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Copyright, ii
About the Authors, v
Global Coverage, xv
Preface, xvii
I. Introduction to Economics, 1
1. The Scope and Method of Economics, 1
Why Study Economics?, 2
The Scope of Economics, 7
The Method of Economics, 10
An Invitation, 16
Summary, 16
Review Terms and Concepts, 16
Problem Set, 17
Appendix: How to Read and Understand Graphs, 17
Time Series Graphs, 17
Graphing Two Variables on a Cartesian Coordinate System, 18
Plotting Income and Consumption Data for Households, 19
Slope, 20
Some Precautions, 21
Summary, 22
Review Terms and Concepts, 22
Problem Set, 23
2. The Economic Problem: Scarcity and Choice, 25
Scarcity, Choice, and Opportunity Cost, 26
Economic Systems, 39
Looking Ahead, 42
Summary, 42
Review Terms and Concepts, 43
Problem Set, 43
3. Demand, Supply, and Market Equilibrium, 47
Firms and Households: The Basic Decision-Making Units, 48
Input Markets and Output Markets: The Circular Flow, 48
Demand in Product/Output Markets, 50
Supply in Product/Output Markets, 59
Market Equilibrium, 64
Demand and Supply in Product Markets: A Review, 70
Looking Ahead: Markets and the Allocation of Resources, 70
Summary, 72
Review Terms and Concepts, 73
Problem Set, 73
4. Demand and Supply Applications, 77
The Price System: Rationing and Allocating Resources, 77
Supply and Demand Analysis: An Oil Import Fee, 85
Supply and Demand and Market Efficiency, 86
Looking Ahead, 91
Summary, 91
Review Terms and Concepts, 92
Problem Set, 92
5. Elasticity, 95
Price Elasticity of Demand, 96
Calculating Elasticities, 100
The Determinants of Demand Elasticity, 105
Other Important Elasticities, 107
Looking Ahead, 108
Summary, 108
Review Terms and Concepts, 109
Problem Set, 109
Appendix: Point Elasticity (Optional), 110
II. Foundations of Microeconomics: Consumers and Firms, 111
6. Household Behavior and Consumer Choice, 113
Assumptions, 114
Household Choice in Output Markets, 116
The Basis of Choice: Utility, 122
Income and Substitution Effects, 126
Consumer Surplus, 128
Household Choice in Input Markets, 130
A Review: Households in Output and Input Markets, 134
Summary, 134
Review Terms and Concepts, 135
Problem Set, 135
Appendix: Indifference Curves, 137
Assumptions, 137
Deriving Indifference Curves, 137
Properties of Indifference Curves, 138
Consumer Choice, 139
Deriving a Demand Curve from Indifference Curves and Budget Constraints, 139
Summary, 140
Review Terms and Concepts, 140
Problem Set, 141
7. The Production Process: The Behavior of Profit-Maximizing Firms, 143
Production Is Not Limited to Firms, 143
Perfect Competition, 144
The Behavior of Profit-Maximizing Firms, 146
The Production Process, 151
Choice of Technology, 155
Looking Ahead: Cost and Supply, 157
Summary, 157
Review Terms and Concepts, 158
Problem Set, 158
Appendix: Isoquants and Isocosts, 159
New Look at Technology: Isoquants, 159
Factor Prices and Input Combinations: Isocosts, 160
Finding the Least-Cost Technology with Isoquants and Isocosts, 161
The Cost-Minimizing Equilibrium Condition, 162
Summary, 163
Review Terms and Concepts, 163
Problem Set, 163
8. Short-Run Costs and Output Decisions, 165
Costs in the Short Run, 165
Output Decisions: Revenues, Costs, and Profit Maximization, 176
Looking Ahead, 182
Summary, 183
Review Terms and Concepts, 183
Problem Set, 184
9. Long-Run Costs and Output Decisions, 187
Short-Run Conditions and Long-Run Directions, 188
Long-Run Costs: Economies and Diseconomies of Scale, 194
Long-Run Adjustments to Short-Run Conditions, 200
Output Markets: A Final Word, 204
Summary, 204
Review Terms and Concepts, 205
Problem Set, 205
Appendix: External Economies and Diseconomies and the Long-Run Industry Supply Curve, 207
The Long-Run Industry Supply Curve, 207
Summary, 209
Review Terms and Concepts, 209
Problem Set, 210
10. Input Demand: The Labor and Land Markets, 211
Input Markets: Basic Concepts, 211
Labor Markets, 215
Land Markets, 221
The Firm’s Profit-Maximization Condition in Input Markets, 223
Input Demand Curves, 224
Resource Allocation and the Mix of Output in Competitive Markets, 225
Looking Ahead, 226
Summary, 226
Review Terms and Concepts, 227
Problem Set, 227
11. Input Demand: The Capital Market and the Investment Decision, 231
Capital, Investment, and Depreciation, 231
The Capital Market, 234
The Demand for New Capital and the Investment Decision, 240
A Final Word on Capital, 243
Summary, 244
Review Terms and Concepts, 245
Problem Set, 245
Appendix: Calculating Present Value, 246
Present Value, 246
Lower Interest Rates, Higher Present Values, 249
Summary, 249
Review Terms and Concepts, 249
Problem Set, 250
12. General Equilibrium and the Efficiency of Perfect Competition, 251
General Equilibrium Analysis, 253
Allocative Efficiency and Competitive Equilibrium, 258
The Sources of Market Failure, 263
Evaluating the Market Mechanism, 266
Summary, 267
Review Terms and Concepts, 268
Problem Set, 268
III. Market Imperfections and the Role of Government, 270
13. Monopoly and Antitrust Policy, 271
Imperfect Competition and Market Power: Core Concepts, 271
Price and Output Decisions in Pure Monopoly Markets, 275
The Social Costs of Monopoly, 284
Price Discrimination, 287
Remedies for Monopoly: Antitrust Policy, 288
The Enforcement of Antitrust Law, 292
A Natural Monopoly, 294
Imperfect Markets: A Review and A Look Ahead, 296
Summary, 297
Review Terms and Concepts, 298
Problem Set, 298
14. Monopolistic Competition and Oligopoly, 301
Monopolistic Competition, 302
Oligopoly, 310
The Role of Government, 321
Summary, 324
Review Terms and Concepts, 325
Problem Set, 325
15. Externalities, Public Goods, Imperfect Information, and Social Choice, 327
Externalities and Environmental Economics, 328
Public (Social) Goods, 338
Imperfect Information, 344
Social Choice, 347
Government and the Market, 350
Summary, 351
Review Terms and Concepts, 352
Problem Set, 352
16. Income Distribution and Poverty, 355
The Utility Possibilities Frontier, 355
The Sources of Household Income, 357
The Distribution of Income, 360
The Redistribution Debate, 366
Redistribution Programs and Policies, 369
Government or the Market? A Review, 373
Summary, 374
Review Terms and Concepts, 375
Problem Set, 375
17. Public Finance: The Economics of Taxation, 377
The Economics of Taxation, 377
Tax Incidence: Who Pays?, 385
Excess Burdens and the Principle of Neutrality, 391
Measuring Excess Burdens, 395
Summary, 396
Review Terms and Concepts, 397
Problem Set, 398
IV. The World Economy, 399
18. International Trade, Comparative Advantage, and Protectionism, 399
Trade Surpluses and Deficits, 400
The Economic Basis for Trade: Comparative Advantage, 400
The Sources of Comparative Advantage, 408
Trade Barriers: Tariffs, Export Subsidies, and Quotas, 409
Free Trade or Protection?, 413
An Economic Consensus, 417
Summary, 417
Review Terms and Concepts, 419
Problem Set, 419
19. Globalization, 421
The Global Circular Flow, 421
A Brief History of Economic Globalization, 423
The Benefits and Costs of Globalization, 424
Public Policy and Globalization, 432
Globalization, Capitalism, and Democracy, 434
A Final Word, 435
Summary, 435
Review Terms and Concepts, 436
Problem Set, 436
20. Economic Growth in Developing and Transitional Economies, 437
Life in the Developing Nations: Population and Poverty, 438
Economic Development: Sources and Strategies, 439
Issues in Economic Development, 445
Economies in Transition, 449
The End of the Soviet Union, 452
The Transition to a Market Economy, 452
Summary, 457
Review Terms and Concepts, 458
Problem Set, 458
Glossary, 458
Solutions to Even-Numbered Problems, S-1
Chapter 1, S-1
Chapter 1 Appendix, S-1
Chapter 2, S-1
Chapter 3, S-3
Chapter 4, S-5
Chapter 5, S-6
Chapter 6, S-7
Chapter 6 Appendix, S-9
Chapter 7, S-10
Chapter 7 Appendix, S-11
Chapter 8, S-11
Chapter 9, S-13
Chapter 9 Appendix, S-14
Chapter 10, S-14
Chapter 11, S-15
Chapter 11 Appendix, S-18
Chapter 12, S-19
Chapter 13, S-20
Chapter 14, S-21
Chapter 15, S-22
Chapter 16, S-23
Chapter 17, S-24
Chapter 18, S-24
Chapter 19, S-25
Chapter 20, S-25
Index, I-1-1

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