INDEX • 741 Cobb-Douglas production function and, 276–278 cost functions and, 266–267 cost minimization and, 273–274 degree of economies of scope, 259–260 diseconomies of scope and, 259 duality in production and cost theory, 275–276 dynamic changes in costs, 261–265 economic costs, 230 economies and diseconomies of scale and, 255–256 economies of scope and, 258–261 energy reduction, 251–253 estimating and predicting of, 265–269 fixed costs, 233–234 learning curve and, 261–265 long-run and short-run relationship and, 257–258 long-run average costs and, 254–255 long-run costs, 243–253 marginal costs, 236–237 marginal rate of technical substitution, 274–275 opportunity costs, 230–231 product transformation curves, 258–259 short-run costs, 237–242 short-run production inflexibility, 253–254 shutting down and, 233 sunk costs, 231–232 total costs, 233 variable costs, 233–234 Production decisions, intertemporal, 584–587 Production efficiency, 613–618 input efficiency, 613–614 marginal rate of transformation and, 614–615 output efficiency and, 615–616 output markets and, 617–618 Production possibilities frontier, 614–615 Production quotas, 333–338 Production technology, 201–202 Production with one variable input (labor), 206–215 average and marginal products and, 206–207 average product of labor curve and, 209 labor productivity and, 214 law of diminishing marginal returns and, 209–211 marginal product of labor curve and, 209 product curve slopes and, 207–209 Production with two variable inputs, 216–223 diminishing marginal returns and, 217–219 fixed-proportions production function and, 219–220 input flexibility and, 217 isoquants and, 216–217 perfect substitutes and, 219, 220 substitution among inputs and, 218–219 Products choice problem, 492–493 curve slopes, 207–209 differentiation, price competition and, 465–467 diversity, monopolistic competition and, 455 homogeneity, perfect competition and, 280 transformation curves, 258–259 Profit maximization, 282–284 See also Competitive firms assumptions of, 282 choosing output in the long run, 300–306 highly competitive markets, 281 long run, 300–301 management cost considerations and, 291–292 marginal cost and revenue and, 284– 287, 362 organizational forms and, 283 short-run by competitive firm, 287–289 Profits competitive equilibrium and, 301–304 producer surplus versus, 299–300 Property rights, 684–685 bargaining and economic efficiency, 685–686 legal solutions and, 686–687 Prospective sunk costs, 232, 234 Protectionism, 622–623 Public education, 691 Public goods, 690–694 definition of, 626 efficiency and, 691–692 market failure and, 692–693 nonexclusive goods, 690–691 private preferences for, 694–696 Public organizations, principal-agent problem and, 648–649 Publishing, price discrimination and, 413 Purchasing decisions, with monopsony power, 547–548 Purchasing power, 85 Pure bundling, 423–424 Pure monopoly, 357, 368 Pure monopsony, 358 Putnam, Howard, 392 Q Quadratic cost function, 267 Quality uncertainty, 632–638 Quantity discounts, 404 Quantity forcing, 443 Quigley, John, 130n4, 314n11 R Rabin, Matthew, 189n23 Range of products, Rapaport, Carol, 32n5 Raphael, Stephen S., 314n11 Raphael, Steven, 130n4 Rate of return See Effective yield, bond Rate-of-return regulation, 381 Rationing, gasoline, 98–100 Rawls, John, 611n3 Rawlsian view of equity, 611, 612 Raw material costs, 23 Reaction curves, Cournot equilibrium and, 460 Real discount rate, 571–572 Real prices, 12–16 Real returns, 178 Rebates, 123–124, 408–409 Recreation, revealed preference for, 94–95 Recycling, 675–677 Reference point, 190–191 Refundable deposits, 677 Regression See Multiple regression analysis Regression residual, 701 Regulation, monopolies and, 381 Regulatory lag, 382 Reiley, David Jr., 492n5 Relative prices, determination of, 406–407 Relative valuations, bundling and, 420–423 Rental rate of capital, 244–245 Rent-maximizing policy, 552 Rent seeking, 378–379 Repeated games, 498–502 Reputation, 507–508 Research and development (R&D), 665, 679 Reservation prices, 401, 420 Reserve price, auctioning and, 517 Resource depletion, 584–587 degrees of, 587 price of exhaustible resource, 586 Resource production, by monopolist, 586–587 Restaurants, pricing and, 427–428 Return, tradeoff with risk, 179–180 Return on assets, 177–179 Returns to scale, 223–226 constant, 223 decreasing, 223 description of, 224 increasing, 223 Revealed preference, 92–95 Revenue-sharing arrangements, 651 Reynolds, R Larry, 327n4 Rhône-Poulenc of France, 393 Rigidity, price, 473–474 Risk See also Assets; Behavioral economics aversion to, 166–169 budget line and, 180 business executives and, 169–170 decision making and, 163–164 demand for risky assets, 176–184 description of, 160–165 diversification and, 170–171 expected value and, 161 indifference curves and, 180–183 information value and, 174–176 insurance and, 172–173