Student Value Edition for Microeconomics plus MyEconLab plus eBook 1-semester Student Access Kit

by Lipsey, Richard G.; Ragan, Christopher T.S.; Storer, Paul

• ISBN13: 9780201360110
• ISBN10: 020136011X
• Additional ISBN(s): 9780321413499
• Edition: 12th
• Format: Loose-leaf
• Copyright: 2008-01-01
• Publisher: Prentice Hall
• More Book Details
• Purchase Benefits

Summary

This thoroughly revised edition provides a complete, balanced introduction to microeconomics and to the most important issues facing the world's economies at the turn of the millennium. The new edition examines the following key topicsand more: the use of game theory in the study of firms' behavior the "good jobs/bad jobs" debate and the "deindustrialization" of America the antitrust case brought by the Department of Justice against Microsoft the challenges of reforming Social Security U.S. trade policy, especially regarding the importance of NAFTA Chapter 1 introduces the issues of scarcity and choice, surveys national and international trends, and ends with a discussion of the importance and role of economic policy. The case studies in Chapter 6 on rent controls, agricultural price supports, and tariffs are designed to provide practice in applying the tools of price determination and elasticity that are covered in Chapters 4 and 5. Subsequent chapters cover short- and long-run costs, perfect competition, monopolistic competition and oligopoly, factor pricing, factor mobility, labor markets, and government in the market economy. The final three chapters, on taxation, the gains from trade, and trade policy, expand on the basics of microeconomic analysis that are presented throughout the book by providing current illustrations of the relevance of economic theory to contemporary policy situations.

Table of Contents

To the Instructor	ix
Acknowledgments	xiv
To the Student	xv
Part 1 The Nature of Economics	1	(66)
The Economic Problem	3	(23)
What Is Economics?	4	(5)
Resources	5	(1)
Scarcity	5	(1)
Choice	5	(3)
Four Key Economic Problems	8	(1)
Alternative Economic Systems	9	(4)
Types of Economic Systems	10	(1)
Ownership of Resources	11	(1)
Command Versus Market Determination	12	(1)
Aspects of A Modern Economy	13	(7)
Origins	13	(1)
Living Standards	13	(4)
Ongoing Change	17	(3)
Economic Policy	20	(6)
The Pervasiveness of Policy Decisions	20	(2)
Conflicts of Policy	22
The Opportunity Cost of Your College Degree	6	(8)
The Failure of Central Planning	14	(12)
Economics As a Social Science	26	(23)
The Distinction Between Positive And Normative	27	(3)
The Importance of the Distiction	27	(1)
Positive and Normative Statements in Economics	28	(2)
The Scientific Approach in Economics	30	(4)
Is Human Behavior Predictable?	30	(1)
The Importance of Theories	31	(1)
The Structure of Theories	31	(2)
Economic Models	33	(1)
Testing Theories	34	(3)
Refutation versus Confirmation	34	(2)
Statistical Analysis	36	(1)
The Decision to Accept or Reject	36	(1)
Can Economics Be Made Value-Free?	37
Why Economists Disagree	28	(1)
Limits on the Positive-Normative Distinction	29
Appendix to Chapter	2	(38)
An Introduction to Graphs	40	(1)
Understanding Graphs	40	(2)
Straight Lines and Their Slopes	41	(1)
Curved Lines and Their Slopes	41	(1)
Graphing Data	42	(7)
Cross-Sectional Data	42	(2)
Time-Series Data	44	(2)
Ratio (Logarithmic) Scales	46	(1)
Graphing Three Variables in Two Dimensions	47	(2)
The Anatomy of a Market Economy	49	(18)
The Development of Market Economies	52	(2)
Specialization, Surplus, and Trade	52	(1)
The Division of Labor	52	(2)
The Decision Makers	54	(1)
Households	54	(1)
Firms	54	(1)
Government	55	(1)
Markets And Economies	55	(2)
Markets	55	(1)
Economies	56	(1)
The Sectors of an Economy	56	(1)
Institutions	57	(1)
Microeconomics and Macroeconomics	57	(10)
An Overview of Microeconomics	60	(1)
An Overview of Macroeconomics	61	(3)
The Next Step	64
The Gains from Specialization	50	(3)
The Division of Labor	53	(5)
The Transition Economies of Central and Eastern Europe and the Former Soviet Union	58	(9)
Part 2 An Introduction to Demand and Supply	67	(70)
Demand, Supply, and Price	69	(19)
Demand	70	(7)
What Is ``Quantity Demanded''?	70	(1)
Quantity Demanded and Price	71	(1)
Demand Schedules and Demand Curves	72	(5)
Supply	77	(3)
What Is ``Quantity Supplied''?	77	(1)
Quantity Supplied and Price	77	(1)
Supply Schedules and Supply Curves	77	(3)
The Determination of Price	80	(8)
The Laws of Demand and Supply	81	(2)
Prices and Inflation	83
The Distinction Between Stocks and Flows	71	(13)
Plywood, Coffee, and the Weather	84	(4)
Elasticity	88	(25)
Price Elasticity of Demand	89	(8)
The Measurement of Price Elasticity	90	(2)
What Determines Elasticity of Demand?	92	(4)
Price Elasticity and Changes in Total Expenditure	96	(1)
Other Demand Elasticities	97	(3)
Income Elasticity of Demand	97	(2)
Cross Elasticity of Demand	99	(1)
Elasticity of Supply	100	(1)
Determinants of Supply Elasticity	97	(4)
Two Examples Where Elasticity Matters	101
Short-Run and Long-Run Market Adjustment	101	(1)
The Incidence of Sales Taxes	102	(2)
Employer-Paid Health Insurance	104
The Terminology of Elasticity	94
Appendix To Chapter	5	(103)
More Details About Elasticity	108	(1)
Arc Elasticity as an Approximation of Point Elasticity	108	(1)
The Precise Definition of Point Elasticity	108	(5)
Demand and Supply in Action	113	(24)
Government-Controlled Prices	114	(3)
Disequilibrium Prices	114	(1)
Price Floors	114	(1)
Price Ceilings	115	(2)
Rent Controls: A Case Study of Price Ceilings	117	(4)
The Predicted Effects of Rent Controls	117	(3)
Temporary Versus Permanent Increases in Demand	120	(1)
Who Gains and Who Loses?	121	(1)
Policy Alternatives	121	(1)
Agriculture and The Farm Problem	121	(7)
Long-Term and Short-Term Problems	121	(3)
The Theory of Agricultural Policy	124	(4)
U.S. Farm Policy	128	(1)
The Determination of Imports and Exports	128	(3)
The Law of One Price	129	(1)
The Pattern of Foreign Trade	129	(1)
Who Pays for Tariffs?	130	(1)
Four General Lessons About Resource Allocation	131	(6)
Costs Can Be Shifted, But Not Avoided	131	(1)
Market Prices Encourage Economical Use of Resources	132	(1)
Government Intervention Affects Resource Allocation	132	(1)
Intervention Requires Alternative Mechanisms	132
Winners and Losers Under Rent Control	119	(18)
Part 3 Consumers and Producers	137	(70)
Consumer Behavior	139	(27)
Marginal Utility and Consumer Choice	140	(4)
Diminishing Marginal Utility	140	(1)
Utility Schedules and Graphs	140	(1)
Maximizing Utility	141	(2)
Derivation of the Consumer's Demand Curve	143	(1)
The Distinction Between Total and Marginal Utility	144	(5)
Consumer Surplus	145	(2)
The Paradox of Value	147	(1)
Free and Scarce Goods	147	(2)
Income and Substitution Effects of Price Changes	149
The Substitution Effect	149	(1)
The Income Effect	150	(2)
The Slope of the Demand Curve	152
Market and Individual Demand Curves	144	(6)
Can Demand Curves Have a Postive Slope?	150
Appendix to Chapter	7	(148)
Indifference Curves	155	(1)
Indifference Curves	155	(3)
Diminishing Marginal Rate of Substitution	156	(1)
The Indifference Map	157	(1)
The Budget Line	158	(1)
Properties of the Budget Line	158	(1)
The Slope of the Budget Line	158	(1)
The Consumer's Utility-Maximizing Choice	159	(2)
The Consumer's Reaction to a Change in Income	160	(1)
The Consumer's Reaction to a Change in Price	160	(1)
Derivation of the Demand Curve	161	(5)
Income and Substitution Effects	162	(4)
Production and Cost in the Short Run	166	(20)
Profits and Costs	167	(5)
Profit Maximization	167	(1)
Factors of Production	167	(2)
The Meaning of Cost	169	(1)
The Measurement of Opportunity Cost	169	(2)
The Meaning of Economic Profits	171	(1)
Choices Open to the Firm	172	(2)
Time Horizons for Decision Making	173	(1)
The Production Function in the Short Run	174	(3)
Total, Average, and Marginal Products	174	(2)
Diminishing Marginal Product	176	(1)
The Average-Marginal Relationship	176	(1)
The Significance of Diminishing Returns	177	(1)
Short-Run Variations in Cost	177	(9)
Cost Concepts Defined	177	(2)
Short-Run Cost Curves	179	(2)
Capacity	181	(1)
Shifts in Short-Run Cost Curves	181	(1)
A Family of Short-Run Cost Curves	182
Why Are There Firms?	168	(10)
Diminishing Returns	178	(1)
A Summary of Short-Run Cost Concepts	179	(7)
Production and Cost in the Long Run	186	(21)
The Long Run: No Fixed Factors	187	(8)
Profit Maximization and Cost Minimization	187	(2)
The Principle of Substitution	189	(1)
Long-Run Cost Curves	190	(4)
Shifts in Cost Curves	194	(1)
The Very Long Run: Changes in Technology	195
Technological Change	195	(2)
Firms' Choices in the Very Long Run	197
Concepts of Efficiency	188	(6)
Jacob Viner and the Clever Draftsman	194	(2)
The Significance of Productivity Growth	196
Appendix to Chapter	9	(191)
Isoquant Analysis	200	(1)
Isoquants	200	(2)
An Isoquant Map	201	(1)
Conditions for Cost Minimization	202	(5)
The Principle of Substitution	204	(3)
Part 4 Markets, Pricing, and Efficiency	207	(109)
Competitive Markets	209	(22)
Market Structure and Firm Behavior	210	(1)
Competitive Market Structure	210	(1)
Competitive Behavior	210	(1)
The Significance of Market Structure	211	(1)
The Theory of Perfect Competition	211	(2)
The Assumptions of Perfect Competition	211	(1)
The Demand Curve for a Perfectly Competitive Firm	212	(1)
Total, Average, and Marginal Revenue	212	(1)
Short-Run Decisions	213	(5)
Rules for All Profit-Maximizing Firms	215	(2)
Short-Run Supply Curves	217	(1)
Short-Run Equilibrium in a Competitive Market	217	(1)
Long-Run Decisions	218	(8)
Entry and Exit	219	(1)
Long-Run Equilibrium	220	(4)
Changes in Technology	224	(2)
Declining Idustries	226	(1)
The Appeal of Perfect Competition	226	(5)
Demand Under Perfect Competition: Firm and Industry	214	(13)
The Parable of the Seaside Inn	227	(4)
Monopoly	231	(19)
A Single-Price Monopolist	232	(6)
Cost and Revenue in the Short Run	232	(2)
Short-Run Profit Maximization	234	(2)
Long-Run Equilibrium	236	(2)
The Very Long Run and Creative Destruction	238	(1)
Cartels as Monopolies	238	(4)
The Effects of Cartelization	240	(1)
Problems That Cartels Face	240	(2)
A Multiprice Monopolist: Price Discrimination	242	(8)
Different Forms of Price Discrimination	242	(3)
When Is Price Discrimination Possible?	245	(1)
The Consequences of Price Discrimination	246	(1)
Normative Aspects of Price Discrimination	246
Some Everyday Examples of Creative Destruction	239	(4)
Ease of Entry and Technical Change: The Case of Fashion Knockoffs	243	(7)
Imperfect Competition	250	(24)
The Structure of the U.S. Economy	251	(3)
Industries with Many Small Firms	251	(1)
Industries with a Few Large Firms	251	(2)
Industrial Concentration	253	(1)
Imperfectly Competitive Market Structures	254	(3)
Firms Select Their Products	255	(1)
Firms Choose Their Prices	255	(1)
Non-price Competition	256	(1)
Monopolistic Competition	257	(2)
The Assumptions of Monopolistic Competition	257	(1)
Predictions of the Theory	257	(1)
Evaluation of the Theory	258	(1)
Oligopoly	259	(15)
Why Bigness?	260	(1)
Strategic Behavior and the Basic Dilemma of Oligopoly	261	(2)
Cooperation or Competition?	263	(3)
The Importance of Entry Barriers	266	(3)
Contestable Markets	269	(1)
Oligopoly: An Overview	270
Globalization and the Communication Revolution	252	(12)
The Prisoner's Dilemma	264	(2)
Explicit Cooperation in OPEC	266	(8)
Economic Efficiency and Public Policy	274	(25)
Economic Efficiency	275	(7)
Productive and Allocative Efficiency	275	(3)
Efficiency and Market Structure	278	(1)
Allocative Efficiency and Total Surplus	279	(2)
Allocative Efficiency and Market Failure	281	(1)
Economic Regulation to Promote Efficiency	282	(8)
Regulation of Natural Monopolies	283	(3)
Regulation of Oligopolies	286	(4)
Intervention to Keep Firms Competing	290	(1)
U.S. Antitrust Policy	290	(9)
Laws Promoting Competition	290	(6)
The Success of Antitrust Policy	296
Pricing Problems with Regulated Electric Utilities	288	(3)
Principal Antitrust Provisions	291	(3)
Ticketmaster, Pearl Jam, and Antitrust Law	294	(5)
Inside The Firm	299	(17)
The Organization of Firms	300	(2)
Forms of Business Organization	300	(1)
The Rise of the Modern Corporation	301	(1)
The Financing of Firms	301	(1)
The Goals of Modern Firms	302	(4)
The Separation of Ownership from Control	302	(1)
Principal-Agent Theory	303	(1)
The Market for Corporate Control	304	(1)
Nonmaximizing Theories	304	(1)
The Importance of Nonmaximizing Behavior	305	(1)
Foreign Direct Investment	306	(10)
World Attitudes Toward Foreign Investment	307	(1)
FDI in the United States: Facts and Debates	308	(1)
The Multilateral Agreement on Investment	309	(7)
Part 5 The Markets for Factors of Production	316	(63)
Factor Pricing And Factor Mobility	317	(45)
Income Distribution	318	(2)
Factor Pricing	319	(1)
The Link Between Output and Input Decisions	320	(1)
The Demand for Factors	320	(4)
The Firm's Marginal Decision on Factor Use	321	(1)
The Firm's Demand Curve for a Factor	322	(1)
Elasticity of Factor Demand	323	(1)
The Supply of Factors	324	(4)
The Total Supply of Factors	324	(2)
The Supply of Factors to a Particular Use	326	(2)
The Supply of Factors to a Particular Firm	328	(1)
The Operation of Factor Markets	328	(11)
Differentials in Factor Prices	328	(2)
Policy Issues	330	(2)
Economic Rent	332	(3)
A Final World	335
The Principles of Derived Demand	325	(8)
David Ricardo and ``Economic Rent''	333	(6)
Labor Markets
Wage Differentials	339	(8)
Conditions for a Single Wage	339	(1)
Wage Differential in Competitive Markets	339	(3)
Wage Differential in Noncompetitive Markets	342	(3)
Legislated Minimum Wages	345	(2)
A Final Word	347	(1)
Labor Unions	347	(5)
Collective Bargaining	347	(4)
Unanswered Questions	351	(1)
Discrimination in Labor Markets	352	(6)
A Model of Labor-Market Discrimination	352	(3)
Black-White Wage Differentials	355	(1)
Male-Female Wage Differentials	356	(1)
Progress Against Discrimination	357	(1)
The ``Good Jobs--Bad Jobs'' Debate	358	(4)
Four Observations	358
The Increasing Returns to Education	341	(7)
The Puzzle of Interindustry Wage Differentials	348	(2)
Unions in the United States	350	(12)
Captial And Nonrenewabel Resources	362	(17)
Capital and the Interest Rate	363	(7)
Two Prices of Capital	363	(1)
The Present Value of Future Returns	364	(2)
The Firm's Decision	366	(1)
The Equilibrium Interest Rate	367	(3)
Nonrenewable Resources	370	(9)
The Extraction Rate of a Resource	371	(2)
Conservation Through the Price System	373	(2)
Actual Price Movements	375
The Rental and Purchase Price of Labor	364	(4)
Inflation and Interest Rates	368	(11)
Part 6 Government in the Market Economy	379
Costs and Benefits of Government Intervention	381	(24)
How Markets Coordinate	382	(2)
Signals and Responses	382	(1)
Profits and Losses	383	(1)
The Case for Free Markets	384	(2)
Automatic Coordination	384	(1)
Innovation and Growth	385	(1)
Self-Correction of Disequilibrium	385	(1)
Decentralization of Power	386	(1)
The Case for Government Intervention	386	(10)
Market Power	387	(1)
Externalities	387	(2)
Public Goods	389	(1)
Asymmetric Information	390	(2)
Failure to Achieve Social Goals	392	(4)
Government Intervention	396	(9)
The Tools of Government Intervention	397	(1)
The Costs of Government Intervention	398	(1)
The Causes of Government Failure	399	(3)
How Much Should Government Intervene?	402
Overfishing and the Tragedy of the Commons	392	(2)
Used-Car Prices: The ``Lemons'' Problem	394	(1)
Arthur Okun's ``Leaky Bucket''	395	(6)
The Problem with Democracy	401	(4)
Environmental and Safety Regulation	405	(18)
The Economics of Pollution Control	406	(7)
The Economic Rationale for Regulating Pollution	406	(1)
Pollution-Control Policies	407	(6)
Regulation for Health and Safety	413	(6)
Information as a Public Good	415	(3)
Health and Safety Regulation in Practice	418	(1)
Cost-Benefit Analysis of Social Regulation	419	(4)
Principles of Regulatory Reform	420
Charging for Garbage by the Bag	412	(2)
A Market for So2 Emissions	414	(2)
Resistance to Market-Based Environmental Policies	416	(7)
Taxation and Public Expenditure	423	(340)
Taxation	424	(3)
Some Definitions	424	(1)
The U.S. Tax System	425	(2)
Evaluating the Tax System	427	(4)
Taxation and Equity	428	(1)
Taxation and Efficiency	429	(2)
Can We Increase Equity and Efficiency?	431	(1)
Public Expenditure	431	(6)
Transfer Payments	434	(2)
Purchases of Goods and Services	436	(1)
Grants-in-Aid	436	(1)
Evaluating the Role of Government	437	(326)
Public Versus Private Sector	437	(1)
Scope of Government Activity	438	(1)
Equity and Efficiency	438	(1)
Evolution of Policy	438
The Negative Income Tax	432	(331)
Part 11 International Economics
The Gains from International Trade	763	(14)
Sources of the Gains from Trade	764	(8)
Interpersonal, Interregional, and International Trade	764	(1)
Gains from Specialization with Given Costs	765	(3)
Gains from Trade with Variable Costs	768	(1)
Sources of Comparative Advantage	769	(2)
Is Comparative Advantage Obsolete?	771	(1)
The Terms of Trade	772	(5)
The Gains from Trade Illustrated Graphically	772	(5)
Trade Policy	777
The Theory of Trade Policy	778	(6)
The Case for Free Trade	778	(1)
The Case for Protection	778	(4)
Fallacious Arguments for Protection	782	(2)
Methods of Protection	784	(5)
Policies That Directly Raise Prices	784	(1)
Policies That Directly Lower Quantities	785	(2)
Nominal and Effective Tariff Rates	787	(1)
Trade-Remedy Laws and Nontariff Barriers	788	(1)
Current Trade Policy	789
The General Agreement on Tariffs and Trade (GATT)	790	(1)
Regional Trade Agreements	790	(2)
The North American Free Trade Agreement (NAFTA)	792	(2)
The Future of the World Trading System	794
Import Restrictions on Japanese Cars: Tariffs or Quotas?	786	(8)
Trade Disputes Between the United States and Canada	794
Mathematical Notes	M-1
Time Line of Great Economists	T-1
Glossary	G-1
Index	I-1