Cover
Title
Copyright
Contents
PART 1 Introduction
Chapter 1 Thinking Like an Economist
The Cost-Benefit Approach to Decisions
Example 1.1: Comparing Costs and Benefits
The Role of Economic Theory
Common Pitfalls in Decision Making
Example 1.2: Implicit Cost
Example 1.3: Costs and Benefits Are Reciprocal
Example 1.4: Opportunity Cost
Example 1.5: Sunk Cost Part 1
Example 1.6: Sunk Cost Part 2
Example 1.7: Comparing Costs and Benefits Part 1
Example 1.8: Comparing Costs and Benefits Part 2
Example 1.9: Marginal Cost and Benefit vs. Average Cost and Benefit
Example 1.10: Applying the Cost-Benefit Principle
Using Marginal Benefit and Marginal Cost Graphically
Example 1.11: Comparing Marginal Benefit and Cost Graphically
The Invisible Hand
Example 1.12: Applying Marginal Benefit and Cost Graphically
Would Parents Want Their Daughter or Son to Marry Homo Economicus?
The Economic Naturalist
ECONOMIC NATURALIST 1.1: Why Is Airline Food So Bad?
ECONOMIC NATURALIST 1.2: Why Do Many Manual Transmissions Have Six Forward Speeds, Many Automatics Only Four?
Positive Questions and Normative Questions
Microeconomics and Macroeconomics
Summary
Review Questions
Problems
Answers to Concept Checks
Chapter 2 Supply and Demand
Chapter Preview
Supply and Demand Curves
Equilibrium Quantity and Price
Adjustment to Equilibrium
Some Welfare Properties of Equilibrium
Free Markets and the Poor
Example 2.1: Alternate Allocation Mechanisms
Example 2.2: Excess Demand
Price Supports
Determinants of Supply and Demand
Predicting and Explaining Changes in Price and Quantity
ECONOMIC NATURALIST 2.1: Why Do the Prices of Some Goods, Such as Apples, Go Down during the Months of Heaviest Consumption While the Prices of Others, Such as Beachfront Cottages, Go Up?
Example 2.3: Increasing Opportunity Cost
The Algebra of Supply and Demand
Summary
Review Questions
Problems
Answers to Concept Checks
Appendix 2A: How Do Taxes Affect Equilibrium Prices And Quantities?
PART 2 The Theory of Consumer Behavior
Chapter 3 Rational Consumer Choice
Chapter Preview
The Opportunity Set or Budget Constraint
Budget Shifts Due to Price or Income Changes
Example 3.1: Quantity Discounts
Example 3.2: Budget Constraints
Consumer Preferences
The Best Feasible Bundle
Example 3.3: Corner Solutions
Example 3.4: Rational Choice Model in Action
ECONOMIC NATURALIST 3.1: Why Do People Often Give Gifts in Kind Instead of Cash?
Summary
Review Questions
Problems
Answers to Concept Checks
Appendix 3A: The Utility Function Approach to the Consumer Budgeting Problem
Chapter 4 Individual and Market Demand
Chapter Preview
The Effects of Changes in Price
The Effects of Changes in Income
The Income and Substitution Effects of a Price Change
Example 4.1: Perfect Complements
Example 4.2: Perfect Substitutes
Consumer Responsiveness to Changes in Price
Example 4.3: Individual Demand Curves for Perfect Complements
Market Demand: Aggregating Individual Demand Curves
Example 4.4: Market Demand
Example 4.5: Market Demand with Identical Consumers
Price Elasticity of Demand
Elasticity and Total Expenditure
Example 4.6: Market Demand for Transit
The Dependence of Market Demand on Income
Example 4.7: The Engel Curve
ECONOMIC NATURALIST 4.1: Why Has the Nature of Outdoor Cooking Appliances Changed Dramatically in Recent Decades?
Application: Forecasting Economic Trends
Cross-Price Elasticities of Demand
Summary
Review Questions
Problems
Answers to Concept Checks
Appendix 4A: Additional Topics in Demand Theory
Chapter 5 Applications of Rational Choice and Demand Theories
Chapter Preview
Using the Rational Choice Model to Answer Policy Questions
Consumer Surplus
Example 5.1: Consumer Surplus
ECONOMIC NATURALIST 5.1: Why Do Some Tennis Clubs Have an Annual Membership Charge in Addition to Their Hourly Court Fees?
ECONOMIC NATURALIST 5.2: Why Do Some Amusement Parks Charge Only a Fixed Admission Fee, with no Additional charge even for rides with long lines?
Overall Welfare Comparisons
Example 5.2: Budget Constraints
Using Price Elasticity of Demand
The Intertemporal Choice Method
Example 5.3: Marginal Rate of Time Preference
Summary
Review Questions
Problems
Answers to Concept Checks
Chapter 6 The Economics of Information and Choice under Uncertainty
Chapter Preview
The Economics of Information
The Costly-to-Fake Principle
ECONOMIC NATURALIST 6.1: Why Is Coyness Often an Attractive Attribute?
ECONOMIC NATURALIST 6.2: Why Do Residents of Small Towns Spend Less on Professional Clothes Than Their Counterparts in Big Cities?
The Full-Disclosure Principle
ECONOMIC NATURALIST 6.3: Why Do "Almost New" Used Cars Sell for So Much Less Than Brand New Ones?
Choice under Uncertainty
Example 6.1: Expected Utility
Example 6.2: Expected Value of Wealth
Example 6.3: Risk Neutral
Example 6.4: Expected Utility
Example 6.5: Expected Benefit
Insuring against Bad Outcomes
ECONOMIC NATURALIST 6.4: Why Was American Health Reform Legislation So Complicated?
Statistical Discrimination
Summary
Review Questions
Problems
Answers to Concept Checks
Appendix 6A: Search Theory and the Winner's Curse
Chapter 7 Departures from Standard Rational Choice Models (With and Without Regret)
Chapter Preview
An Application of the Present-Aim Standard: Altruistic Preferences
Example 7.1: Altruistic Preferences
The Strategic Role of Preferences
Tastes Not Only Can Differ, They Must Differ
ECONOMIC NATURALIST 7.1: Why Do People Vote in Presidential Elections?
Example 7.2: A Symmetric Problem
Bounded Rationality
Affective Forecasting Errors
Judgmental Heuristics and Biases
ECONOMIC NATURALIST 7.2: Why Does the Rookie of the Year In Baseball Often Have a Mediocre Second Season?
The Psychophysics of Perception
ECONOMIC NATURALIST 7.3: Why Do Real Estate Agents Often Show Clients Two Houses That Are Nearly Identical, Even Though One Is Cheaper and in Better Condition than the Other?
The Self-Control Pitfall
Summary
Review Questions
Problems
Answers to Concept Checks
PART 3 The Theory of the Firm and Market Structure
Chapter 8 Production
Chapter Preview
The Input-Output Relationship, or Production Function
Production in the Short Run
ECONOMIC NATURALIST 8.1: Why Can't All the World's People Be Fed from the Amount of Grain Grown in a Single Flowerpot?
Total, Marginal, and Average Products
Example 8.1: Interior Solution
Example 8.2: Production Decision
Example 8.3: Efficient Allocation
Production in the Long Run
Returns to Scale
ECONOMIC NATURALIST 8.2: Why Do Builders Use Prefabricated Frames for Roofs but Not for Walls?
Summary
Review Questions
Problems
Answers to Concept Checks
Appendix 8A: Mathematical Extensions of Production Theory
Chapter 9 Costs
Chapter Preview
Costs in the Short Run
Graphing the Total, Variable, and Fixed Cost Curves
Example 9.1: Graphing the Cost Functions
Other Short-Run Costs
Example 9.2: Determining Production Costs
Example 9.3: Graphing Cost Curves
Allocating Production between Two Processes
Example 9.4: Minimum-Cost Production
The Relationship Among MP, AP, MC, and AVC
Costs in the Long Run
ECONOMIC NATURALIST 9.1: Why Is Gravel Made by Hand in Nepal but by Machine in the United States?
ECONOMIC NATURALIST 9.2: Why Do Unions Support Minimum Wage Laws So Strongly?
ECONOMIC NATURALIST 9.3: Why Would a Bathroom Equipment Manufacturer Bake the Image of a Housefly onto the Center of Its Ceramic Urinals?
Long-Run Costs and the Structure of Industry
The Relationship between Long-Run and Short-Run Cost Curves
Summary
Review Questions
Problems
Answers to Concept Checks
Appendix 9A: Mathematical Extensions of the Theory of Costs
Chapter 10 Perfect Competition
Chapter Preview
The Goal of Profit Maximization
Example 10.1: Accounting Profits vs. Economic Profits
The Four Conditions for Perfect Competition
The Short-Run Condition for Profit Maximization
The Short-Run Competitive Industry Supply
Example 10.2: Industry Supply Curve
Example 10.3: Consumer and Producer Surplus
The Invisible Hand
The Long-Run Competitive Industry Supply Curve
ECONOMIC NATURALIST 10.1: Why Do Color Photographs Cost Less than Black-and-White Photographs?
Applying the Competitive Model
ECONOMIC NATURALIST 10.2: Why Did 18-Wheel Cargo Trucks Suddenly Begin Using Airfoils in the Mid-1970s?
Summary
Review Questions
Problems
Answers to Concept Checks
Chapter 11 Monopoly
Chapter Preview
Defining Monopoly
Five Sources of Monopoly
The Profit-Maximizing Monopolist
Example 11.1: Marginal Revenue Curve
Example 11.2: Profit Maximization
A Monopolist Has No Supply Curve
Price Discrimination
Example 11.3: Profits in Two Different Markets
ECONOMIC NATURALIST 11.1: Why Do Some Doctors and Lawyers Offer Discounts to People with Low Incomes?
ECONOMIC NATURALIST 11.2: Why Do Theater Owners Offer Student Discounts on Admission Tickets but Not on Popcorn?
The Efficiency Loss from Monopoly
Public Policy toward Natural Monopoly
Example 11.4: The Impact of Innovation on Profits
Summary
Review Questions
Problems
Answers to Concept Checks
Chapter 12 A Game-Theoretic Approach to Strategic Behavior
Chapter Preview
The Prisoner's Dilemma: An Introduction to the Theory of Games
ECONOMIC NATURALIST 12.1: Why Do Cigarette Companies Advertise "Too Much"?
ECONOMIC NATURALIST 12.2: Why Might a Company Make an Investment It Knew It Would Never Use?
ECONOMIC NATURALIST 12.3: Why Would a Firm Build a Factory with More Capacity than It Would Ever Need?
The Evolution of Strategic Preferences
The Commitment Problem
Illustration: The Cheating Problem
Summary
Review Questions
Problems
Answers to Concept Checks
Chapter 13 Oligopoly and Monopolistic Competition
Chapter Preview
Some Specific Oligopoly Models
Example 13.1: The Cournot Model
Example 13.2: The Bertrand Model
Example 13.3: The Stackelberg Model
Competition When There Are Increasing Returns to Scale
Monopolistic Competition
A Spatial Interpretation of Monopolistic Competition
ECONOMIC NATURALIST 13.1: Why Are There Fewer Grocery Stores in Cities than There Were in 1930? Why Do Neighborhoods in New York City Have More Grocery Stores than Neighborhoods in LA?
Consumer Preferences and Advertising
Summary
Review Questions
Problems
Answers to Concept Checks
PART 4 Factor Markets
Chapter 14 Labor
Chapter Preview
The Perfectly Competitive Firm's Demand for Labor
An Imperfect Competitor's Demand for Labor
The Supply of Labor
Example 14.1: Labor Supply Curve
ECONOMIC NATURALIST 14.1: Why Is It So Hard to Find a Taxi on Rainy Days?
Example 14.2: Leisure Demand
The Market Supply Curve
Example 14.3: Market Supply
Monopsony
Minimum Wage Laws
Labor Unions
Discrimination in the Labor Market
The Internal Wage Structure
Winner-Take-All Markets
Summary
Review Questions
Problems
Answers to Concept Checks
Appendix 14A: The Economics of Workplace Safety
Chapter 15 Capital
Chapter Preview
Financial Capital and Real Capital
The Relationship between the Rental Rate and the Interest Rate
The Criterion for Buying a Capital Good
Interest Rate Determination
Real versus Nominal Interest Rates
The Market for Stocks and Bonds
ECONOMIC NATURALIST 15.1: Why Is Owning Stock in a Monopoly No Better than Owning Stock in a Perfectly Competitive Firm?
Economic Rent
Peak-Load Pricing
Exhaustible Resources as Inputs in Production
Summary
Review Questions
Problems
Answers to Concept Checks
Appendix 15A: More Detailed Look at Exhaustible Resource Allocation
PART 5 General Equilibrium and Welfare
Chapter 16 Externalities, Property Rights, and the Coase Theorem
Chapter Preview
The Reciprocal Nature of Externalities
Example 16.1: Shutdown Decision Part 1
Example 16.2: Shutdown Decision Part 2
Example 16.3: Efficient Negotiation Part 1
Example 16.4: Efficient Negotiation Part 2
Example 16.5: Negotiation at a Cost
Example 16.6: Barriers to Negotiation
Application: External Effects from Nuclear Power Plants
Property Rights
ECONOMIC NATURALIST 16.1: Why Does the Law Permit Airlines to Operate Flights over Private Land without Permission
ECONOMIC NATURALIST 16.2: Why Does the Law of Trespass Not Apply along Waterfront Property?
ECONOMIC NATURALIST 16.3: Why Are Property Rights Often Suspended during Storms?
ECONOMIC NATURALIST 16.4: Why Do Building Height Limits Vary from City to City?
Example 16.7: Tragedy of the Commons
Example 16.8: Compromise vs. Cost
Positive Externalities
Positional Externalities
Taxing Externalities
Example 16.9: Taxing Externalities
Example 16.10: Regulation vs. Taxation
Summary
Review Questions
Problems
Answers to Concept Checks
Chapter 17 General Equilibrium and Market Efficiency
Chapter Preview
A Simple Exchange Economy
Efficiency in Production
Efficiency in Product Mix
Gains from International Trade
Example 17.1: The Trade Decision
Taxes in General Equilibrium
Other Sources of Inefficiency
Summary
Review Questions
Problems
Answers to Concept Checks
Chapter 18 Government
Chapter Preview
Public Goods
Private Provision of Public Goods
Example 18.1: Free-Rider Problem
Public Choice
Example 18.2: Cost-Benefit Analysis vs. Majority Rule
Example 18.3: Lobbying Wars
Income Distribution
Summary
Review Questions
Problems
Answers to Concept Checks
Index
A
B
C
D
E
F
G
H
I
J
K
L
M
N
O
P
Q
R
S
T
U
V
W
X
Y
Z
