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Microeconomics, Sixth Edition

by Robert S. Pindyck - Massachusetts Institute of Technology; Daniel L. Rubinfeld - University of California, Berkeley

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Copyright, iv
About the Authors, vi
List of Examples, xix
Preface, xxiii
Part 1. Introduction: Markets and Prices, 1
Chapter 1. Preliminaries, 3
1.1. The Themes of Microeconomics, 4
1.2. What Is a Market?, 7
1.3. Real versus Nominal Prices, 12
1.4. Why Study Microeconomics?, 15
SUMMARY, 17
QUESTIONS FOR REVIEW, 18
EXERCISES, 18
Chapter 2. The Basics of Supply and Demand, 19
2.1. Supply and Demand, 20
2.2. The Market Mechanism, 23
2.3. Changes in Market Equilibrium, 24
2.4. Elasticities of Supply and Demand, 32
2.5. Short-Run versus Long-Run Elasticities, 38
*2.6. Understanding and Predicting the Effects of Changing Market Conditions, 47
2.7. Effects of Government Intervention—Price Controls, 54
SUMMARY, 57
QUESTIONS FOR REVIEW, 57
EXERCISES, 58
Part 2. Producers, Consumers, and Competitive Markets, 61
Chapter 3. Consumer Behavior, 63
Consumer Behavior, 64
3.1. Consumer Preferences, 65
3.2. Budget Constraints, 79
3.3. Consumer Choice, 83
3.4. Revealed Preference, 89
3.5. Marginal Utility and Consumer Choice, 92
*3.6. Cost-of-Living Indexes, 97
SUMMARY, 102
QUESTIONS FOR REVIEW, 103
EXERCISES, 104
Chapter 4. Individual and Market Demand, 107
4.1. Individual Demand, 108
4.2. Income and Substitution Effects, 116
4.3. Market Demand, 122
4.4. Consumer Surplus, 128
4.5. Network Externalities, 132
*4.6. Empirical Estimation of Demand, 136
SUMMARY, 140
QUESTIONS FOR REVIEW, 141
EXERCISES, 142
APPENDIX TO CHAPTER 4 Demand Theory—A Mathematical Treatment, 145
Utility Maximization, 145
The Method of Lagrange Multipliers, 146
The Equal Margin Principle, 147
Marginal Rate of Substitution, 147
Marginal Utility of Income, 148
An Example, 148
Duality in Consumer Theory, 149
Income and Substitution Effects, 150
EXERCISES, 152
Chapter 5. Uncertainty and Consumer Behavior, 153
5.1. Describing Risk, 154
5.2. Preferences Toward Risk, 159
5.3. Reducing Risk, 164
*5.4. The Demand for Risky Assets, 171
5.5. Behavioral Economics, 179
SUMMARY, 183
QUESTIONS FOR REVIEW, 183
EXERCISES, 184
Chapter 6. Production, 187
The Production Decisions of a Firm, 187
6.1. The Technology of Production, 188
6.2. Production with One Variable Input (Labor), 190
6.3. Production with Two Variable Inputs, 199
6.4. Returns to Scale, 207
SUMMARY, 210
QUESTIONS FOR REVIEW, 211
EXERCISES, 211
Chapter 7. The Cost of Production, 213
7.1. Measuring Cost: Which Costs Matter?, 213
7.2. Cost in the Short Run, 220
7.3. Cost in the Long Run, 225
7.4. Long-Run versus Short-Run Cost Curves, 234
7.5. Production with Two Outputs—Economies of Scope, 240
*7.6. Dynamic Changes in Costs—The Learning Curve, 243
*7.7. Estimating and Predicting Cost, 248
SUMMARY, 252
QUESTIONS FOR REVIEW, 253
EXERCISES, 254
APPENDIX TO CHAPTER 7 Production and Cost Theory—A Mathematical Treatment, 256
Cost Minimization, 256
Marginal Rate of Technical Substitution, 257
Duality in Production and Cost Theory, 258
The Cobb-Douglas Cost and Production Functions, 258
EXERCISES, 260
Chapter 8. Profit Maximization and Competitive Supply, 261
8.1. Perfectly Competitive Markets, 262
8.2. Profit Maximization, 264
8.3. Marginal Revenue, Marginal Cost, and Profit Maximization, 265
8.4. Choosing Output in the Short Run, 268
8.5. The Competitive Firm's Short-Run Supply Curve, 273
8.6. The Short-Run Market Supply Curve, 276
8.7. Choosing Output in the Long Run, 281
8.8. The Industry's Long-Run Supply Curve, 287
SUMMARY, 294
QUESTIONS FOR REVIEW, 295
EXERCISES, 296
Chapter 9. The Analysis of Competitive Markets, 299
9.1. Evaluating the Gains and Losses from Government Policies—Consumer and Producer Surplus, 299
9.2. The Efficiency of a Competitive Market, 306
9.3. Minimum Prices, 310
9.4. Price Supports and Production Quotas, 314
9.5. Import Quotas and Tariffs, 321
9.6. The Impact of a Tax or Subsidy, 326
SUMMARY, 332
QUESTIONS FOR REVIEW, 333
EXERCISES, 333
Part 3. Market Structure and Competitive Strategy, 336
Chapter 10. Market Power: Monopoly and Monopsony, 339
10.1. Monopoly, 340
10.2. Monopoly Power, 351
10.3. Sources of Monopoly Power, 357
10.4. The Social Costs of Monopoly Power, 359
10.5. Monopsony, 364
10.6. Monopsony Power, 368
10.7. Limiting Market Power: The Antitrust Laws, 372
SUMMARY, 377
QUESTIONS FOR REVIEW, 378
EXERCISES, 378
Chapter 11. Pricing with Market Power, 381
11.1. Capturing Consumer Surplus, 382
11.2. Price Discrimination, 383
11.3. Intertemporal Price Discrimination and Peak-Load Pricing, 393
11.4. The Two-Part Tariff, 397
*11.5. Bundling, 404
*11.6. Advertising, 415
SUMMARY, 419
QUESTIONS FOR REVIEW, 419
EXERCISES, 420
APPENDIX TO CHAPTER 11 Transfer Pricing in the Integrated Firm, 424
Transfer Pricing When There Is No Outside Market, 424
Transfer Pricing with a Competitive Outside Market, 427
Transfer Pricing with a Noncompetitive Outside Market, 428
A Numerical Example, 431
EXERCISES, 432
Chapter 12. Monopolistic Competition and Oligopoly, 435
12.1. Monopolistic Competition, 436
12.2. Oligopoly, 441
12.3. Price Competition, 449
12.4. Competition versus Collusion: The Prisoners' Dilemma, 453
12.5. Implications of the Prisoners' Dilemma for Oligopolistic Pricing, 457
12.6. Cartels, 462
SUMMARY, 468
QUESTIONS FOR REVIEW, 468
EXERCISES, 469
Chapter 13. Game Theory and Competitive Strategy, 473
13.1. Gaming and Strategic Decisions, 473
13.2. Dominant Strategies, 476
13.3. The Nash Equilibrium Revisited, 478
13.4. Repeated Games, 484
13.5. Sequential Games, 489
13.6. Threats, Commitments, and Credibility, 491
13.7. Entry Deterrence, 497
*13.8. Auctions, 503
SUMMARY, 510
QUESTIONS FOR REVIEW, 511
EXERCISES, 511
Chapter 14. Markets for Factor Inputs, 515
14.1. Competitive Factor Markets, 515
14.2. Equilibrium in a Competitive Factor Market, 528
14.3. Factor Markets with Monopsony Power, 533
14.4. Factor Markets with Monopoly Power, 537
SUMMARY, 542
QUESTIONS FOR REVIEW, 543
EXERCISES, 543
Chapter 15. Investment, Time, and Capital Markets, 545
15.1. Stocks versus Flows, 546
15.2. Present Discounted Value, 547
15.3. The Value of a Bond, 550
15.4. The Net Present Value Criterion for Capital Investment Decisions, 554
15.5. Adjustments for Risk, 557
15.6. Investment Decisions by Consumers, 562
15.7. Investments in Human Capital, 564
*15.8. Intertemporal Production Decisions—Depletable Resources, 567
15.9. How Are Interest Rates Determined?, 571
SUMMARY, 574
QUESTIONS FOR REVIEW, 574
EXERCISES, 575
Part 4. Information, Market Failure, and the Role of Government, 577
Chapter 16. General Equilibrium and Economic Efficiency, 579
16.1. General Equilibrium Analysis, 579
16.2. Efficiency in Exchange, 583
16.3. Equity and Efficiency, 591
16.4. Efficiency in Production, 594
16.5. The Gains from Free Trade, 601
16.6. An Overview—The Efficiency of Competitive Markets, 606
16.7. Why Markets Fail, 607
SUMMARY, 609
QUESTIONS FOR REVIEW, 610
EXERCISES, 610
Chapter 17. Markets with Asymmetric Information, 613
17.1. Quality Uncertainty and the Market for Lemons, 614
17.2. Market Signaling, 619
17.3. Moral Hazard, 624
17.4. The Principal–Agent Problem, 627
*17.5. Managerial Incentives in an Integrated Firm, 633
17.6. Asymmetric Information in Labor Markets: Efficiency Wage Theory, 635
SUMMARY, 638
QUESTIONS FOR REVIEW, 638
EXERCISES, 639
Chapter 18. Externalities and Public Goods, 641
18.1. Externalities, 641
18.2. Ways of Correcting Market Failure, 645
18.3. Externalities and Property Rights, 659
18.4. Common Property Resources, 662
18.5. Public Goods, 665
18.6. Private Preferences for Public Goods, 670
SUMMARY, 671
QUESTIONS FOR REVIEW, 672
EXERCISES, 672
Appendix: The Basics of Regression, 675
An Example, 675
Estimation, 676
Statistical Tests, 677
Goodness of Fit, 679
Economic Forecasting, 679
SUMMARY, 682
Glossary, 682
Answers to Selected Exercises, 693
Chapter 1, 693
Chapter 2, 693
Chapter 3, 693
Chapter 4, 694
Chapter 4—Appendix, 695
Chapter 5, 695
Chapter 6, 695
Chapter 7, 696
Chapter 7—Appendix, 696
Chapter 8, 696
Chapter 9, 697
Chapter 10, 698
Chapter 11, 698
Chapter 11—Appendix, 700
Chapter 12, 700
Chapter 13, 701
Chapter 14, 702
Chapter 15, 702
Chapter 16, 702
Chapter 17, 703
Chapter 18, 703
PHOTO CREDITS, 705

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