Principles of Microeconomics

by Stiglitz, Joseph E.

• ISBN13: 9780393969290
• ISBN10: 0393969290
• Edition: 2nd
• Format: Paperback
• Copyright: 1997-02-01
• Publisher: W W Norton & Co

Summary

These day s economics is big news. If we pick up a newspaper or turn on the television for the prime-time news report, we are likely to be bombarded with statistics on unemployment rates, inflation rates, exports, and imports. How well are we doing in competition with other countries, such as Japan? Everyone seems to want to know. Political fortunes as well as the fortunes of countries, firms, and individuals depend on how well the economy does.

Table of Contents

PREFACE
PART ONE INTRODUCTION	1	(170)
CHAPTER 1 THE AUTOMOBILE AND ECONOMICS	1	(26)
THE AUTOMOBILE: A BRIEF HISTORY	2	(4)
CRISIS IN THE AMERICAN AUTOMOBILE INDUSTRY	4	(1)
CHRYSLER: GOVERNMENT TO THE RESCUE	5	(1)
POLICY PERSPECTIVE: WHEN IS A TRUCK A CAR?	6	(3)
PROTECTION FROM FOREIGN COMPETITION	7	(1)
THE REBIRTH OF THE AMERICAN AUTOMOBILE INDUSTRY	8	(1)
THE HISTORY OF THE AUTOMOBILE IN STATISTICS	8	(1)
WHAT IS ECONOMICS?	9	(3)
MARKETS AND GOVERNMENT IN THE MIXED ECONOMY	12	(3)
MARKETS	13	(1)
THE ROLE OF GOVERNMENT	13	(1)
THE THREE MAJOR MARKETS	14	(1)
CLOSE-UP: A FAILED ALTERNATIVE TO THE MIXED ECONOMY	15	(2)
TWO CAVEATS	17	(1)
MICROECONOMICS AND MACROECONOMICS: THE TWO BRANCHES OF ECONOMICS	17	(1)
THE SCIENCE OF ECONOMICS	18	(3)
DISCOVERING AND INTERPRETING RELATIONSHIPS	19	(1)
CAUSATION VERSUS CORRELATION	19	(1)
EXPERIMENTS IN ECONOMICS	20	(1)
WHY ECONOMISTS DISAGREE	21	(1)
CLOSE-UP: ECONOMISTS AGREE!	22	(2)
DISAGREEMENTS WITHIN POSITIVE ECONOMICS	23	(1)
DISAGREEMENTS WITHIN NORMATIVE ECONOMICS	23	(1)
CONSENSUS ON THE IMPORTANCE OF SCARCITY	24	(1)
REVIEW AND PRACTICE	24	(3)
CHAPTER 2 THINKING LIKE AN ECONOMIST	27	(25)
THE BASIC COMPETITIVE MODEL	28	(2)
RATIONAL CONSUMERS AND PROFIT-MAXIMIZING FIRMS	28	(1)
COMPETITIVE MARKETS	29	(1)
PRICES, PROPERTY RIGHTS, AND PROFITS: INCENTIVES AND INFORMATION	30	(3)
INCENTIVES VERSUS EQUALITY	32	(1)
WHEN PROPERTY RIGHTS FAIL	32	(1)
CONSENSUS ON INCENTIVES	33	(1)
RATIONING	33	(2)
OPPORTUNITY SETS	35	(5)
BUDGET AND TIME CONSTRAINTS	35	(2)
THE PRODUCTION POSSIBILITIES CURVE	37	(3)
COST	40	(2)
OPPORTUNITY COSTS	41	(1)
CLOSE-UP: OPPORTUNITY COSTS OF MEETINGS	42	(2)
SUNK COSTS	42	(1)
MARGINAL COSTS	43	(1)
POLICY PERSPECTIVE: POLICY AT THE MARGIN	44	(1)
USING ECONOMICS: USING MARGINAL ANALYSIS TO SET SAFETY STANDARDS	45	(1)
REVIEW AND PRACTICE	45	(3)
APPENDIX: READING GRAPHS	48	(4)
CHAPTER 3 TRADE	52	(19)
THE BENEFITS OF ECONOMIC INTERDEPENDENCE	53	(2)
THE GAINS FROM TRADE	53	(2)
TRADE BETWEEN COUNTRIES	55	(6)
COMPARATIVE ADVANTAGE	59	(2)
USING ECONOMICS: CALCULATING THE GAINS FROM TRADE	61	(3)
CLOSE-UP: THE COMPARATIVE ADVANTAGE OF THE UNITED STATES	64	(1)
THE PERCEIVED COSTS OF INTERNATIONAL INTERDEPENDENCE	65	(2)
POLICY PERSPECTIVE: GETTING NAFTA PASSED	67	(1)
REVIEW AND PRACTICE	68	(3)
CHAPTER 4 DEMAND, SUPPLY, AND PRICE	71	(25)
THE ROLE OF PRICES	72	(1)
DEMAND	73	(4)
THE INDIVIDUAL DEMAND CURVE	73	(2)
THE MARKET DEMAND CURVE	75	(1)
SHIFTS IN DEMAND CURVES	76	(1)
POLICY PERSPECTIVE: GOOD NEWS IS BAD NEWS	77	(2)
SOURCES OF SHIFTS IN DEMAND CURVES	78	(1)
CLOSE-UP: GASOLINE PRICES AND DEMAND FOR SMALL CARS	79	(3)
SHIFTS IN A DEMAND CURVE VERSUS MOVEMENTS ALONG A DEMAND CURVE	81	(1)
SUPPLY	82	(3)
MARKET SUPPLY	83	(2)
SHIFTS IN SUPPLY CURVES	85	(1)
SOURCES OF SHIFTS IN SUPPLY CURVES	85	(1)
USING ECONOMICS: PREDICTING THE EFFECTS OF THE DROUGHT OF 1988	86	(1)
SHIFTS IN A SUPPLY CURVE VERSUS MOVEMENTS ALONG A SUPPLY CURVE	87	(1)
LAW OF SUPPLY AND DEMAND	87	(2)
CLOSE-UP: THE STRUCTURE OF ECONOMIC MODELS	89	(2)
USING DEMAND AND SUPPLY CURVES	90	(1)
CONSENSUS ON THE DETERMINATION OF PRICES	91	(1)
PRICE, VALUE, AND COST	91	(2)
REVIEW AND PRACTICE	93	(3)
CHAPTER 5 USING DEMAND AND SUPPLY	96	(26)
SENSITIVITY TO PRICE CHANGES: THE PRICE ELASTICITY OF DEMAND	97	(6)
PRICE ELASTICITY AND REVENUES	99	(4)
THE DETERMINANTS OF THE ELASTICITY OF DEMAND	103	(2)
THE PRICE ELASTICITY OF SUPPLY	105	(2)
USING DEMAND AND SUPPLY ELASTICITIES	107	(2)
TAX POLICY AND THE LAW OF SUPPLY AND DEMAND	109	(1)
SHORTAGES AND SURPLUSES	109	(3)
POLICY PERSPECTIVE: ILLUSORY GAINS FROM TAXING LUXURIES?	112	(1)
INTERFERING WITH THE LAW OF SUPPLY AND DEMAND	113	(1)
CLOSE-UP: RENT CONTROL IN NEW YORK CITY	114	(3)
PRICE CEILINGS: THE CASE OF RENT CONTROL	115	(1)
PRICE FLOORS: THE CASE OF AGRICULTURAL SUPPORTS	116	(1)
ALTERNATIVE SOLUTIONS	117	(1)
USING ECONOMICS: CALCULATING RESPONSES TO OIL PRICE CHANGES	117	(1)
REVIEW AND PRACTICE	118	(4)
CHAPTER 6 TIME AND RISK	122	(21)
INTEREST	123	(2)
THE TIME VALUE OF MONEY	123	(2)
USING ECONOMICS: THE VALUE OF WINNING A LOTTERY	125	(1)
THE MARKET FOR LOANABLE FUNDS	125	(2)
INFLATION AND THE REAL RATE OF INTEREST	127	(1)
THE MARKET FOR ASSETS	128	(2)
FORMING EXPECTATIONS	129	(1)
THE MARKET FOR RISK	130	(1)
RESPONDING TO RISK	131	(2)
POLICY PERSPECTIVE: ADVERSE SELECTION AND HEALTH INSURANCE	133	(3)
THE RISK-INCENTIVE TRADE-OFF	135	(1)
CLOSE-UP: AUTO INSURANCE AND ADVERSE SELECTION IN NEW JERSEY	136	(1)
ENTREPRENEURSHIP	137	(1)
AN OVERVIEW OF FINANCIAL MARKETS	138	(1)
REVIEW AND PRACTICE	138	(3)
APPENDIX: CALCULATING PRESENT DISCOUNTED VALUE	141	(2)
CHAPTER 7 THE PUBLIC SECTOR	143	(28)
THE CHANGING ROLES OF GOVERNMENT	145	(2)
THE PICTURE IN STATISTICS	146	(1)
POLICY PERSPECTIVE: THE "PEACE DIVIDEND"--NOW YOU SEE IT, NOW YOU DON'T	147	(2)
STATE AND LOCAL GOVERNMENT	148	(1)
WHAT DISTINGUISHES THE PRIVATE AND PUBLIC SECTORS?	148	(1)
CLOSE-UP: INTERNATIONAL PERSPECTIVES	149	(1)
ADAM SMITH'S "INVISIBLE HAND" AND THE CENTRAL ROLE OF MARKETS	150	(1)
CLOSE-UP: ADAM SMITH--FOUNDER OF MODERN ECONOMICS	151	(1)
GOVERNMENT AND IGNORANCE OF ECONOMICS	152	(1)
GOVERNMENT AND REDISTRIBUTION	152	(1)
GOVERNMENT AND MARKET FAILURES	153	(2)
STABILIZATION OF THE ECONOMY	154	(1)
LACK OF COMPETITION	154	(1)
EXTERNALITIES	154	(1)
USING ECONOMICS: CORRECTING FOR EXTERNALITIES	155	(6)
PUBLIC GOODS	157	(2)
MISSING MARKETS	159	(1)
INFORMATION AND KNOWLEDGE	159	(1)
BEYOND MARKET FAILURES	160	(1)
GOVERNMENT'S OPTIONS	161	(2)
TAKING DIRECT ACTION	161	(1)
PROVIDING INCENTIVES TO THE PRIVATE SECTOR	162	(1)
MANDATING ACTION IN THE PRIVATE SECTOR	162	(1)
COMBINING OPTIONS	163	(1)
GOVERNMENT FAILURES	163	(3)
IMPERFECT INFORMATION	163	(1)
INCENTIVES AND THE EFFICIENCY OF GOVERNMENT	164	(1)
WASTE IN GOVERNMENT	165	(1)
UNFORESEEN RESPONSES TO A PROGRAM	165	(1)
POLICY PERSPECTIVE: REINVENTING GOVERNMENT--THE THIRTY-PAGE T-SHIRT	166	(2)
AN APPRAISAL OF THE ROLE OF GOVERNMENT	168	(1)
REVIEW AND PRACTICE	168	(3)
PART TWO PERFECT MARKETS	171	(164)
CHAPTER 8 THE CONSUMPTION DECISION	171	(28)
THE BASIC PROBLEM OF CONSUMER CHOICE	172	(6)
THE BUDGET CONSTRAINT	172	(2)
CHOOSING A POINT ON THE BUDGET CONSTRAINT: INDIVIDUAL PREFERENCES	174	(1)
WHAT HAPPENS TO CONSUMPTION WHEN INCOME CHANGES?	175	(3)
POLICY PERSPECTIVE: THE FATE OF THE BTU TAX	178	(2)
A CLOSER LOOK AT THE DEMAND CURVE	179	(1)
USING ECONOMICS: CALCULATING TAX REVENUES	180	(2)
DERIVING DEMAND CURVES	180	(1)
THE IMPORTANCE OF DISTINGUISHING BETWEEN INCOME AND SUBSTITUTION EFFECTS	181	(1)
USING ECONOMICS: INCOME AND SUBSTITUTION EFFECTS	182	(1)
UTILITY AND THE DESCRIPTION OF PREFERENCES	182	(5)
LOOKING BEYOND THE BASIC MODEL: HOW WELL DO THE UNDERLYING ASSUMPTIONS MATCH REALITY?	187	(1)
CLOSE-UP: INTERNATIONAL PRICE AND INCOME ELASTICITIES FOR FOOD	188	(1)
REVIEW AND PRACTICE	189	(2)
APPENDIX: INDIFFERENCE CURVES AND THE CONSUMPTION DECISION	191	(8)
CHAPTER 9 LABOR SUPPLY AND SAVINGS	199	(27)
THE LABOR SUPPLY DECISION	200	(7)
THE CHOICE BETWEEN LEISURE AND CONSUMPTION	201	(3)
LABOR FORCE PARTICIPATION	204	(2)
TAX POLICY AND LABOR SUPPLY	206	(1)
POLICY PERSPECTIVE: THE AMBIGUOUS EFFECTS OF THE EARNED INCOME CREDIT	207	(1)
THE RETIREMENT DECISION	208	(1)
HUMAN CAPITAL AND EDUCATION	208	(3)
EDUCATION AND ECONOMIC TRADE-OFFS	209	(1)
THE WIDENING WAGE GAP	210	(1)
CLOSE-UP: THE "RATIONAL" COUPLES DEBATE	211	(1)
BUDGET CONSTRAINTS AND SAVINGS	212	(4)
SAVINGS AND THE INTEREST RATE	214	(1)
OTHER FACTORS AFFECTING SAVINGS	215	(1)
USING ECONOMICS: INTEREST ELASTICITY OF SAVINGS	216	(1)
CLOSE-UP: WHY IS THE U.S. SAVINGS RATE SO LOW?	217	(1)
POLICY PERSPECTIVE: STIMULATING SAVINGS	218	(1)
REVIEW AND PRACTICE	219	(3)
APPENDIX: INDIFFERENCE CURVES AND THE LABOR SUPPLY AND SAVINGS DECISIONS	222	(4)
CHAPTER 10 A STUDENT'S GUIDE TO INVESTING	226	(24)
INVESTMENT ALTERNATIVES	227	(4)
BANK DEPOSITS	227	(1)
HOUSING	228	(1)
BONDS	228	(1)
SHARES OF STOCK	229	(1)
MUTUAL FUNDS	230	(1)
DESIRABLE ATTRIBUTES OF INVESTMENTS	231	(6)
EXPECTED RETURNS	232	(3)
RISK	235	(1)
TAX CONSIDERATIONS	236	(1)
CLOSE-UP: STOCK MARKET CRASHES	237	(2)
LIQUIDITY	238	(1)
POLICY PERSPECTIVE: CAPITAL GAINS	239	(1)
EFFICIENT MARKET THEORY	240	(1)
USING ECONOMICS: ARBITRAGE--RISK-FREE RETURNS?	241	(3)
EFFICIENCY AND THE STOCK MARKET	241	(3)
EFFICIENT MARKETS OR RANDOM NOISE?	244	(1)
STRATEGIES FOR INTELLIGENT INVESTING	244	(2)
CLOSE-UP: JUST HOW SMART IS THE "SMART MONEY"?	246	(1)
REVIEW AND PRACTICE	247	(3)
CHAPTER 11 THE FIRM'S COSTS	250	(31)
PROFITS, COSTS, AND FACTORS OF PRODUCTION	251	(9)
PRODUCTION WITH ONE VARIABLE INPUT	252	(3)
COST CURVES	255	(5)
CLOSE-UP: HOW IMPORTANT IS THE FORTUNE 500?	260	(2)
PRODUCTION WITH MANY FACTORS	262	(3)
COST MINIMIZATION	262	(1)
THE PRINCIPLE OF SUBSTITUTION	263	(2)
POLICY PERSPECTIVE: THE SUBSTITUTION PRINCIPLE AND GLOBAL WARMING	265	(1)
SHORT-RUN AND LONG-RUN COST CURVES	266	(4)
SHORT-RUN COST CURVES	266	(1)
LONG-RUN COST CURVES	267	(3)
USING ECONOMICS: ECONOMIES OF SCALE IN SAVINGS AND LOAN BRANCHES	270	(1)
LOOKING BEYOND THE BASIC MODEL: COST CURVES AND THE COMPETITIVENESS OF MARKETS	270	(1)
ECONOMIES OF SCOPE	271	(1)
REVIEW AND PRACTICE	272	(3)
APPENDIX: COST MINIMIZATION WITH MANY INPUTS	275	(6)
CHAPTER 12 PRODUCTION	281	(28)
REVENUE	282	(1)
COSTS	283	(1)
BASIC CONDITIONS OF COMPETITIVE SUPPLY	284	(3)
ENTRY, EXIT, AND MARKET SUPPLY	287	(3)
SUNK COSTS AND EXIT	288	(1)
THE FIRM'S SUPPLY CURVE	289	(1)
THE MARKET SUPPLY CURVE	289	(1)
USING ECONOMICS: ENTERING THE PAINTING BUSINESS	290	(2)
LONG-RUN VERSUS SHORT-RUN SUPPLY	292	(2)
POLICY PERSPECTIVE: THE 1996 GASOLINE CRISIS	294	(2)
LOOKING BEYOND THE BASIC MODEL: SUNK COSTS, ENTRY, AND COMPETITION	295	(1)
CLOSE-UP: PAN AM'S EXIT	296	(1)
ACCOUNTING PROFITS AND ECONOMIC PROFITS	297	(2)
OPPORTUNITY COSTS	297	(1)
ECONOMIC RENT	298	(1)
FACTOR DEMAND	299	(4)
FROM THE FIRM'S FACTOR DEMAND TO THE MARKET'S FACTOR DEMAND	302	(1)
CLOSE-UP: FACTOR ELASTICITIES ON THE FARM	303	(2)
FACTOR DEMANDS WITH TWO OR MORE FACTORS	304	(1)
THE THEORY OF THE COMPETITIVE FIRM	304	(1)
REVIEW AND PRACTICE	305	(2)
APPENDIX: ALTERNATIVE WAYS OF CALCULATING THE DEMAND FOR LABOR	307	(2)
CHAPTER 13 COMPETITIVE EQUILIBRIUM	309	(26)
GENERAL EQUILIBRIUM ANALYSIS	310	(3)
EXAMPLE: THE CORPORATE INCOME TAX	310	(2)
WHEN PARTIAL EQUILIBRIUM ANALYSIS WILL DO	312	(1)
EXAMPLE: A TAX ON CIGARETTES	312	(1)
THE BASIC COMPETITIVE EQUILIBRIUM MODEL	313	(2)
THE CIRCULAR FLOW OF FUNDS	315	(3)
COMPETITIVE GENERAL EQUILIBRIUM AND ECONOMIC EFFICIENCY	318	(2)
CLOSE-UP: THE MINIMUM WAGE AND GENERAL EQUILIBRIUM	319	(3)
PARETO EFFICIENCY	320	(1)
CONDITIONS FOR THE PARETO EFFICIENCY OF THE MARKET ECONOMY	320	(2)
CLOSE-UP: PARETO IMPROVEMENT IN THE SKIES	322	(2)
POLICY PERSPECTIVE: THE COST OF AIR SAFETY FOR CHILDREN	324	(2)
COMPETITIVE MARKETS AND PARETO EFFICIENCY	324	(1)
COMPETITIVE MARKETS AND INCOME DISTRIBUTION	325	(1)
LOOKING BEYOND THE BASIC MODEL: MARKET FAILURES AND THE ROLE OF GOVERNMENT	326	(2)
REVIEW AND PRACTICE	328	(3)
APPENDIX: PARETO EFFICIENCY AND COMPETITIVE MARKETS	331	(4)
PART THREE IMPERFECT MARKETS	335	(170)
CHAPTER 14 MONOPOLIES AND IMPERFECT COMPETITION	335	(28)
MARKET STRUCTURES	336	(2)
MONOPOLY OUTPUT	338	(5)
AN EXAMPLE: THE ABC-MENT COMPANY	341	(2)
USING ECONOMICS: MONOPOLY VERSUS COMPETITIVE PRICES	343	(2)
MONOPOLY PROFITS	343	(1)
PRICE DISCRIMINATION	344	(1)
IMPERFECT COMPETITION	345	(3)
NUMBER OF FIRMS IN THE INDUSTRY	346	(1)
PRODUCT DIFFERENTIATION	346	(2)
BARRIERS TO ENTRY: WHY IS COMPETITION LIMITED?	348	(2)
GOVERNMENT POLICIES	349	(1)
SINGLE OWNERSHIP OF AN ESSENTIAL INPUT	349	(1)
INFORMATION	349	(1)
POLICY PERSPECTIVE: USING PATENTS TO MAINTAIN A MONOPOLY--THE CASE OF XEROX	350	(5)
ECONOMIES OF SCALE AND NATURAL MONOPOLIES	351	(2)
MARKET STRATEGIES	353	(2)
EQUILIBRIUM WITH MONOPOLISTIC COMPETITION	355	(2)
CLOSE-UP: IBM--FROM THE EDGE OF MONOPOLY TO THE EDGE OF COMPETITION	357	(1)
SCHUMPETERIAN COMPETITION	358	(1)
REVIEW AND PRACTICE	358	(2)
APPENDIX A: MONOPSONY	360	(1)
APPENDIX B: DEMAND FOR INPUTS UNDER MONOPOLY AND IMPERFECT COMPETITION	361	(2)
CHAPTER 15 OLIGOPOLIES	363	(25)
COLLUSION	364	(2)
THE PROBLEM OF SELF-ENFORCEMENT	364	(2)
CLOSE-UP: GOVERNMENT COMPLICITY	366	(3)
THE PROBLEM OF COORDINATION	366	(2)
THE PROBLEM OF ENTRY	368	(1)
CLOSE-UP: PRICE FIXING IN ACTION	369	(1)
GAME THEORY: THE PRISONER'S DILEMMA	370	(2)
USING ECONOMICS: GAME THEORY AND COLLUSION	372	(1)
RESTRICTIVE PRACTICES	373	(1)
POLICY PERSPECTIVE: RESTRICTIVE PRACTICES AND THE MICROSOFT CASE	374	(2)
CONSEQUENCES OF RESTRICTIVE PRACTICES	375	(1)
THE MANY DIMENSIONS OF COMPETITION AMONG OLIGOPOLISTS	376	(1)
PRICE AND OUTPUT COMPETITION	377	(2)
COURNOT COMPETITION	377	(1)
BERTRAND COMPETITION	377	(1)
KINKED DEMAND CURVES	378	(1)
THE IMPORTANCE OF IMPERFECTIONS IN COMPETITION	379	(1)
REVIEW AND PRACTICE	380	(4)
APPENDIX: DESCRIBING THE MARKET EQUILIBRIUM FOR OLIGOPOLY	384	(4)
CHAPTER 16 GOVERNMENT POLICIES TOWARD COMPETITION	388	(23)
THE DRAWBACKS OF MONOPOLIES AND LIMITED COMPETITION	389	(4)
RESTRICTED OUTPUT	389	(2)
MANAGERIAL SLACK	391	(1)
REDUCED RESEARCH AND DEVELOPMENT	392	(1)
RENT SEEKING	392	(1)
FURTHER DRAWBACKS OF LIMITED COMPETITION	393	(1)
POLICIES TOWARD NATURAL MONOPOLIES	393	(3)
PUBLIC OWNERSHIP	394	(1)
REGULATION	395	(1)
POLICY PERSPECTIVE: CORPORATIZING THE AIR TRAFFIC CONTROL SYSTEM	396	(4)
ENCOURAGING COMPETITION	398	(2)
CLOSE-UP: THE BREAKUP OF AT&T	400	(1)
ANTITRUST POLICIES	401	(5)
LIMITING MARKET DOMINATION	401	(2)
DEFINING MARKETS	403	(1)
CURBING RESTRICTIVE PRACTICES	404	(1)
ENFORCING THE ANTITRUST LAWS	405	(1)
USING ECONOMICS: COKE AND PEPSI PLAY MERGER MANIA	406	(3)
CURRENT ANTITRUST CONTROVERSIES	407	(2)
REVIEW AND PRACTICE	409	(2)
CHAPTER 17 TECHNOLOGICAL CHANGE	411	(19)
LINKS BETWEEN TECHNOLOGICAL CHANGE AND IMPERFECT COMPETITION	412	(6)
PATENTS	413	(1)
THE TRADE-OFF BETWEEN SHORT-RUN EFFICIENCY AND INNOVATION	413	(3)
R & D AS A FIXED COST	416	(1)
LEARNING BY DOING	417	(1)
CLOSE-UP: ELI WHITNEY AND THE COTTON GIN	418	(2)
ACCESS TO CAPITAL MARKETS	419	(1)
CLOSE-UP: JOSEPH SCHUMPETER AND SCHUMPETERIAN COMPETITION	420	(1)
BASIC RESEARCH AS A PUBLIC GOOD	421	(2)
GOVERNMENT PROMOTION OF TECHNOLOGICAL PROGRESS	423	(1)
SUBSIDIES	423	(1)
POLICY PERSPECTIVE: SUCCESS STORIES IN GOVERNMENT RESEARCH PROGRAMS	424	(2)
PROTECTION	425	(1)
POLICY PERSPECTIVE: COMPETITION VS. COOPERATION IN AIRCRAFT MANUFACTURING	426	(1)
RELAXING ANTITRUST POLICIES	426	(1)
TECHNOLOGICAL CHANGE AND ECONOMIC GROWTH	427	(1)
REVIEW AND PRACTICE	428	(2)
CHAPTER 18 IMPERFECT INFORMATION IN THE PRODUCT MARKET	430	(24)
THE INFORMATION PROBLEM	431	(2)
HOW BIG A PROBLEM?	432	(1)
HOW PRICES CONVEY INFORMATION	432	(1)
MARKETS FOR INFORMATION	432	(1)
THE MARKET FOR LEMONS AND ADVERSE SELECTION	433	(3)
SIGNALING	435	(1)
JUDGING QUALITY BY PRICE	435	(1)
CLOSE-UP: AUTOMOBILE BROKERS AND IMPERFECT INFORMATION	436	(1)
THE INCENTIVE PROBLEM	437	(2)
MARKET SOLUTIONS	438	(1)
POLICY PERSPECTIVE: MEDICAL SAVINGS ACCOUNTS	439	(3)
CONTRACT SOLUTIONS	440	(1)
REPUTATION SOLUTIONS	441	(1)
POLICY PERSPECTIVE: INFORMATION PROBLEMS AND INCENTIVES IN THE MEDICAL CARE INDUSTRY	442	(1)
THE SEARCH PROBLEM	443	(2)
SEARCH AND IMPERFECT COMPETITION	444	(1)
SEARCH AND INFORMATION INTERMEDIARIES	445	(1)
ADVERTISING	445	(1)
USING ECONOMICS: EXPLAINING JOB MOBILITY--THE ECONOMICS OF SEARCH	446	(2)
ADVERTISING AND COMPETITION	447	(1)
ADVERTISING AND PROFITS	447	(1)
CLOSE-UP: ADVERTISING ORANGE JUICE	448	(2)
THE IMPORTANCE OF IMPERFECT INFORMATION	450	(1)
GOVERNMENT AND INFORMATION	451	(1)
REVIEW AND PRACTICE	451	(3)
CHAPTER 19 IMPERFECTIONS IN THE LABOR MARKET	454	(21)
LABOR UNIONS	455	(6)
A BRIEF HISTORY	455	(3)
ECONOMIC EFFECTS	458	(2)
LIMITS ON UNION POWER	460	(1)
CLOSE-UP: LESSONS FROM UNIONS IN OTHER COUNTRIES	461	(2)
WAGE DIFFERENTIALS	463	(3)
DISCRIMINATION	464	(2)
MOTIVATING WORKERS	466	(3)
PIECE RATES AND INCENTIVES	466	(1)
EFFICIENCY WAGES	467	(1)
OTHER INCENTIVES	468	(1)
POLICY PERSPECTIVE: MINIMUM WAGES	469	(2)
CLOSE-UP: FRINGE BENEFITS	471	(1)
REVIEW AND PRACTICE	472	(3)
CHAPTER 20 FINANCING, CONTROLLING, AND MANAGING THE FIRM	475	(30)
THE FIRM'S LEGAL FORM	476	(2)
CORPORATE FINANCE	478	(3)
WHY CORPORATIONS CARE ABOUT FINANCIAL STRUCTURE	480	(1)
USING ECONOMICS: ESTIMATING THE TAX BENEFITS OF DEBT VERSUS EQUITY	481	(6)
FINANCE AND CONTROL	482	(2)
LIMITED FINANCIAL OPTIONS	484	(3)
OVERVIEW: THE LIFE CYCLE OF A FIRM	487	(1)
TAKEOVERS, CONTROL OF FIRMS, AND THE MARKET FOR MANAGERS	487	(4)
TAKEOVERS: PROS AND CONS	489	(1)
PUBLIC POLICY TOWARD TAKEOVERS	490	(1)
POLICY PERSPECTIVE: WHY PENNSYLVANIA COMPANIES DO NOT WANT PROTECTION AGAINST TAKEOVERS	491	(1)
MAKING DECISIONS	492	(2)
DELEGATION AND THE PRINCIPAL-AGENT PROBLEM	493	(1)
CLOSE-UP: THE BEST EXECUTIVES FOR THE MONEY?	494	(2)
CLOSE-UP: WHAT IS GOOD MANAGEMENT?	496	(3)
CENTRALIZATION AND DECENTRALIZATION	497	(2)
THE BOUNDARIES OF THE FIRM	499	(2)
REVIEW AND PRACTICE	501	(4)
PART FOUR POLICY ISSUES	505
CHAPTER 21 EXTERNALITIES AND THE ENVIRONMENT	505	(17)
NEGATIVE EXTERNALITIES AND OVERSUPPLY	506	(3)
ENVIRONMENTAL PROTECTION AND CONSERVATION: EXAMPLES	508	(1)
POLICY RESPONSES TO PROBLEMS IN THE ENVIRONMENT	509	(2)
PROPERTY RIGHTS RESPONSES	509	(1)
REGULATION	510	(1)
CLOSE-UP: THE MARKET FOR WHALES	511	(2)
TAXES AND SUBSIDIES	512	(1)
USING ECONOMICS: CALCULATING THE EFFECTS OF A GASOLINE TAX	513	(2)
THE MARKETABLE PERMIT RESPONSE	513	(1)
WEIGHING THE ALTERNATIVE APPROACHES	514	(1)
POLICY PERSPECTIVE: UNFUNDED MANDATES, TAKINGS, AND COST-BENEFIT ANALYSIS	515	(1)
NATURAL RESOURCES	516	(2)
MERIT GOODS AND BADS	518	(1)
REVIEW AND PRACTICE	518	(4)
CHAPTER 22 TAXES, TRANSFERS, AND REDISTRIBUTION	522	(21)
THE CASE FOR INCOME REDISTRIBUTION	523	(1)
THE CHANGING U.S. INCOME DISTRIBUTION	524	(1)
TAXES	524	(3)
CHARACTERISTICS OF A GOOD TAX SYSTEM	526	(1)
POLICY PERSPECTIVE: CAPITAL GAINS TAXATION	527	(4)
GRADING THE U.S. TAX SYSTEM	528	(3)
TRANSFERS	531	(2)
NEED-BASED TRANSFER PROGRAMS	531	(2)
CLOSE-UP: DRAWING A POVERTY LINE	533	(1)
SOCIAL INSURANCE	534	(2)
THE COSTS AND BENEFITS OF REDISTRIBUTION	536	(2)
EQUITY-EFFICIENCY TRADE-OFFS	536	(1)
HOW WELL DOES THE UNITED STATES DO?	537	(1)
THE ROLES OF GOVERNMENT: A REVIEW	538	(2)
REVIEW AND PRACTICE	540	(3)
CHAPTER 23 PUBLIC DECISION MAKING	543
DECISION MAKING IN A DEMOCRACY	544	(4)
COLLECTIVE DECISION MAKING	544	(1)
MAJORITY VOTING AND THE MEDIAN VOTER	545	(1)
THE VOTING PARADOX	546	(1)
INTEREST GROUPS AND RENT SEEKING	547	(1)
POLICY PERSPECTIVE: MOTOR VOTERS	548	(2)
BUREAUCRACIES	549	(1)
AGRICULTURE: A CASE STUDY IN MIXED MOTIVES	549	(1)
CLOSE-UP: ECONOMICS, LIABILITY, AND LEGAL REFORM	550	(2)
PUBLIC FAILURES	552	(4)
INCENTIVES AND CONSTRAINTS	553	(1)
BUDGETING AND SPENDING PROCEDURES	554	(1)
UNINTENDED CONSEQUENCES	555	(1)
POLICY PERSPECTIVE: REINVENTING GOVERNMENT	556	(1)
DECENTRALIZATION AND THE FEDERAL ROLE	557	(3)
REVIEW AND PRACTICE	560
GLOSSARY	A1	(16)
CREDITS	A17	(2)
INDEX	A19