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Microeconomics : Incentives in an Imperfect World

ISBN: 9780201637731 | 0201637731
Edition: 2nd
Format: Hardcover
Publisher: Pearson College Div
Pub. Date: 7/1/2000

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SummaryTable of Contents
The integration of real-world applications throughout this text gives students a practical perspective on microeconomic theory. Students are motivated and challenged by the use of core theory and modern theories to analyze actual markets, and the author's clear, step-by-step approach to problem-solving helps them to better understand how microeconomic theory is used to solve economic problems and analyze policy issues.
Prefacexiii
Introduction
1(12)
Microeconomics: The Allocation of Scarce Resources
1(3)
... MORE
Trade-Offs
2(1)
Who Makes the Decisions
2(1)
Application Oregon Decides Which Medical Treatments to Provide
2(1)
Prices Determine Allocations
3(1)
Application Tax on Fast-Food Containers
4(1)
Models
4(4)
Application Income Threshold Model and China
4(1)
Simplifications by Assumption
5(1)
Testing Theories
6(1)
Positive Versus Normative
7(1)
Uses of Microeconomic Models
8(5)
Uses of Microeconomics by Individuals and Governments
8(1)
Application Putting Saturn in Orbit
9(3)
Summary
12(1)
PART ONE SUPPLY AND DEMAND
Supply and Demand
13(33)
Demand
14(7)
The Demand Curve
15(3)
The Demand Function
18(2)
Summing Demand Curves
20(1)
Application Aggregating the Demand for Cling Peaches
20(1)
Supply
21(6)
The Supply Curve
22(2)
The Supply Function
24(1)
Summing Supply Curves
24(1)
Effects of Government Import Policies on Supply Curves
25(1)
Solved Problem 2.1
26(1)
Market Equilibrium
27(3)
Using a Graph to Determine the Equilibrium
27(1)
Using Math to Determine the Equlibrium
27(1)
Forces That Drive the Market to Equlibrium
28(2)
Shocking the Equilibrium
30(2)
Effects of a Shift in the Demand Curve
30(1)
Effects of a Shift in the Supply Curve
31(1)
Solved Problem 2.2
31(1)
Effects of Government Interventions
32(9)
Policies that Shift Supply Curves
32(2)
Solved Problem 2.3
34(1)
Application American Steel Quotas
35(1)
Policies that Cause Demand to Differ from Supply
35(2)
Application Gas Lines
37(3)
Application Minimum Wage Law in Puerto Rico
40(1)
Why Supply Need Not Equal Demand
41(1)
When to Use the Supply-and-Demand Model
41(5)
Summary
43(1)
Problems
44(1)
Math Problems
45(1)
Applying the Supply-and-Demand Model
46(27)
How Shapes of Demand and Supply Curves Matter
47(1)
Sensitivity of Quantity Demanded to Price
48(8)
Price Elasticity of Demand
48(2)
Application Web Fees
50(1)
Elasticity Along the Demand Curve
50(3)
Other Demand Elasticities
53(2)
Application Demanding Rail Safety
55(1)
Sensitivity of Quantity Supplied to Price
56(2)
Elasticity of Supply
56(1)
Elasticity Along the Supply Curve
57(1)
Long Run Versus Short Run
58(1)
Demand Elasticities over Time
58(1)
Supply Elasticities over Time
59(1)
Effects of a Sales Tax
59(14)
Two Types of Sales Taxes
59(1)
Equilibrium Effects of a Specific Tax
60(2)
Application Discouraging Smoking
62(1)
Tax Incidence of a Specific Tax
63(1)
Solved Problem 3.1
64(1)
Application Gasoline Taxes as a Revenue Source
65(1)
The Same Equilibrium No Matter Who Is Taxed
66(1)
The Similar Effects of Ad Valorem and Specific Taxes
67(1)
Solved Problem 3.2
68(2)
Application Incidence of Federal Ad Valorem Taxes
70(1)
Summary
70(1)
Problems
71(1)
Math Problems
72(1)
PART TWO CONSUMER THEORY
Consumer Choice
73(32)
Preferences
74(10)
Properties of Consumer Preferences
75(1)
Preference Maps
76(3)
Solved Problem 4.1
79(4)
Application Indifference Curves Between Food and Clothing
83(1)
Utility
84(3)
Utility Function
84(1)
Ordinal Preferences
84(1)
Utility and Indifference Curves
85(1)
Utility and Marginal Utility
85(2)
Utility and Marginal Rates of Substitution
87(1)
Budget Constraint
87(5)
Slope of the Budget Constraint
89(1)
Purchasing Fractional Quantities
89(1)
Effect of a Change in Price on Consumption
89(1)
Effect of a Change in Income on Consumption
90(1)
Solved Problem 4.2
91(1)
Constrained Consumer Choice
92(13)
The Consumer's Optimal Bundle
92(3)
Solved Problem 4.3
95(1)
Application Taxes and Internet Shopping
96(1)
*Optimal Bundles on Convex Sections of Indifference Curves
96(1)
Buying Where More Is Better
97(1)
Solved Problem 4.4
98(1)
Food Stamps
99(2)
Application Food Stamp Experiments
101(1)
Summary
102(1)
Problems
103(1)
Math Problems
104(1)
Applying Consumer Theory
105(38)
Deriving Demand Curves
106(3)
How Changes in Income Shift Demand Curves
109(8)
Effects of a Rise in Income
109(2)
Solved Problem 5.1
111(1)
Consumer Theory and Income Elasticites
112(4)
Application Income Elasticities of Demand for Cars
116(1)
Effects of a Price Change
117(6)
Income and Substitution Effects with a Normal Good
117(2)
Income and Substitution Effects with an Inferior Good
119(2)
Solved Problem 5.2
121(1)
Application Why the Wealthy Buy More Houses
122(1)
Cost-of-Living Adjustments
123(7)
Inflation Indexes
123(2)
Application Does Inflation Hurt?
125(1)
Effects of Inflation Adjustments
126(3)
Application The Total CPI Bias
129(1)
Deriving Labor Supply Curves
130(13)
Labor-Leisure Choice
130(3)
Income and Substitution Effects
133(1)
Solved Problem 5.3
134(1)
Application Leisure-Income Choices of Textile Workers
135(1)
Shape of the Labor Supply Curve
136(1)
Application Estimated Labor Supply Curves
136(2)
Income Tax Rates and Labor Supply
138(1)
Application Effects of Tax Cuts
139(1)
Summary
140(1)
Problems
141(1)
Math Problems
142(1)
PART THREE THEORY OF THE FIRM
Firms and Production
143(34)
The Ownership and Management of Firms
144(2)
The Ownership of Firms
145(1)
The Management of Firms
145(1)
What Owners Want
146(1)
Production
146(2)
Production Functions
147(1)
Time and the Variability of Inputs
147(1)
Short-Run Production: One Variable and One Fixed Input
148(7)
Total Product
148(1)
Marginal Product of Labor
149(1)
Average Product of Labor
150(1)
Graphing the Product Curves
150(3)
Law of Diminishing Marginal Returns
153(1)
Application Malthus and Mass Starvation
154(1)
Long-Run Production: Two Variable Inputs
155(9)
Isoquants
155(4)
Application A Semiconductor Integrated Circuit Isoquant
159(2)
Substituting Inputs
161(2)
Solved Problem 6.1
163(1)
Returns to Scale
164(4)
Constant, Increasing, and Decreasing Returns to Scale
164(1)
Solved Problem 6.2
165(1)
Application Returns to Scale in Manufacturing
166(2)
Varying Returns to Scale
168(1)
Productivity and Technical Change
168(9)
Relative Productivity
169(1)
Application German Versus British Productivity
170(1)
Innovations
171(1)
Application Nonneutral Technical Change in Pin Manufacturing
172(1)
Application Automobile Manufacturing Innovations
173(1)
Summary
174(1)
Problems
174(2)
Math Problems
176(1)
Costs
177(46)
Measuring Costs
178(3)
Economic Cost
178(1)
Application Opportunity Cost of Waiting Time
179(1)
Capital Costs
179(1)
Application Swarthmore College's Cost of Capital
180(1)
Short-Run Costs
181(12)
Short-Run Cost Measures
181(2)
Application Internet Firms' Fixed Costs
183(1)
Short-Run Cost Curves
183(3)
Production Functions and the Shape of Cost Curves
186(3)
Application Short-Run Cost Curves for a Printing Firm
189(1)
Effects of Taxes on Costs
189(2)
Solved Problem 7.1
191(1)
Short-Run Cost Summary
192(1)
Long-Run Costs
193(16)
Input Choice
193(6)
Application Rice Milling on Java
199(2)
Solved Problem 7.2
201(1)
How Long-Run Cost Varies with Output
202(2)
Solved Problem 7.3
204(1)
The Shape of Long-Run Cost Curves
204(3)
Application Average Cost of Cement Firms
207(1)
Estimating Cost Curves Versus Introspection
208(1)
Lower Costs in the Long Run
209(9)
Long-Run Average Cost as the Envelope of Short-Run Average Cost Curves
209(1)
Application Long-Run Cost Curves in Printing and Oil Pipelines
210(3)
Application Choosing an Ink-Jet or a Laser Printer
213(1)
Short-Run and Long-Run Expansion Paths
214(1)
How Learning by Doing Lowers Costs
214(3)
Application Learning by Doing in Computer Chips
217(1)
Cost of Producing Multiple Goods
218(5)
Application Dead End
220(1)
Summary
220(1)
Problems
220(1)
Math Problems
221(2)
PART FOUR PERFECT COMPETITION
Competitive Firms and Markets
223(42)
Competition
224(4)
Price Taking
224(1)
Why the Firm's Demand Curve Is Horizontal
224(2)
*Derivation of a Competitive Firm's Demand Curve
226(1)
Why We Study Perfect Competition
227(1)
Profit Maximization
228(5)
Profit
228(1)
Application Breaking Even on Christmas Trees
229(1)
Two Steps to Maximizing Profit
230(3)
Competition in the Short Run
233(13)
Short-Run Competitive Profit Maximization
233(2)
Solved Problem 8.1
235(3)
Solved Problem 8.2
238(1)
Short-Run Firm Supply Curve
239(2)
Short-Run Market Supply Curve
241(2)
Application Shutting Down Oil Wells
243(1)
Short-Run Competitive Equilibrium
244(2)
Comptetition in the Long Run
246(13)
Long-Run Competitive Profit Maximization
246(1)
Long-Run Firm Supply Curve
246(2)
Long-Run Market Supply Curve
248(1)
Application Threat of Entry in Shipping
249(1)
Application The Naked Truth About Costs and Entry
250(2)
Application Upward-Sloping Long-Run Supply Curves For Cotton
252(4)
Application Slope of Long-Run Market Supply Curves
256(1)
Long-Run Competitive Equilibrium
256(2)
Solved Problem 8.3
258(1)
Zero Profit for Competitive Firms in the Long Run
259(6)
Zero Long-Run Profit with Free Entry
259(1)
Zero Long-Run Profit When Entry Is Limited
260(2)
The Need to Maximize Profit
262(1)
Summary
262(1)
Problems
263(1)
Math Problems
264(1)
Applying the Competitive Model
265(40)
Consumer Welfare
266(7)
Measuring Consumer Welfare Using a Demand Curve
266(3)
Application Consumer Surplus from Television
269(1)
Effect of a Price Change on Consumer Surplus
269(2)
Solved Problem 9.1
271(2)
Producer Welfare
273(3)
Measuring Producer Surplus Using a Supply Curve
273(1)
Using Producer Surplus
274(1)
Solved Problem 9.2
275(1)
Competition Maximizes Welfare
276(4)
Why Producing Less than the Competitive Output Lowers Welfare
276(2)
Why Producing More than the Competitive Output Lowers Welfare
278(1)
Application Deadweight Loss of Christmas Presents
279(1)
Policies that Shift Supply Curves
280(7)
Restricting the Number of Firms
281(2)
Application Taxicab Medallions
283(1)
Excluding Certain Groups from Owning Firms
284(1)
Application Discriminating Against Groups
284(1)
Raising Entry and Exit Costs
285(1)
Application Barriers to Protect Our Way of Life
286(1)
Application Job Termination Laws
287(1)
Policies that Create A Wedge Between Supply and Demand
287(8)
Welfare Effects of a Sales Tax
287(2)
Welfare Effects of a Price Floor
289(2)
Solved Problem 9.3
291(2)
Application International Cost of Agricultural Subsidies
293(1)
Welfare Effects of a Price Ceiling
293(1)
Solved Problem 9.4
294(1)
Comparing Both Types of Policies: Imports
295(10)
Free Trade Versus a Ban on Imports
296(1)
Free Trade Versus a Tariff
296(4)
Free Trade Versus a Quota
300(1)
Application Japanese Nontariff Barriers
300(1)
Rent Seeking
301(1)
Summary
302(1)
Problems
303(1)
Math Problems
304(1)
General Equilibrium and Economic Welfare
305(38)
General Equilibrium
306(8)
Feedback Between Competitive Markets
307(3)
Application Sin Taxes
310(1)
Minimum Wages with Incomplete Coverage
311(2)
Application Living-Wage Laws
313(1)
Solved Problem 10.1
313(1)
Trading Between Two People
314(5)
Endowments
315(1)
Mutually Beneficial Trades
315(4)
Solved Problem 10.2
319(1)
Bargaining Ability
319(1)
Competitive Exchange
319(4)
Competitive Equilibrium
320(2)
The Efficiency of Competition
322(1)
Obtaining Any Efficient Allocation Using Competition
322(1)
Production and Trading
323(8)
Comparative Advantage
323(2)
Solved Problem 10.3
325(3)
Efficient Product Mix
328(1)
Competition
328(2)
Application Auto Trade Barriers
330(1)
Efficiency and Equity
331(12)
Role of the Government
331(1)
Application Wealth Distribution in the United States
332(2)
Efficiency
334(1)
Equity
335(4)
Efficiency Versus Equity
339(1)
Summary
340(1)
Problems
341(1)
Math Problems
341(2)
PART FIVE MARKET POWER AND MARKET STRUCTURE
Monopoly
343(40)
Monopoly Profit Maximization
344(8)
Marginal Revenue
344(4)
Choosing Price or Quantity
348(1)
Graphical Approach
349(1)
Mathematical Approach
350(2)
Market Power
352(4)
Market Power and the Shape of the Demand Curve
352(1)
Lerner Index
353(1)
Application Humana Hospitals
354(1)
Sources of Market Power
354(1)
Application Airport Monopolies
355(1)
Effects of a Shift of the Demand Curve
356(1)
Welfare Effects of Monopoly
357(7)
Graphing the Welfare Loss
357(2)
Application Deadweight Loss of the U.S. Postal Service
359(1)
Solved Problem 11.1
360(2)
Welfare Effects of Ad Valorem Versus Specific Taxes
362(2)
Cost Advantages that Create Monopolies
364(3)
Sources of Cost Advantages
364(1)
Natural Monopoly
364(2)
Solved Problem 11.2
366(1)
Application Electric Power Utilities
366(1)
Government Actions that Create Monopolies
367(5)
Barriers to Entry
367(1)
Application Government Sales of Monopolies
368(1)
Patents
368(1)
Application A Drug Patent
369(3)
Government Actions That Reduce Market Power
372(11)
Regulating Monopolies
372(2)
Solved Problem 11.3
374(4)
Increasing Competition
378(1)
Application Monopoly in Names
378(1)
Dominant Firm and Competitive Fringe
379(1)
Summary
380(1)
Problems
381(1)
Math Problems
382(1)
Pricing
383(33)
Why and How Firms Price Discriminate
384(5)
Why Price Discrimination Pays
384(2)
Application Disneyland Pricing
386(1)
Who Can Price Discriminate
387(1)
Preventing Resales
388(1)
Not All Price Differences Are Price Discrimination
388(1)
Types of Price Discrimination
389(1)
Perfect Price Discrimination
389(7)
How a Firm Perfectly Price Discriminates
389(2)
Application A Hot Sale of Coke
391(1)
Perfect Price Discrimination: Efficient but Hurts Consumers
391(2)
Application Tagamet Revisited
393(1)
Solved Problem 12.1
394(1)
Transaction Costs and Perfect Price Discrimination
395(1)
Quantity Discrimination
396(1)
Multimarket Price Discrimination
397(9)
Multimarket Price Discrimination with Two Groups
398(2)
Solved Problem 12.2
400(1)
Application Generics and Brand-Name Loyalty
401(2)
Identifying Groups
403(1)
Application Getting Consumers to Identify Themselves
404(1)
Welfare Effects of Multimarket Price Discrimination
405(1)
Application Taking Women to the Cleaners
406(1)
Two-Part Tariffs
406(4)
A Two-Part Tariff with Identical Consumers
407(1)
A Two-Part Tariff with Nonidentical Consumers
408(2)
Application Warehouse Stores
410(1)
Tie-in Sales
410(6)
Requirement Tie-In Sales
410(1)
Application IBM
411(1)
Bundling
411(2)
Application Automatic Savings
413(1)
Summary
413(1)
Problems
414(1)
Math Problems
415(1)
Oligopoly and Monopolistic Competition
416(49)
Market Structures
417(2)
Game Theory
419(4)
A Single-Period, Two-Firm, Quantity-Setting Game
419(2)
Why Firms Do Not Cooperate in a Single-Period Game
421(1)
Collusion in Repeated Games
422(1)
Application Oligopoly Competition Among Governments
423(1)
Cooperative Oligopoly Models
423(8)
Laws Against Cartels
424(1)
Why Cartels Form
425(1)
Why Cartels Fail
426(1)
Maintaining Cartels
427(1)
Application Vitamin Price Fixing
428(1)
Application A Government-Created Cartel
429(1)
Entry and Cartel Success
430(1)
Application Bail Bonds
430(1)
Mergers
430(1)
Application Airline Mergers
430(1)
Cournot Model of Noncooperative Oligopoly
431(9)
Cournot Model of an Airline Market
431(5)
Comparing the Cournot and Cartel Models
436(2)
The Cournot Equilibrium and the Number of Firms
438(2)
Application Appliances
440(1)
Stackelberg Model of Noncooperative Behavior
440(10)
Stackelberg Game Tree
440(2)
Stackelberg Graphical Model
442(2)
Why Moving Sequentially Is Essential
444(1)
Strategic Trade Policy
444(4)
Application Airbus and Boeing
448(1)
Solved Problem 13.1
449(1)
Comparison of Collusive, Cournot, Stackelberg, and Competitive Equilibria
450(1)
Application Deadweight Losses in the Food and Tobacco Industries
451(1)
Monopolistic Competition
451(5)
Monopolistically Competitive Equilibrium
452(1)
Fixed Costs and the Number of Firms
452(3)
Solved Problem 13.2
455(1)
Application Entry and Airline Prices
455(1)
Bertrand Price-Setting Model
456(9)
Bertrand Equilibrium with Identical Products
456(3)
Bertrand Equilibrium with Differentiated Products
459(1)
Differentiating Products
459(1)
Application Toothbrushes
460(1)
Application Welfare Gain from New Cereals
461(1)
Summary
462(1)
Problems
463(1)
Math Problems
464(1)
Strategy
465(36)
Preventing Entry: Simultaneous Decisions
466(4)
Room for Two Firms
467(1)
Room for Only One Firm
468(1)
Summary of the Simultaneous-Decision Entry Game
469(1)
Solved Problem 14.1
469(1)
Preventing Entry: Sequential Decisions
470(14)
To Act or Not to Act?
471(2)
Application Government Deterrence
473(1)
Commitment and Entry Prevention
473(4)
Solved Problem 14.2
477(1)
Commitment and Fixed Costs
477(5)
Solved Problem 14.3
482(2)
Creating and Using Cost Advantages
484(7)
Lowering Marginal Cost While Raising Total Cost
484(1)
Learning by Doing
485(1)
Raising Rivals' Costs
485(1)
Application Hitting Rivals Where It Hurts
486(1)
Application Preventing Customers from Switching
487(1)
Raising All Firms' Costs
488(1)
Advantages and Disadvantages to Moving First
489(1)
Preventing Entry: Summary
489(1)
Application Evidence on Strategic Entry Deterrence
489(2)
Advertising
491(7)
Monopoly Advertising
491(1)
Application Drug Commercials
492(2)
Application O.J. Trial Effect
494(1)
Strategic Advertising
495(1)
Application Pink Toothbrush
495(1)
Application Secret Ingredients
496(2)
Summary
498(1)
Problems
499(1)
Math Problems
500(1)
PART SIX FACTOR MARKETS
Factor Markets and Vertical Integration
501(36)
Competitive Factor Market
502(10)
Short-Run Factor Demand of a Firm
502(5)
Solved Problem 15.1
507(1)
Application Thread Mill
507(1)
Long-Run Factor Demand
508(1)
Factor Market Demand
509(2)
Competitive Factor Market Equilibrium
511(1)
Effect of Monopolies on Factor Markets
512(9)
Market Structure and Factor Demands
512(2)
A Model of Market Power in Input and Output Markets
514(2)
Application Record Prices
516(1)
Application Union Monopoly Power
517(2)
Solved Problem 15.2
519(1)
Application Baseball Salaries and Ticket Prices
520(1)
Monopsony
521(7)
Monopsony Profit Maximization
521(3)
Application Monopsony Wage Setting
524(1)
Welfare Effects of Monopsony
524(1)
Solved Problem 15.3
524(2)
Monopsony Price Discrimination
526(1)
Application Monopsony Price Discrimination
527(1)
Vertical Integration
528(9)
Stages of Production
528(1)
Degree of Vertical Integration
529(1)
Application Outsourcing
529(1)
Produce or Buy
530(1)
Application Aluminum
531(2)
Application Cutting Off Oxygen
533(1)
Summary
534(1)
Problems
534(1)
Math Problems
535(2)
Interest Rates, Investments, and Capital Markets
537(34)
Comparing Money Today to Money in the Future
538(12)
Interest Rates
538(1)
Applcation Usury
538(3)
Using Interest Rates to Connect the Present and Future
541(1)
Application Power of Compounding
542(1)
Stream of Payments
543(2)
Solved Problem 16.1
545(1)
Application Saving for Retirement
546(1)
Inflation and Discounting
547(2)
Application Winning the Lottery
549(1)
Choices over Time
550(9)
Application Comparing Two Contracts
550(1)
Investing
551(1)
Solved Problem 16.2
552(2)
Solved Problem 16.3
554(1)
Rate of Return on Bonds
554(1)
Durability
555(1)
Application Durability of Telephone Poles
555(1)
Human Capital
556(3)
Exhaustible Resources
559(7)
When to Sell an Exhaustible Resource
559(1)
Price of a Scarce Exhaustible Resource
560(3)
Application Redwood Trees
563(1)
Why Price May Be Constant or Fall
564(2)
Capital Markets, Interest Rates, and Investments
566(5)
Increased Savings, More Investment
566(1)
Increased Government Demand, Less Private Investment
567(1)
Application Taking from Future Generations
568(1)
Summary
569(1)
Problems
569(1)
Math Problems
570(1)
PART SEVEN UNCERTAINTY, MISSING MARKETS, AND LIMITED INFORMATION
Uncertainty
571(31)
Degree of Risk
572(5)
Probability
572(2)
Expected Value
574(1)
Solved Problem 17.1
574(1)
Variance and Standard Deviation
575(2)
Decision Making Under Uncertainty
577(8)
Expected Utility
577(1)
Risk Aversion
578(2)
Solved Problem 17.2
580(1)
Risk Neutrality
581(1)
Risk Preference
582(1)
Application Gambling
583(2)
Avoiding Risk
585(8)
Just Say No
586(1)
Obtain Information
586(1)
Application Bond Ratings
586(1)
Diversify
587(2)
Application Laws Limiting Diversification
589(1)
Insure
589(1)
Solved Problem 17.3
590(2)
Application Flight Insurance
592(1)
Application Natural Disasters
593(1)
Investing Under Uncertainty
593(9)
How Investing Depends on Attitudes Toward Risk
594(1)
Application Premium for a Riskier Investment
595(1)
Investing with Uncertainty and Discounting
596(1)
Investing with Altered Probabilities
597(1)
Application Loans, Defaults, and Usury Laws
598(1)
Summary
599(1)
Problems
600(1)
Math Problems
601(1)
Externalities, Commons, and Public Goods
602(35)
Externalities
603(1)
Application Michael Jordan's Positive Externalities
604(1)
The Inefficiency of Competition with Externalities
604(12)
Supply-and-Demand Analysis
605(2)
Application Waste Not
607(4)
Solved Problem 18.1
611(1)
Application Taxes on Fuels
611(1)
Cost-Benefit Analysis
612(2)
Application Emissions Standards for Ozone
614(2)
Market Structure and Externalities
616(3)
Monopoly and Externalities
616(1)
Monopoly Versus Competitive Welfare with Externalities
617(1)
Solved Problem 18.2
618(1)
Taxing Externalities in Noncompetitive Markets
618(1)
Allocating Property Rights to Reduce Externalities
619(5)
Coase Theorem
619(3)
Markets for Pollution
622(1)
Application Sulfur Dioxide Market
623(1)
Common Property
624(3)
Overuse of Common Property
624(1)
Application Extensive Overfishing
625(1)
Solving the Commons Problem
626(1)
Application For Whom the Bridge Tolls
626(1)
Public Goods
627(10)
Types of Goods
627(2)
Markets for Public Goods
629(2)
Reducing Free Riding
631(1)
Application Free Riding on Water
632(1)
Valuing Public Goods
633(2)
Summary
635(1)
Problems
635(1)
Math Problems
636(1)
Asymmetric Information
637(30)
Problems Due to Asymmetric Information
638(1)
Responses to Adverse Selection
639(2)
Controlling Opportunistic Behavior Through Universal Coverage
639(1)
Through Universal Coverage
639(1)
Equalizing Information
640(1)
Application Risky Hobbies
641(1)
How Ignorance About Quality Drives Out High-Quality Goods
641(9)
Lemons Market with Fixed Quality
642(2)
Solved Problem 19.1
644(1)
Lemons Market with Variable Quality
645(1)
Limiting Lemons
646(1)
Application Recyling Lemons
646(3)
Application College Guarantee
649(1)
Price Discrimination Due to False Beliefs About Quality
650(1)
Application Multiple Brand Names
651(1)
Market Power from Price Ignorance
651(4)
Tourist-Trap Model
652(2)
Solved Problem 19.2
654(1)
Advertising and Prices
654(1)
Application Advertising Lowers Prices
654(1)
Problems Arising from Ignorance When Hiring
655(12)
Information About Employment Risks
655(1)
Cheap Talk
656(2)
Education as a Signal
658(2)
Solved Problem 19.3
660(3)
Screening in Hiring
663(1)
Summary
664(1)
Problems
665(1)
Math Problems
666(1)
Contracts and Moral Hazards
667
Principal-Agent Problem
668(3)
A Model
669(1)
Types of Contracts
669(1)
Efficiency
670(1)
Production Efficiency
671(8)
Efficient Contract
671(1)
Full Information
672(5)
Solved Problem 20.1
677(1)
Asymmetric Information
677(1)
Application Contracts and Productivity in Agriculture
678(1)
Trade-Off between Efficiency in Production and in Risk Bearing
679(6)
Contracts and Efficiency
680(2)
Choosing the Best Contract
682(1)
Application Lawyers' Contingent Fees
683(1)
Solved Problem 20.2
684(1)
Payments Linked to Production or Profit
685(3)
Piece-Rate Hire Contracts
685(1)
Application Pleased to Be Paid by the Piece
686(1)
Contingent Contract Rewards Linked to a Firm's Success
687(1)
Application Increasing Use of Incentives
687(1)
Monitoring
688(9)
Bonding
689(1)
Solved Problem 20.3
690(1)
Deferred Payments
691(1)
Efficiency Wages
692(2)
After-the-Fact Monitoring
694(1)
Application Abusing Leased Cars
695(1)
Application Savings and Loans Moral Hazards
696(1)
Checks on Principals
697(3)
Application Performance Termination Contracts
698(2)
Contract Choice
700
Summary
701(1)
Problems
702(1)
Math Problems
703
Appendixes
Appendix 2A: Regressions
1(2)
Appendix 3A: Effects of a Specific Tax on Equilibrium
3(1)
Appendix 4A: Utility and Indifference Curves
4(2)
Appendix 4B: Maximizing Utility
6(2)
Appendix 5A: The Slutsky Equation
8(1)
Appendix 5B: Labor-Leisure Model
9(1)
Appendix 6A: Properties of Marginal and Average Product Curves
10(1)
Appendix 6B: Cobb-Douglas Production Function
11(1)
Appendix 7A: Minimum of the Average Cost Curve
11(1)
Appendix 7B: Norwegian Printing Firm's Short-Run Cost Curves
12(1)
Appendix 7C: Minimizing Cost
13(2)
Appendix 8A: The Elasticity of the Residual Demand
15(1)
Appendix 8B: Profit Maximization
15(1)
Appendix 9A: Demand Elasticities and Surplus
16(1)
Appendix 11A: Relationship Between a Linear Demand Curve and Its Marginal Revenue Curve
17(1)
Appendix 11B: Incidence of a Specific Tax on a Monopoly
17(1)
Appendix 12A: Perfect Price Discrimination
18(1)
Appendix 12B: Quantity Discrimination
19(1)
Appendix 12C: Multimarket Price Discrimination
19(1)
Appendix 12D: Two-Part Tariffs
20(1)
Appendix 13A: Cournot Equilibrium
20(3)
Appendix 13B: Stackelberg Equilibrium
23(1)
Appendix 13C: Betrand Equilibrium
24(1)
Appendix 14A: Mixed Strategies
25(1)
Appendix 14B: Profit-Maximizing Advertising and Production
25(1)
Appendix 15A: Factor Demands
26(1)
Appendix 15B: Monopsony
27(1)
Appendix 16A: Perpetuity
28(1)
Appendix 18A: Welfare Effects of Pollution in a Competitive Market
29(1)
Appendix 20A: Nonshirking Condition
30(1)
Answers to Selected Problems31(10)
Definitions41(6)
References47(6)
Sources for Applications53(7)
Credits60(1)
Index61

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