Microeconomics: Theory & Applications, 13th Edition teaches students how fundamental tools of analysis are used explain and predict market phenomena. Designed for both economics and business students, this thorough yet accessible textbook describes basic microeconomic principles using various applications to clarify complicated economic concepts and provides an essential foundation of microeconomics knowledge. Clear and engaging chapters discuss cutting-edge models and explore numerous real-world examples of microeconomic theory in action.
Comprehensive and topically relevant, this textbook offers greater coverage of input market analysis and applications than other texts on the subject. In-depth applications, such as consumer choice theory and noncompetitive market models, complement over 100 shorter applications that reinforce the graphical and logical techniques developed in the theory chapters. The authors’ innovative use of relatable applications promotes student engagement and comprehension, and facilitates a case-based, active-learning approach. Discussion of globalization, ethics, sustainability, and other important contemporary themes helps students understand how economics impacts their lives in various, often unexpected ways.
Table of Contents
Preface iii
Acknowledgments viii
Chapter 1: An Introduction to Microeconomics 1
1.1 The Scope of Microeconomic Theory 2
1.2 The Nature and Role of Theory 2
1.3 Positive versus Normative Analysis 3
1.4 Market Analysis and Real versus Nominal Prices 4
1.5 Basic Assumptions about Market Participants 5
1.6 Opportunity Cost 6
1.7 Production Possibility Frontier 9
Chapter 2: Supply and Demand 13
2.1 Demand and Supply Curves 14
2.2 Determination of Equilibrium Price and Quantity 21
2.3 Adjustment to Changes in Demand or Supply 22
2.4 Government Intervention in Markets: Price Controls 25
2.5 Elasticities 30
Chapter 3: The Theory of Consumer Choice 42
3.1 Consumer Preferences 43
3.2 The Budget Constraint 52
3.3 The Consumer’s Choice 56
3.4 Changes in Income and Consumption Choices 61
3.5 Are People Selfish? 67
3.6 The Utility Approach to Consumer Choice 69
Chapter 4: Individual and Market Demand 75
4.1 Price Changes and Consumption Choices 76
4.2 Income and Substitution Effects of a Price Change 80
4.3 Income and Substitution Effects: Inferior Goods 85
4.4 From Individual to Market Demand 88
4.5 Consumer Surplus 89
4.6 Price Elasticity and the Price-Consumption Curve 95
4.7 Network Effects 97
4.8 The Basics of Demand Curve Estimation 100
Chapter 5: Using Consumer Choice Theory 107
5.1 Excise Subsidies, Health Care, and Consumer Welfare 108
5.2 Subsidizing Health Insurance: ObamaCare 112
5.3 Public Schools and the Voucher Proposal 116
5.4 Paying for Garbage 121
5.5 The Consumer’s Choice to Save or Borrow 124
5.6 Investor Choice 130
Chapter 6: Exchange, Efficiency, and Prices 140
6.1 Two-Person Exchange 141
6.2 Efficiency in the Distribution of Goods 147
6.3 Competitive Equilibrium and Efficient Distribution 151
6.4 Price and Nonprice Rationing and Efficiency 154
Chapter 7: Production 160
7.1 Relating Output to Inputs 161
7.2 Production When Only One Input is Variable: The Short Run 161
7.3 Production When All Inputs are Variable: The Long Run 167
7.4 Returns to Scale 173
7.5 Functional Forms and Empirical Estimation of Production Functions 176
Chapter 8: The Cost of Production 182
8.1 The Nature of Cost 183
8.2 Short-Run Cost of Production 183
8.3 Short-Run Cost Curves 186
8.4 Long-Run Cost of Production 192
8.5 Input Price Changes and Cost Curves 197
8.6 Long-Run Cost Curves 199
8.7 Learning by Doing 202
8.8 Importance of Cost Curves to Market Structure 204
8.9 Using Cost Curves: Controlling Pollution 206
8.10 Economies of Scope 208
8.11 Estimating Cost Functions 209
Chapter 9: Profit Maximization in Perfectly Competitive Markets 213
9.1 The Assumptions of Perfect Competition .214
9.2 Profit Maximization 215
9.3 The Demand Curve for a Competitive Firm 217
9.4 Short-Run Profit Maximization 218
9.5 The Perfectly Competitive Firm’s Short-Run Supply Curve 223
9.6 The Short-Run Industry Supply Curve 226
9.7 Long-Run Competitive Equilibrium 227
9.8 The Long-Run Industry Supply Curve 231
9.9 When Does the Competitive Model Apply? 239
Chapter 10: Using the Competitive Model 244
10.1 The Evaluation of Gains and Losses 244
10.2 Excise Taxation 250
10.3 Airline Regulation and Deregulation 258
10.4 City Taxicab Markets 263
10.5 Consumer and Producer Surplus, and the Net Gains from Trade 267
10.6 Government Intervention in Markets: Quantity Controls 271
Chapter 11: Monopoly 279
11.1 The Monopolist’s Demand and Marginal Revenue Curves 280
11.2 Profit-Maximizing Output of a Monopoly 282
11.3 Further Implications of Monopoly Analysis 287
11.4 The Measurement and Sources of Monopoly Power 290
11.5 The Efficiency Effects of Monopoly 297
11.6 Public Policy toward Monopoly 300
Chapter 12: Product Pricing with Monopoly Power 308
12.1 Price Discrimination 309
12.2 Three Necessary Conditions for Price Discrimination 313
12.3 Price and Output Determination with Price Discrimination 315
12.4 Intertemporal Price Discrimination and Peak-Load Pricing 318
12.5 Two-Part Tariffs 324
Chapter 13: Monopolistic Competition and Oligopoly 332
13.1 Price and Output under Monopolistic Competition 333
13.2 Oligopoly and the Cournot Model 338
13.3 Other Oligopoly Models 342
13.4 Cartels and Collusion 347
Chapter 14: Game Theory and the
Economics of Information 360
14.1 Game Theory 361
14.2 The Prisoner’s Dilemma Game 364
14.3 Repeated Games 369
14.4 Asymmetric Information 373
14.5 Adverse Selection and Moral Hazard 377
14.6 Limited Price Information 381
14.7 Advertising 383
Chapter 15: Using Noncompetitive Market Models 389
15.1 The Size of the Deadweight Loss of Monopoly 389
15.2 Do Monopolies Suppress Inventions? 393
15.3 Natural Monopoly 396
15.4 More on Game Theory: Iterated Dominance and Commitment 400
Chapter 16: Employment and Pricing of Inputs 406
16.1 The Input Demand Curve of a Competitive Firm 407
16.2 Industry and Market Demand Curves for an Input 412
16.3 The Supply of Inputs 415
16.4 Industry Determination of Price and Employment of Inputs 417
16.5 Input Price Determination in a Multi-Industry Market 420
16.6 Input Demand and Employment by an Output Market Monopoly 422
16.7 Monopsony in Input Markets 424
Chapter 17: Wages, Rent, Interest, and Profit 429
17.1 The Income-Leisure Choice of the Worker 429
17.2 The Supply of Hours of Work 432
17.3 The General Level of Wage Rates 437
17.4 Why Wages Differ 439
17.5 Economic Rent 443
17.6 Monopoly Power in Input Markets: The Case of Unions 445
17.7 Borrowing, Lending, and the Interest Rate 448
17.8 Investment and the Marginal Productivity of Capital 449
17.9 Saving, Investment, and the Interest Rate 452
17.10 Why Interest Rates Differ 454
Chapter 18: Using Input Market Analysis 457
18.1 The Minimum Wage 458
18.2 Who Really Pays for Social Security? 464
18.3 The Hidden Cost of Social Security 467
18.4 The NCAA Cartel 470
18.5 Discrimination in Employment 476
18.6 The Benefits and Costs of Immigration 480
Chapter 19: General Equilibrium Analysis and Economic Efficiency 486
19.1 Partial and General Equilibrium Analysis Compared 487
19.2 Economic Efficiency 490
19.3 Conditions for Economic Efficiency 492
19.4 Efficiency in Production 492
19.5 The Production Possibility Frontier and Efficiency in Output 496
19.6 Competitive Markets and Economic Efficiency 501
19.7 The Causes of Economic Inefficiency 504
Chapter 20: Public Goods and Externalities 509
20.1 What are Public Goods? 510
20.2 Efficiency in the Provision of a Public Good 512
20.3 Externalities 516
20.4 Externalities and Property Rights 522
20.5 Controlling Pollution, Revisited 524
The Market for Los Angeles Smog 527
Answers to Selected Problems 532
Glossary G-1
Index 1
