Microeconomics Principles and Applications, 2006 Update (with InfoTrac)

by Hall, Robert E.; Lieberman, Marc

• ISBN13: 9780324374254
• ISBN10: 0324374259
• Edition: 3rd
• Format: Paperback
• Copyright: 2005-10-27
• Publisher: South-Western College Pub

Summary

Policy and real applications are very important to the Principles of Microeconomics course and knowing this, Hall and Lieberman have made their comprehensive, cutting edge text as current as today's headlines. MICROECONOMICS: PRINCIPLES AND APPLICATIONS, 3e, 2006 Update gives students a real-world, up-to-the-minute overview that presents economics as a unified discipline. Taking a no-nonsense approach to economic theory and application, the Update is very accessible, equipping readers with a solid foundation in economics that they can build upon wherever their career paths may lead. The authors' modern approach to theory is captivating and appeals to a broad range of teaching styles and philosophies. This proven author team focuses on core theoretical ideas and presents a systematic application of theoretical tools to real-world domestic and global issues, teaching students how to use analytical processes to develop and sharpen their own economic analysis skills. In addition, the book's innovative Aplia homework management solution provides the most integrated text and homework management system available.

Table of Contents

PART I: PRELIMINARIES
What Is Economics?	1	(20)
Economics, Scarcity, and Choice	1	(4)
Scarcity and Individual Choice	2	(1)
Scarcity and Social Choice	3	(1)
Scarcity and Economics	4	(1)
The World of Economics	5	(1)
Microeconomics and Macroeconomics	5	(1)
Positive and Normative Economics	5	(1)
Why Study Economics?	6	(2)
To Understand the World Better	7	(1)
To Gain Self-Confidence	7	(1)
To Achieve Social Change	7	(1)
To Help Prepare for Other Careers	7	(1)
To Become an Economist	8	(1)
The Methods of Economics	8	(3)
The Art of Building Economic Models	9	(1)
Assumptions and Conclusions	9	(1)
The Three-Step Process	10	(1)
Math, Jargon, and Other Concerns ...	10	(1)
How to Study Economics	11	(3)
Appendix: Graphs and Other Useful Tools	14	(7)
Tables and Graphs	14	(2)
Linear Equations	16	(2)
How Straight Lines and Curves Shift	18	(2)
Solving Equations	20	(1)
Scarcity, Choice, and Economic Systems	21	(31)
The Concept of Opportunity Cost	21	(13)
Opportunity Cost for Individuals	22	(4)
Opportunity Cost and Society	26	(1)
Production Possibilities Frontiers	26	(3)
The Search for a Free Lunch	29	(5)
Economic Systems	34	(12)
Specialization and Exchange	34	(5)
Resource Allocation	39	(4)
Resource Ownership	43	(1)
Types of Economic Systems	44	(2)
Using the Theory: Are We Saving Lives Efficiently?	46	(6)
Supply and Demand	52	(37)
Markets	53	(4)
How Broadly Should We Define the Market?	53	(1)
Buyers and Sellers	54	(1)
Competition in Markets	55	(1)
Using Supply and Demand	56	(1)
Demand	57	(8)
The Law of Demand	58	(1)
The Demand Schedule and the Demand Curve	59	(1)
Shifts vs. Movements Along the Demand Curve	59	(2)
Factors That Shift the Demand Curve	61	(4)
Supply	65	(8)
The Law of Supply	66	(1)
The Supply Schedule and the Supply Curve	67	(1)
Shifts vs. Movements Along the Supply Curve	68	(1)
Factors That Shift the Supply Curve	69	(4)
Putting Supply and Demand Together	73	(3)
What Happens When Things Change?	76	(4)
Income Rises, Causing an Increase in Demand	76	(1)
An Ice Storm Causes a Decrease in Supply	77	(1)
Handheld PCs in 2003: Both Curves Shift	78	(2)
The Three-Step Process	80	(2)
Using the Theory: College Administrators Make a Costly Mistake	82	(6)
Appendix: Solving for Equilibrium Algebraically	88	(1)
Working with Supply and Demand	89	(43)
Government Intervention in Markets	89	(5)
Price Ceilings	90	(2)
Price Floors	92	(2)
Price Elasticity of Demand	94	(16)
The Problem with Rate of Change	95	(1)
The Elasticity Approach	95	(1)
Calculating Price Elasticity of Demand	96	(2)
Elasticity and Straight-Line Demand Curves	98	(1)
Categorizing Goods by Elasticity	99	(2)
Elasticity and Total Revenue	101	(2)
Determinants of Elasticity	103	(4)
Using Price Elasticity of Demand	107	(3)
Other Elasticities	110	(7)
Income Elasticity of Demand	110	(3)
Cross-Price Elasticity of Demand	113	(2)
Price Elasticity of Supply	115	(2)
Taxes and Market Equilibrium	117	(6)
Example: The Tax on Airline Travel	117	(3)
Tax Incidence and Demand Elasticity	120	(1)
Tax Incidence and Supply Elasticity	121	(2)
Using the Theory: The Story of Two Markets	123	(9)
The Market for Food	123	(3)
Health Insurance and the Market for Health Care	126	(6)
PART II: MICROECONOMIC DECISION MAKERS
Consumer Choice	132	(40)
The Budget Constraint	133	(4)
Changes in the Budget Line	135	(2)
Preferences	137	(2)
Rationality	137	(1)
More Is Better	137	(2)
Consumer Decisions: The Marginal Utility Approach	139	(10)
Utility and Marginal Utility	139	(2)
Combining the Budget Constraint and Preferences	141	(3)
What Happens When Things Change?	144	(5)
The Individual's Demand Curve	149	(1)
Income and Substitution Effects	149	(3)
The Substitution Effect	149	(1)
The Income Effect	150	(1)
Combining Substitution and Income Effects	150	(2)
Consumers in Markets	152	(1)
Consumer Theory in Perspective	153	(3)
Extensions of the Model	154	(1)
Challenges to the Model	154	(2)
Using the Theory: Improving Education	156	(8)
Appendix: The Indifference Curve Approach	164	(8)
An Indifference Curve	164	(2)
The Indifference Map	166	(1)
Consumer Decision Making	167	(1)
What Happens When Things Change?	168	(4)
Production and Cost	172	(38)
The Nature of the Firm	173	(5)
Types of Business Firms	174	(2)
Why Employees?	176	(1)
The Limits to the Firm	177	(1)
Thinking About Production	178	(1)
The Short Run and the Long Run	178	(1)
Production in the Short Run	179	(3)
Marginal Returns to Labor	181	(1)
Thinking About Costs	182	(3)
The Irrelevance of Sunk Costs	183	(1)
Explicit Versus Implicit Costs	184	(1)
Costs in the Short Run	185	(7)
Measuring Short-Run Costs	185	(4)
Explaining the Shape of the Marginal Cost Curve	189	(1)
The Relationship Between Average and Marginal Costs	190	(2)
Production and Cost in the Long Run	192	(9)
The Relationship Between Long-Run and Short-Run Costs	194	(3)
Explaining the Shape of the LRATC Curve	197	(4)
Using the Theory: Long-Run Costs, Market Structure, and Mergers	201	(9)
LRATC and the Size of Firms	201	(3)
The Urge to Merge	204	(6)
How Firms Make Decisions: Profit Maximization	210	(24)
The Goal of Profit Maximization	211	(1)
Understanding Profit	212	(2)
Two Definitions of Profit	212	(2)
Why Are There Profits?	214	(1)
The Firm's Constraints	214	(3)
The Demand Constraint	215	(1)
The Cost Constraint	216	(1)
The Profit-Maximizing Output Level	217	(8)
The Total Revenue and Total Cost Approach	217	(1)
The Marginal Revenue and Marginal Cost Approach	218	(2)
Profit Maximization Using Graphs	220	(3)
What About Average Costs?	223	(2)
The Marginal Approach to Profit	225	(1)
Dealing with Losses	225	(3)
The Short Run and the Shutdown Rule	225	(3)
The Long Run: The Exit Decision	228	(1)
Using the Theory: Getting It Wrong and Getting It Right	228	(6)
Getting It Wrong: The Failure of Franklin National Bank	228	(2)
Getting It Right: The Success of Continental Airlines	230	(4)
PART III: PRODUCT MARKETS
Perfect Competition	234	(35)
What Is Perfect Competition?	235	(3)
The Three Requirements of Perfect Competition	236	(1)
Is Perfect Competition Realistic?	237	(1)
The Perfectly Competitive Firm	238	(9)
Goals and Constraints of the Competitive Firm	239	(1)
Cost and Revenue Data for a Competitive Firm	240	(2)
Finding the Profit-Maximizing Output Level	242	(1)
Measuring Total Profit	243	(2)
The Firm's Short-Run Supply Curve	245	(2)
Competitive Markets in the Short Run	247	(4)
The (Short-Run) Market Supply Curve	247	(1)
Short-Run Equilibrium	248	(3)
Competitive Markets in the Long Run	251	(6)
Profit and Loss and the Long Run	251	(1)
Long-Run Equilibrium	252	(3)
The Notion of Zero Profit in Perfect Competition	255	(1)
Perfect Competition and Plant Size	255	(1)
A Summary of the Competitive Firm in the Long Run	256	(1)
What Happens When Things Change?	257	(5)
A Change in Demand	257	(4)
Market Signals and the Economy	261	(1)
Using the Theory: Changes in Technology	262	(7)
Monopoly	269	(36)
What Is a Monopoly?	270	(1)
The Sources of Monopoly	271	(5)
Economies of Scale	271	(2)
Legal Barriers	273	(2)
Network Externalities	275	(1)
Monopoly Goals and Constraints	276	(1)
Monopoly Price or Output Decision	277	(5)
Profit and Loss	280	(2)
Equilibrium in Monopoly Markets	282	(5)
Short-Run Equilibrium	282	(1)
Long-Run Equilibrium	282	(1)
Comparing Monopoly to Perfect Competition	283	(3)
Why Monopolies Often Earn Zero Economic Profit	286	(1)
What Happens When Things Change?	287	(4)
An Increase in Demand	288	(1)
A Cost-Saving Technological Advance	288	(3)
Price Discrimination	291	(7)
Requirements for Price Discrimination	291	(2)
Effects of Price Discrimination	293	(5)
The Decline of Monopoly?	298	(1)
Using the Theory: Price Discrimination at Colleges and Universities	299	(6)
Monopolistic Competition and Oligopoly	305	(35)
The Concept of Imperfect Competition	306	(1)
Monopolistic Competition	306	(8)
Monopolistic Competition in the Short Run	309	(1)
Monopolistic Competition in the Long Run	310	(1)
Excess Capacity Under Monopolistic Competition	311	(2)
Nonprice Competition	313	(1)
Oligopoly	314	(15)
Oligopoly in the Real World	314	(2)
Why Oligopolies Exist	316	(1)
Oligopoly Versus Other Market Structures	317	(1)
The Game Theory Approach	318	(4)
Cooperative Behavior in Oligopoly	322	(5)
The Future of Oligopoly	327	(2)
Using the Theory: Advertising in Monopolistic Competition and Oligopoly	329	(5)
Advertising and Market Equilibrium Under Monopolistic Competition	329	(3)
Advertising and Collusion in Oligopoly	332	(2)
The Four Market Structures: A Postscript	334	(6)
PART IV: LABOR, CAPITAL, AND FINANCIAL MARKETS
The Labor Market	340	(44)
Factor Markets in General	341	(1)
Labor Markets in Particular	342	(3)
Defining a Labor Market	343	(1)
Competitive Labor Markets	344	(1)
Firms in Labor Markets	345	(1)
Demand for Labor by a Single Firm	345	(9)
Labor as a Derived Demand	345	(1)
Resource Demand: A General Rule	346	(1)
The Firm's Employment Decision When Only Labor Is Variable	347	(5)
The Firm's Employment Decision When Several Inputs Are Variable	352	(2)
The Market Demand for Labor	354	(5)
Shifts in the Market Labor Demand Curve	355	(4)
Labor Supply	359	(9)
Individual Labor Supply	359	(2)
Market Labor Supply	361	(1)
Shifts in the Market Labor Supply Curve	361	(4)
Short-run Versus Long-run Labor Supply	365	(3)
Labor Market Equilibrium	368	(1)
What Happens When Things Change?	369	(5)
A Change in Labor Demand	369	(2)
A Change in Labor Supply	371	(1)
Labor Shortages and Surpluses	372	(2)
Using the Theory: Understanding the Market for College-Educated Labor	374	(6)
Appendix: Monopsony	380	(4)
Spotless Car Wash as a Monopsony	380	(2)
The Profit-Maximizing Employment Level	382	(1)
Comparative Monopsony to Perfectly Competitive Labor Markets	382	(2)
Economic Inequality	384	(44)
Why Do Wages Differ?	385	(16)
An Imaginary World	387	(1)
Compensating Differentials	388	(3)
Differences in Ability	391	(3)
Barriers to Entry	394	(7)
Discrimination and Wages	401	(6)
Employer Prejudice	402	(1)
Employee and Customer Prejudice	403	(1)
Statistical Discrimination	403	(1)
Dealing with Discrimination	404	(1)
Discrimination and Wage Differentials	404	(3)
Income Inequality	407	(8)
The Poverty Rate	407	(1)
The Lorenz Curve	408	(2)
Growing Income in Equality	410	(2)
Problems with Inequality Measures	412	(3)
Economic Inequality and Fairness	415	(2)
Using the Theory: CEOs in the 1990s and 2000s	417	(8)
Appendix: The Minimum Wage and Union Bargaining Under Monopsony	425	(3)
Monopsony and the Minimum Wage	425	(1)
Monopsony and Union Bargining	426	(2)
Capital and Financial Markets	428	(36)
Physical Capital and the Firm's Investment Decision	429	(9)
A First, Simple Approach	429	(2)
The Value of Future Dollars	431	(4)
The Firm's Demand for Capital	435	(1)
What Happens When Things Change: The Investment Curve	436	(2)
Investment in Human Capital	438	(3)
General Versus Specific Human Capital	439	(1)
The Decision to Invest in General Human Capital	440	(1)
Financial Markets	441	(15)
The Bond Market	442	(4)
The Stock Market	446	(7)
The Economic Role of Financial Markets	453	(3)
Using the Theory: Can Anyone Predict Stock Prices?	456	(8)
Predicting Stock Prices: Fundamental Analysis	456	(1)
Predicting Stock Prices: Technical Analysis	456	(1)
The Economist's View: Efficient Markets Theory	457	(7)
PART V: EFFICIENCY, GOVERNMENT, AND THE GLOBAL ECONOMY
Economic Efficiency and the Role of Government	464	(49)
The Meaning of Efficiency	465	(1)
Pareto Improvements	466	(2)
Side Payments and Pareto Improvements	467	(1)
Markets and Economic Efficiency	468	(5)
Reinterpreting the Demand Curve	468	(1)
Reinterpreting the Supply Curve	469	(1)
The Efficient Quantity of a Good	470	(2)
Perfect Competition and Efficiency	472	(1)
Measuring Market Gains	473	(8)
Consumer Surplus	473	(2)
Producer Surplus	475	(2)
Total Net Benefits in a Market	477	(1)
Perfect Competition and Efficiency: The Total Benefits View	477	(1)
A Price Ceiling	478	(2)
A Price Floor	480	(1)
The Efficiency Role of Government	481	(1)
The Institutional Infrastructure of a Market Economy	482	(6)
The Legal System	483	(3)
Regulation	486	(1)
Law and Regulation in Perspective	487	(1)
Market Failures	488	(1)
Monopoly and Monopoly Power	488	(5)
Antitrust Law as a Remedy	490	(1)
The Special Case of Natural Monopoly	490	(2)
Regulation of Natural Monopoly	492	(1)
Externalities	493	(8)
The Private Solution to a Negative Externality	494	(2)
Market Externalities and Government Solutions	496	(5)
Public Goods	501	(5)
Mixed Goods	504	(2)
Efficiency and Government in Perspective	506	(2)
Using the Theory: Traffic as a Market Failure	508	(5)
Comparative Advantage and the Gains from International Trade	513	(32)
The Logic of Free Trade	514	(1)
The Theory of Comparative Advantage	515	(5)
Opportunity Cost and Comparative Advantage	516	(1)
Specialization and World Production	517	(1)
How Each Nation Gains from International Trade	518	(1)
The Terms of Trade	519	(1)
How Potential Gains Turn into Actual Gains	520	(5)
Some Important Provisos	523	(2)
The Sources of Comparative Advantage	525	(2)
Why Some People Object to Free Trade	527	(5)
The Impact of Trade in the Exporting Country	528	(1)
The Impact of Trade in the Importing Country	529	(1)
Attitudes and Influence on Trade Policy	529	(3)
How Free Trade Is Restricted	532	(2)
Tariffs	532	(1)
Quotas	533	(1)
Protectionism	534	(5)
Myths About International Trade	534	(2)
Sophisticated Arguments for Protection	536	(1)
Protectionism in the United States	537	(2)
Using the Theory: The U.S. Sugar Quota	539	(6)
USING ALL THE THEORY: THE MICROECONOMICS OF DOMESTIC SECURITY	545
The Opportunity Cost of Domestic Security	547	(6)
The Ongoing Cost of Domestic Security: The Narrow (Optimistic) Approach	549	(2)
The Ongoing Cost of Domestic Security: The Broad (Pessimistic) Approach	551	(2)
Using the Three-Step Process	553	(1)
Changes in Product Markets	554	(7)
Changes in Demand	554	(3)
Changes in Supply	557	(2)
Air Travel: A Special Case	559	(2)
Changes in Labor Markets	561	(3)
An Example: Strategic Language Speakers	561	(3)
Financial and Capital Markets	564	(5)
An Example: The Defense Industry and the Stock Market	565	(4)
Public Goods and Government Involvement	569	(2)
International Trade and Domestic Security	571
Glossary	1	(1)
Index	1