• The Monopolistic Competitor’s Problem
• Doing the Best You Can: How a Monopolistic Competitor Maximizes Profits
• Letting The Data Speak: Why Do Some Firms Advertise and Some Don’t?
• How a Monopolistic Competitor Calculates Profits
• Long-Run Equilibrium in a Monopolistically Competitive Industry
• 14.4 The “Broken” Invisible Hand
• Regulating Market Power
• 14.5 Summing Up: Four Market Structures
• Letting the Podcast Speak: A Surprising Duopoly: Democrats and Republicans
• Evidence-Based Economics: How many firms are necessary to make a market competitive?
• Summary
• Key Terms
• Questions
• Evidence-Based Economics Problems
• Problems
• Part IV: Extending the Microeconomic Toolbox
• Chapter 15: Trade-offs Involving Time and Risk
• 15.1 Modeling Time and Risk
• 15.2 The Time Value of Money
• Future Value and the Compounding of Interest
• Borrowing Versus Lending
• Present Value and Discounting
• 15.3 Time Preferences
• Time Discounting
• Preference Reversals
• Choice & Consequence: Failing to Anticipate Preference Reversals
• Evidence-Based Economics: Do people exhibit a preference for immediate gratification?
• 15.4 Probability and Risk
• Roulette Wheels and Probabilities
• Independence and the Gambler’s Fallacy
• Letting The Data Speak: Roulette Wheels and Elections
• Expected Value
• Extended Warranties
• Choice & Consequence: Is Gambling Worthwhile?
• 15.5 Risk Preferences
• Summary
• Key Terms
• Questions
• Evidence-Based Economics Problems
• Problems
• Chapter 16: The Economics of Information
• 16.1 Asymmetric Information
• Hidden Characteristics: Adverse Selection in the Used Car Market
• Hidden Characteristics: Adverse Selection in the Health Insurance Market
• Market Solutions to Adverse Selection: Signaling
• Choice & Consequence: Are You Earning a Signal Right Now?
• Evidence-Based Economics: Why do new cars lose considerable value the minute they are driven off the
• Choice & Consequence: A Tale of a Tail
• 16.2 Hidden Actions: Markets with Moral Hazard
• Letting The Data Speak: Moral Hazard on Your Bike
• Market Solutions to Moral Hazard in the Labor Market: Efficiency Wages
• Letting the Podcast Speak: Tackling Adverse Selection and Moral Hazard in the Workplace
• Market Solutions to Moral Hazard in the Insurance Market: “Putting Your Skin in the Game”
• Letting The Data Speak: Designing Incentives for Teachers
• Evidence-Based Economics: Why is private health insurance so expensive?
• 16.3 Government Policy in a World of Asymmetric Information
• Government Intervention and Moral Hazard
• The Equity-Efficiency Trade-off
• Crime and Punishment as a Principall–Agent Problem
• Letting The Data Speak: Moral Hazard Among Job Seekers
• Summary
• Key Terms
• Questions
• Evidence-Based Economics Problems
• Problems
• Chapter 17: Auctions and Bargaining
• 17.1 Auctions
• Types of Auctions
• Open Outcry: English Auctions
• Letting The Data Speak: To Snipe or Not to Snipe?
• Open Outcry: Dutch Auctions
• Sealed Bid: First-Price Auctions
• Sealed Bid: Second-Price Auctions
• The Revenue Equivalence Theorem
• Evidence-Based Economics: How should you bid in an eBay auction?
• 17.2 Bargaining
• What Determines Bargaining Outcomes?
• Bargaining in Action: The Ultimatum Game
• Bargaining and the Coase Theorem
• Evidence-Based Economics: Who determines how the household spends its money?
• Letting The Data Speak: Sex Ratios Change Bargaining Power Too
• Summary
• Key Terms
• Questions
• Evidence-Based Economics Problems
• Problems
• Chapter 18: Social Economics
• 18.1 The Economics of Charity and Fairness
• The Economics of Charity
• Letting The Data Speak: Do People Donate Less When It’s Costlier to Give?
• Letting The Data Speak: Why Do People Give to Charity?
• The Economics of Fairness
• Letting The Data Speak: Dictators in the Lab
• Evidence-Based Economics: Do people care about fairness?
• 18.2 The Economics of Trust and Revenge
• The Economics of Trust
• The Economics of Revenge
• Choice & Consequence: Does Revenge Have an Evolutionary Logic?
• Letting the Podcast Speak: Sorry! I Should Apologize, but How?
• 18.3 How Others Influence Our Decisions
• Where Do Our Preferences Come From?
• The Economics of Peer Effects
• Letting The Data Speak: Is Economics Bad for You?
• Following the Crowd: Herding
• Letting The Data Speak: Your Peers Affect Your Waistline
• Choice & Consequence: Are You an Internet Explorer?
• Summary
• Key Terms
• Questions
• Evidence-Based Economics Problems
• Problems
• Endnotes
• Glossary
• Credits
• Index
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