Đang tải... (xem toàn văn)
Kinh tế vi mô của Mankiw, Kinh tế vi mô của Mankiw, Kinh tế vi mô của Mankiw, Kinh tế vi mô của Mankiw, Kinh tế vi mô của Mankiw, Kinh tế vi mô của Mankiw, Kinh tế vi mô của Mankiw, Kinh tế vi mô của Mankiw, Kinh tế vi mô của Mankiw, Kinh tế vi mô của Mankiw, Kinh tế vi mô của Mankiw, Kinh tế vi mô của Mankiw, Kinh tế vi mô của Mankiw, Kinh tế vi mô của Mankiw, Kinh tế vi mô của Mankiw, Kinh tế vi mô của Mankiw, Kinh tế vi mô của Mankiw, Kinh tế vi mô của Mankiw
Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Principles of Microeconomics: a Guided Tour Introduction 1 Ten Principles of Economics The study of economics is guided by a few big ideas 2 Thinking Like an Economist Economists view the world as both scientists and policymakers 3 Interdependence and the Gains from Trade The theory of comparative advantage explains how people benefit from economic interdependence How Markets Work 4 The Market Forces of Supply and Demand 5 Elasticity and Its Application 6 Supply, Demand, and Government Policies How does the economy coordinate interdependent economic actors? Through the market forces of supply and demand The tools of supply and demand are put to work to examine the effects of various government policies Markets and Welfare 7 Consumers, Producers, and the Efficiency of Markets 8 Application: The Costs of Taxation 9 Application: International Trade Why is the equilibrium of supply and demand desirable for society as a whole? The concepts of consumer and producer surplus explain the efficiency of markets, the costs of taxation, and the benefits of international trade The Economics of the Public Sector 10 Externalities 11 Public Goods and Common Resources 12 The Design of the Tax System Market outcomes are not always efficient, and governments can sometimes remedy market failure To fund programs, governments raise revenue through their tax systems, which are designed with an eye toward balancing efficiency and equity Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Firm Behavior and the Organization of Industry 13 The Costs of Production 14 Firms in Competitive Markets The theory of the firm sheds light on the decisions that lie behind supply in competitive markets 15 Monopoly 16 Monopolistic Competition Firms with market power can cause market outcomes to be inefficient 17 Oligopoly The Economics of Labor Markets 18 The Markets for the Factors of Production 19 Earnings and Discrimination These chapters examine the special features of labor markets, in which most people earn most of their income 20 Income Inequality and Poverty Topics for Further Study 21 The Theory of Consumer Choice 22 Frontiers of Microeconomics Additional topics in microeconomics include household decision making, asymmetric information, political economy, and behavioral economics Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it PRINCIPLES OF MICRO ECONOMICS NINTH EDITION N GREGORY MANKIW HARVARD UNIVERSITY Australia • Brazil • Mexico • Singapore • United Kingdom • United States Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it This is an electronic version of the print textbook Due to electronic rights restrictions, some third party content may be suppressed Editorial review has deemed that any suppressed content does not materially affect the overall learning experience The publisher reserves the right to remove content from this title at any time if subsequent rights restrictions require it For valuable information on pricing, previous editions, changes to current editions, and alternate formats, please visit www.cengage.com/highered to search by ISBN#, author, title, or keyword for materials in your areas of interest Important Notice: Media content referenced within the product description or the product text may not be available in the eBook version Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Principles of Microeconomics, Ninth Edition © 2021, 2018 Cengage Learning, Inc N Gregory Mankiw Unless otherwise noted, all content is © Cengage ALL RIGHTS RESERVED No part of this work covered by the copyright Senior Vice President, Higher Education & Skills herein may be reproduced or distributed in any form or by any means, Product: Erin Joyner except as permitted by U.S copyright law, without the prior written Product Director: Jason Fremder permission of the copyright owner Product Manager: Chris Rader For product information and technology assistance, contact us at Senior Learning Designer: Sarah Keeling Cengage Customer & Sales Support, 1-800-354-9706 or Senior Content Manager: Anita Verma support.cengage.com In House Subject Matter Experts: Eugenia Belova, For permission to use material from this text or product, Kasie Jean, Shannon Aucoin submit all requests online at www.cengage.com/permissions Product Assistant: Matt Schiesl Digital Delivery Lead: Timothy Christy Marketing Manager: John Carey Intellectual Property Analysts: Ashley M Maynard, Reba Frederics Library of Congress Control Number: 2019941004 ISBN: 978-0-357-13348-4 Loose-leaf Edition: ISBN: 9780357133712 Intellectual Property Project Managers: Betsy Hathaway, Erika Mugavin Production Service: SPi Global US Art Director: Bethany Bourgeois Text Designer: Harasymczuk Design/Bethany Bourgeois Cengage 200 Pier Boulevard Boston, MA 02210 USA Cengage is a leading provider of customized learning solutions with employees residing in nearly 40 different countries and sales in more Design Images: iStock.com/lolostock; iStock.com/ than 125 countries around the world Find your local representative at eurobanks; iStock.com/peeterv; George Rudy/ www.cengage.com Shutterstock.com; iStock.com/4x6 Cover Image: iStock.com/lolostock; iStock.com/ eurobanks Cengage products are represented in Canada by Nelson Education, Ltd To learn more about Cengage platforms and services, register or access your online learning solution, or purchase materials for your course, visit www.cengage.com Printed in the United States of America Print Number: 01 Print Year: 2019 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it To Catherine, Nicholas, and Peter, my other contributions to the next generation Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it JORDI CABRÉ About the Author N Gregory Mankiw is the Robert M Beren Professor of Economics at Harvard University As a student, he studied economics at Princeton University and MIT As a teacher, he has taught macroeconomics, m icroeconomics, statistics, and principles of economics He even spent one summer long ago as a sailing instructor on Long Beach Island Professor Mankiw is a prolific writer and a regular participant in academic and policy debates His work has been published in scholarly journals, such as the American Economic Review, Journal of Political Economy, and Quarterly Journal of Economics, and in more popular forums, such as the New York Times and The Wall Street Journal He is also author of the best-selling intermediate-level textbook Macroeconomics (Worth Publishers) In addition to his teaching, research, and writing, Professor Mankiw has been a research associate of the National Bureau of Economic Research, an adviser to the Congressional Budget Office and the Federal Reserve Banks of Boston and New York, a trustee of the Urban Institute, and a member of the ETS test development committee for the Advanced Placement exam in economics From 2003 to 2005, he served as chairman of the President’s Council of Economic Advisers iv Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Preface: To the Instructor D uring my 20-year career as a student, the course that excited me most was the two-semester sequence on the principles of economics that I took during my freshman year in college It is no exaggeration to say that it changed my life I had grown up in a family that often discussed politics over the dinner table The pros and cons of various solutions to society’s problems generated fervent debate But in school, I had been drawn to the sciences Whereas politics seemed vague, rambling, and subjective, science was analytic, systematic, and objective While political debate continued without end, science made progress My freshman course on the principles of economics opened my eyes to a new way of thinking Economics combines the virtues of politics and science It is, truly, a social science Its subject matter is society—how people choose to lead their lives and how they interact with one another—but it approaches the subject with the dispassion of a science By bringing the methods of science to the questions of politics, economics tries to make progress on the challenges that all societies face I was drawn to write this book in the hope that I could convey some of the excitement about economics that I felt as a student in my first economics course Economics is a subject in which a little knowledge goes a long way (The same cannot be said, for instance, of the study of physics or the Chinese language.) Economists have a unique way of viewing the world, much of which can be taught in one or two semesters My goal in this book is to transmit this way of thinking to the widest possible audience and to convince readers that it illuminates much about the world around them I believe that everyone should study the fundamental ideas that economics has to offer One purpose of general education is to inform people about the world and thereby make them better citizens The study of economics, as much as any discipline, serves this goal Writing an economics textbook is, therefore, a great honor and a great responsibility It is one way that economists can help promote better government and a more prosperous future As the great economist Paul Samuelson put it, “I don’t care who writes a nation’s laws, or crafts its advanced treaties, if I can write its economics textbooks.” What’s New in the Ninth Edition? Economics is fundamentally about understanding the world in which we live Most chapters of this book include Case Studies illustrating how the principles of economics can be applied In addition, In the News boxes offer excerpts from newspapers, magazines, and online news sources showing how economic ideas shed light on current issues facing society After students finish their first course in economics, they should think about news stories from a new perspective and v Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Index profit maximization and, 266–276, 358–359 revenue of, 264–266 shift in demand in short run and long run, 279 short-run decision to shut down, 270–271 short-run supply curve, 276, 277 sunk costs and, 270–272, 271 supply curve in, 276–281 supply curve, marginal cost as, 268–269 supply decision, 268–269 zero profit and, 278–279 Competitive market, 62, 264, 264–266 characteristics of, 264 firms in, 263–282 long-run supply curve, 279–281 meaning of, 264 revenue of competitive firm, 264–266 shift in demand in short run and long run, 279 zero profit and, 278–279 Complements, 67 cross-price elasticity of demand, 96 Concentration ratio, 318 Condorcet, Marquis de, 453 Condorcet paradox, 454, 454–456 Congestion common resource and, 218–219 gas tax and, 195 pricing, 218 Congressional Budget Office (CBO), 28, 205, 236 Constant returns to scale, 257, 257 Consumer choice budget constraint, 420–423 consumer optimal choices, 428–429 deriving demand curve, 433–434 Giffen goods, 436 income changes and, 429–430 income effect, 432–433 indifference curve, 423–427 inferior good, 430 interest rates and household saving, 440–442 marginal rate of substitution, 424 normal good, 429 optimization, 428–434 perfect complements, 426–427 perfect substitutes, 426 preferences, 423–427 price changes and, 430–431 substitution effect, 432–433 theory of, 435–442 wages affect labor supply, 436–439 Consumer surplus, 132–136, 133, 299 evaluating market equilibrium, 142–145 lower price raises, 134–135 market efficiency and, 141–147 measure, 135–136 price affects, 136 using demand curve to measure, 133–135 willingness to pay, 132–133 Consumption rivalry in, 210 trade expands set of opportunities, 49 Consumption-saving decision, 441, 461 Consumption tax, 232 Cooperation, economics of, 341–347 Coordinate system, 36–37 curves in, 37–39 graphs of two variables, 36–37 Coordination problems, 257–258 Corporate income taxes, 229–230, 236, 238–239 Corporation, defined, 229 Corrective taxes, 194, 194–198, 200, 231 Correlation, positive and negative, 37 Cost(s), 137, 244–246 average fixed, 252, 259 average total, 252, 259, 268 average variable, 252, 259 of capital, 245 economic profit vs accounting profit, 246 economies of scale and, 176 explicit, 245, 246 fixed, 251, 259 implicit, 245, 246 marginal (See Marginal cost (MC)) opportunity (See Opportunity cost(s)) of possible sellers, 137 production and, 247–249 473 in short run and long run, 256–258 social, 190 sunk, 270–272, 271 of taxation, 151–165 total, 244 transaction, 203 variable, 251, 259 various measures of, 250–256 Cost-benefit analysis, 215, 215–216, 309 Cost curves and their shapes, 252–254 typical, 254–255 Council of Economic Advisers (CEA), 28, 198, 404 Countries application of supply, demand, and elasticity, 103–104 failure to keep price of oil high, 103–104 increase in price of crude oil, 112–113 Cox, Michael, 404, 405 Crandall, Robert, 348, 349 Crane, Daniel, 352–353 Cross-price elasticity of demand, 96, 96 Curves, 37–39 movements along, 38–39 shifts of, 38 slope of, 39–41 Customers, discrimination by, 391–392 D Dairy industry, 264 Deadweight loss, 155, 226, 231–232 changes in welfare, 154–155 debate, 158–159 determinants of, 157–159 elasticity and, 157–159 gains from trade and, 155–156 in monopoly, 299–301 source of, 156 tariffs and, 174 of taxation, 152–156 tax revenue and, 160–163 DeBeers, 289 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it 474 Index Demand, 63–69 applications of, 100–106 change in, 77 cross-price elasticity of, 96 decrease in, 66 derived, 358 elastic, 88, 91, 92, 95 elasticity of (See Demand elasticity) equilibrium of supply and, 73–75 excess, 74, 75 expectations and, 67 income changes, 66 increase in, 66, 76, 280 individual, 64–65 inelastic, 88, 91, 92, 95 for labor, 358–364 law of, 63 market, 64–65 market forces of supply and, 61–82 number of buyers and, 67 perfectly inelastic, 91, 92 price elasticity of, 92 prices of related goods and, 66–67 reducing smoking, 68–69 relationship between price and quantity demanded, 63–64 supply, 73–79, 109–110, 358, 363 tastes and, 67 Demand curve(s), 37, 38, 63–64, 64 for competitive firms, 292 demand schedule and, 134 deriving, 433–434 elasticity of linear, 95 measuring consumer surplus with, 133–135 for monopoly firms, 292 price elasticity of demand and, 90–92 shifts in, 38–39, 65–69 shifts in vs movements along, 68 variety of, 91–93 Demand elasticity, 88–96 income, 96 price, 88–89 Demand schedule, 64 demand curve and, 64, 134 Department of Justice, 28, 288, 308, 348, 349, 351 Department of Labor, 28 Department of the Treasury, 28 Derived demand, 358 Differentiated products, competition with, 320–326 Diminishing marginal product, 249, 249, 250, 253–255, 257, 361, 363, 372 Diminishing marginal utility, 407, 430 Discount coupons, price discrimination and, 305–306 Discrimination, 111, 387, 387–393 by customers and governments, 391–392 earnings and, 379–395 economics of, 387–393 by employers, 389–391 in labor market, 387–389 measuring labor-market discrimination, 387–389 profit motive and, 390–391 in sports, 391–392 statistical, 392–393 Diseconomies of scale, 257, 257–258 Disney, 214 Distribution of income in U.S., 398–399 neoclassical theory of, 374 Dividends, 372 Dominant strategy, 342, 342–345 Drug interdiction, applications of supply, demand, and elasticity, 104–105 Drugs, generic vs monopoly, 297 Duopoly, 336, 338, 339 E Earned income tax credit (EITC), 118, 121, 404, 412 Economic growth, production possibilities frontier and, 21–24 Economic life cycle, 403 Economic mobility, 405–406 Economic models, 19–20 Economic profit, 246 Economic Report of the President, 28 Economics, See also Welfare economics behavioral, 458–463 of Black Death, 373 of cooperation, 341–347 of discrimination, 387–393 of immigration, 367 within a marriage, 56–57 supply-side, and Laffer curve, 161–162 ten principles of, 1–13 Economic welfare, total surplus and, 142 Economies of scale, 257, 257–258 as a cause of monopoly, 290 lower costs through, 176 specialization and, 257 Economists vs accountants, 246 disagreement among, 29–32 follow-up on advice of, 28–29 as policy adviser, 25–29 propositions which most agree about, 30 as scientist, 18–25 tech companies hiring, 26 thinking about social value, 80–81 thinking like, 17–33 in Washington, 27–28 Economy centrally planned, market, 7–8 parable for modern, 46–50 political, 453–457 underground, 159 Education alternative view of, 383–384 cost of college, 3–4 as positive externality, 191–193 signaling theory of, 383–384 social optimum and, 192 type of human capital, 380–382 wages and, 383–384 Efficiency, 3, 142 of equilibrium quantity, 144 government intervention and, 10 market (See Market efficiency) production possibilities frontier and, 22 taxes and, 230–234 total surplus and, 142 trade-off between equity and, 239–240 Efficiency wages, 385 Efficient scale, 254, 254, 277, 323, 324 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Index Efforts, wages and, 382–383 Einstein, Albert, 18 EITC See Earned income tax credit Elastic demand, 88, 91, 92, 95 Elasticity, 88 along a linear demand curve, 94–96 applications of, 87–106 deadweight loss and, 157–159 of demand (See Demand elasticity) income elasticity of demand, 96 real world, 91 of supply, 97–100 tax incidence and, 125–126 Elephants, common resource, 220 Employers, discrimination by, 389–391 Engel’s law, 96 Entry/exit into market, 270 firm’s long-run decision to, 276–278 long-run market supply with, 276–278 Environmental Protection Agency (EPA), 194, 198 Environmental regulations, 3, 194 EPA See Environmental Protection Agency Equality, 3, 142 government intervention and, 10 Equilibrium, 73, 73–75 analyzing changes in, 75–79 for an oligopoly, 338–339 consumer and producer surplus in market, 143 decrease in supply affects, 78 increase in demand affects, 77 in labor market, 366–370 long-run, 322–323 market, and shift in supply, 76 in markets for land and capital, 370–373 markets not in, 75 of supply and demand, 73–75 without international trade, 168–169 zero-profit, 278 Equilibrium price, 73, 73–79, 110–112, 115, 153 Equilibrium quantity, 73, 73, 104, 105, 123, 144, 190 Equilibrium wages, 385, 388 ability, effort, and chance, 382–383 above-equilibrium wages, 385 compensating differentials, 380 determinants of, 380–386 human capital, 380–382 signaling, 383–384 superstar phenomenon, 384–385 Equity horizontal, 237–238 taxes and, 234–239 trade-off between efficiency and, 239–240 vertical, 235–237 Ethiopia, income inequality in, 401 EU See European Union European Union (EU), 351, 352 Excess capacity, 324 Excess supply and demand, 74 Excise taxes, 229 Excludability, 210, 211, 213, 214 Expectations shifts in demand curve, 67 shifts in supply curve, 72 Explicit costs, 245, 246, 259, 279 Exports, 54 see also International trade gains and losses from exporting country, 170–171 Externalities, 10, 148, 187–207, 188 business-stealing, 325 carbon tax, 198–199 Coase theorem, 202–203 command-and-control policies, 193–194 corrective taxes and subsidies, 194–197 education as, 191–193 gas tax and, 195 internalizing, 191 market inefficiency and, 189–193 negative, 188, 190–191 positive, 188, 191–193 private solutions to, 201–204 product-variety, 325 public policies toward, 193–201 technology spillovers, 192–193 tradable pollution permits, 197–200 transaction costs, 203 ExxonMobil, 345 Eyeglasses, 327 475 F Facebook, 220 Factors of production, 20–22, 358 competitive profit-maximizing firm, 358–359 demand for labor, 358–364 equilibrium in labor market, 366–370 land and capital, 370–373 linkages among, 372–373 markets for, 20–21, 357–378 production function and marginal product of labor, 359–361 shifting labor-demand curve, 362–363 supply of labor, 364–365 value of marginal product, 361–362 Fair Labor Standards Act of 1938, 116 Fairness, behavioral economics and, 459–460 Farming, applications of supply, demand, and elasticity, 101–103 Federal government receipts of, 227 taxes collected by, 227–229 Federal Reserve (Fed), 28 FICA (Federal Insurance Contributions Act), 124 Financial aid, price discrimination and, 306–307 Firm(s) See also Competitive firms in circular-flow diagram, 20–21 efficient scale of, 324 marginal, 281 market supply with fixed number of, 276 profit-maximizing, 358–359 Fisher, Franklin, 351 Fixed costs, 251 average, 252 Flypaper theory of tax incidence, 238 Food stamp program, 214, 237, 404, 412 Ford, Gerald, 12 Ford Motor Company, 256, 340 401(k) plans, 232, 459, 461 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it 476 Index France, income inequality in, 401 Franklin, Ben, 225, 387 Free rider, 212, 212–215, 349 Free To Be You and Me style, 56 Free trade, 167–186 G Gains from trade comparative advantage, 50–55 deadweight losses and, 155–156 of exporting country, 170–171 of importing country, 171–173 production possibilities, 46–48 specialization, 48–50 Gale, William, 415 Game theory, 335, 336, 341, 342, 344, 460 Gapper, John, 220 Gasoline prices, incentive effects of, Gasoline tax, 235 as corrective tax, 195–196 road congestion and, 195 Gates, Bill, 351 GATT See General Agreement on Tariffs and Trade Gender, 383 See also Women General Agreement on Tariffs and Trade (GATT), 181 General Mills, 328 General Motors, 340 Generic drugs vs monopoly drugs, 297–298 Germany income inequality in, 401 inflation in, 11–12 living standards in, 11 Giberson, Michael, 80–81 Giffen goods, 436 Giffen, Robert, 436 Gifts as signals, 451 Good(s), 66 club, 211, 290 complements, 67 different kinds of, 210–212 excludability of, 210, 211, 213, 214 inferior, 66, 96, 430 international trade increases variety of, 176 markets for, 20–21 normal, 66, 96, 429 private, 210, 211 public, 210, 211, 213–215 related, 66–67 rivalry in consumption, 210 substitutes, 66 types of, 210–211 Google, 26, 27, 288 Government See also Federal government benefits of, 9–10 discrimination by, 391–392 Government-created monopolies, 289, 302 Government policies price control and, 110–118 supply, demand, and, 109–110 taxes and, 119–126 Graph(s), 35–43 cause and effect, 41–43 curves in, 37–39 measuring profit in, 274–275 of single variable, 35–36 slope of, 39–41 of two variable, 36–37 Great Britain, unilateral approach to free trade, 181 Greenspan, Alan, 232 “Guns and butter” tradeoff, H Hamermesh, Daniel, 383 Hamilton, 147 Hamlet (Shakespeare), 350 Health insurance, 450 Hemel, Daniel, 306–307 Hemingway, Mark, 205 Hill, Adriene, 80–81 Holmes, Oliver Wendell, Jr., 151 Homo economicus, 458, 462 Homo sapiens, 458 Honda, 340 Hoover, Herbert, 182 Horizontal equity, 235, 235, 237–238 Horizontal mergers, 308 Households in circular-flow diagram, 20–21 decisions faced by, Housing, rent control, 113–114 Human capital, 380, 380–382 education as, 380–382 role of, 388 Human-capital theory, 384 Human life, value of, 215–216 Human organs, market for, 145 I Immigration, 366 American workers, impact on, 374–375 Imperfect competition, 318, 342, 352 Implicit costs, 245, 246, 259 Import quota, 30 compared to tariff, 175 Imports, 54 See also International trade gains and losses of importing country, 171–173 Impression Products v Lexmark International, 306–307 Incentives, 5, 5–6, 155, 163, 191, 193–195, 231, 233, 234, 276, 289, 329, 336, 398, 407, 408, 413–415, 449, 451 Income See also Wages capital, 372 changes in affect consumers’ choices, 429–430 economic life cycle, 403 effect, 432–433 in-kind transfers as, 403 permanent, 403–404 political philosophy of redistributing, 406–410 shifts in demand and, 66 tax credits, 403 transitory vs permanent, 403–404 U.S distribution of, 398–399 Income effect, 364, 365, 432–436, 442 Income elasticity of demand, 96 Income inequality alternative measures of, 404 around world, 399–400, 414–415 economic mobility, 405–406 measurement of, 398–406 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Index problems in measuring inequality, 403 poverty and, 400–402 in U.S., 398–399 Income or consumption debate, taxation, 231–232 Income redistribution, international differences in, 414–415 Income tax, negative, 411–412 Inconsistency, behavioral economics and, 460–461 India, income inequality in, 401 Indifference curve(s), 423 Input demand and output supply, 363 Input prices and supply, 71–72 Inquiry into the Nature and Causes of the Wealth of Nations, An (Smith), 7, Internalizing the externality, 191 International trade, 167–186 benefits of, 176–177 comparative advantage, 169–170 determinants of, 168–170 effects of tariffs, 173–175 equilibrium without, 168–169 gains and losses of exporting country, 170–171 gains and losses of importing country, 171–173 import quota compared to tariff, 175 lessons for policy of, 175–176 multilateral approach to free trade, 181 relative demand for skilled and unskilled labor and, 382 restriction of, 175 of United States, 54–55 winners and losers from, 170–178 world price, 169–170 extreme examples of, 426–427 income effect, 432–433 perfect complements, 426–427 perfect substitutes, 426 properties of, 424–425 Individual demand, 64–65 Individual retirement account (IRA), 232 Individual supply vs market supply, 70–71 Indonesia, income inequality in, 401 Industrial organization, 243, 244, 311, 319 Industrial policy, 192–193 Inefficiency, externalities and, 189–193 Inelastic demand, 88, 91, 92, 95, 102, 125 Inelastic supply, 97, 103, 126 Inequality alternative measures of, 404 around world, 399–400 Infant-industry argument for trade restrictions, 180 Inferior goods, 66, 430 income elasticity of demand and, 96 Information, 329 Inflation, 11, 11–12 money supply and, 12 short-run trade-off between unemployment and, 12 Information, asymmetry See Asymmetric information In-kind transfers, 403 policies to reduce poverty, 412–413 Intuit, 288 Investment in people, 380 schooling as, 386 Invisible hand, 8–10, 82, 187, 197, 288, 299, 325, 346, 398, 450, 452, 462 IRA See Individual retirement account Irwin, Douglas, 182–183 Israel, shifts in labor supply and, 366 Italy, income inequality in, 401 J Jackson, C Kirabo, 386 Jackson, Penfield, 351 James, LeBron, 54 Japan, income inequality in, 401 477 Jensen, Robert, 436 Job(s) argument for trade restrictions, 178–179 characteristics of, 388 Johnson, Rucker, 386 Jones, Jamal, 389 Journal of Economic History, 390 Journal of Labor Economics, 392 Journal of Law and Economics, The, 327 K Kellogg, 328, 329 Kennedy, John F., 401 Kenya, elephant poaching, 219 Keynes, John Maynard, 28, 32–33 King, Stephen, 317 Knee, Defender, 204 L Labor demand for, 358–364 international trade and demand for skilled and unskilled, 382 jobs argument for trade restrictions, 178–179 marginal product of, 361–362 supply of, 364–365 taxes on, 158–159 technology and demand for skilled and unskilled, 382 Labor demand minimum wage and, 117 shifts in, 368–370 Labor-demand curve output price, 362 supply of other factors, 363 technological change, 363 Labor force, 102, 117, 388 Labor market discrimination, measuring, 387–389 equilibrium in, 366–370 minimum wage effects on, 116–117 racial discrimination in, 389, 390 Labor supply shifts in, 366–368 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it 478 Index Labor-supply curve changes in alternative opportunities, 365 changes in tastes, 365 immigration, 365 shift in, 365 Labor tax, deadweight loss of, 158–159 Laffer, Arthur, 161–162 Laffer curve, 160, 161–162 Laffer curve and supply-side economics, 161–162 Laibson, David, 478 Laissez faire, 144 Land, factors of production, 370–373 Law of demand, 63, 64, 66, 88, 200, 435, 436 Law of supply, 69, 70, 75, 97, 243 Law of supply and demand, 75 Learning by doing, 57 Leisure, trade-off between work and, 364–365 Lemons problem, 450 Lexmark, 306–307 Liberalism, 408–409 Libertarianism, 409 Life cycle, 403 Lighthouses as public goods, 214–215 Local government, taxes collected by, 229–230 Lochner, Lance, 387 Lohr, Steve, 26 Long, Russell, 234 Long run costs in, 256–258 decision to exit or enter a market, 276–278 market supply, 276–278 rent control, 113–114 shift in demand, 279 supply curve, 276–281 Long-run equilibrium, 264, 277, 279, 280, 322–324 Losses See also Deadweight loss of exporting country, 170–171 of importing country, 171–173 Lump-sum taxes, 233, 233–234 Luxuries income elasticity of demand and, 96 price elasticity of demand and, 88–89 Luxury tax, 126 M Macroeconomics, 24, 24–25 Malawi, elephants as private good, 220 Mankiw, N Gregory, 198 Marginal benefits, 4–6 Marginal buyers, 133, 144, 155, 189, 300 Marginal change, Marginal cost (MC), 4–5, 251–252, 252, 259, 363 markup over, 324 pricing for a natural monopoly, 309 related to average total cost, 254 rising, 253 Marginal-cost (MC) curve and average-cost curves, 253 firm’s supply decision and, 268–269 Marginal firm, 281 Marginal product, 248 demand for labor and value of, 361–362 diminishing, 249, 361 Marginal product of labor (MPL), 360, 361 production function and, 359–361 value of, 361–362 Marginal rate of substitution (MRS), 424, 425, 426, 428, 429, 430, 432, 433, 443 Marginal revenue (MR), 266, 293 for competitive firm, 264–266 Marginal revenue product, 361 Marginal seller, 138, 144, 189 Marginal tax rates, 158, 228, 233 vs average tax rates, 233 Margin, defined, Market(s), 62 See also Competitive market competition and, 62–63 definition of, 89 efficiency of, 131–148 firm’s long-run decision to exit or enter, 276–278 for goods and services, 20–21 for land and capital, equilibrium in, 370–373 with only few sellers, 336–340 perfectly competitive, 62 size of oligopoly affecting, 339–340 Market demand, 64–65, 67, 70, 73, 133, 269, 291, 292, 297, 300, 335 Market economy, 7, 7–8 Market efficiency, 141–148 consumer surplus and, 141–147 market failure and, 147–148 producer surplus and, 141–147 Market equilibrium, evaluating, 142–145 Market failure, 10, 147–148, 177, 189, 191, 205, 210, 212, 218, 221, 311, 313, 348, 452 See also Externalities Market power, 10, 147, 148, 177, 263, 264, 282, 288, 289, 291, 298, 300, 301, 302, 308, 318, 324, 327, 340, 343, 348, 349–351, 370, 385 Market share, 340 Market structure, types of, 319 Market supply with entry and exit, long run, 276–278 with fixed number of firms, short run, 276 vs individual supply, 70–71 as sum of individual supplies, 71 Markup over marginal cost, 324, 327 Marron, Donald, 205 Mattis, Jim, 183 Maximin criterion, 408, 409 MC See Marginal cost McDonald’s, 54, 329–330 Median voter theorem, 455–457, 456 Medicaid, 230, 237, 412, 413 Medicare, 124, 158, 228, 229, 237, 415 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Index Mexico income inequality in, 401 NAFTA and, 181 Meyer, Bruce D., 404–405 Microeconomics, 24, 24–25 asymmetric information, 448–453 behavioral economics, 458–463 political economy, 453–457 Microsoft Corporation, 26, 27, 287, 288, 351 Midpoint method, 90 Mill, John Stuart, 407 Miller, Nolan, 436 Miller, Tracy C., 146–147 Minimum wage, 116–117, 120–121 advocates and opponents of, 117 Fair Labor Standards Act of 1938, 116 labor market and, 116–117 price floor, 116, 118 teenage labor market and, 117 Minimum-wage laws determinant of equilibrium wages, 385 evaluating price controls, 118 policies to reduce poverty, 410–411 Miranda, Lin-Manuel, 147 Monetary income, 403 Money supply, inflation and, 12 Monopolistically competitive firms, in the short run, 320–321 Monopolistic competition, 317–332, 318 advertising, 326–330 competition with differentiated products, 320–326 excess capacity, 324 free entry and exit of firms, 319 long-run equilibrium, 322–323 many sellers, 319 markup over marginal cost, 324 between monopoly and perfect competition, 318–320 vs perfect competition, 318–320, 323–324 product differentiation, 319 and welfare of society, 324–325 Monopolistic competitors in the short run, 321 Monopoly(ies), 63, 287–316, 288, 318–320 arising, 288–291 cartels and, 336–338 vs competition, 291–292, 312 deadweight loss in, 299–301 demand and marginal-revenue curves for, 294 economies of scale as a cause of, 290 government-created, 289 inefficiency of, 301 marginal-cost pricing for a natural, 309 natural, 211, 290–291 parable about pricing, 302–303 prevalence of, 311–312 price discrimination and, 302–308 production and pricing decisions in, 291–298 profit, 296–298 profit as social cost, 301–302 profit maximization in, 295 public ownership and, 310 public policy toward, 308–311 regulation, 309–310 resources, 289 revenue, 292–294 supply curve, 297 welfare cost of, 299–302 Monopoly drugs vs generic drugs, 297 Monopoly firms, demand curves for, 292 Monopsony, 370 Moore, Stephen, 162 Moral hazards, 448, 448–449 Moretti, Enrico, 387 Movie tickets, price discrimination and, 305 MPL See Marginal product of labor MR See Marginal revenue MRS See Marginal rate of substitution Mullainathan, Sendhil, 389 Municipal bonds, 233 Muskie, Edmund, 200 N Nadal, Rafael, 384, 385 Nader, Ralph, 479 NAFTA See North American Free Trade Agreement Namibia, elephants as private good, 220 Nash equilibrium, 338, 342, 460 Nash, John, 338 National defense, important public goods, 211, 213 National Highway Traffic Safety Administration, 195 National income, 35, 162, 357 National Institutes of Health (NSF), 213 National Science Foundation, 213 National-security argument for trade restrictions, 179–180 Natural disasters, price and, 80–81 Natural monopolies, 211, 290, 290–291 marginal-cost pricing for, 309 Natural resources, 18 Negative correlation, 37 Negative externalities, 188, 190–191, 194, 195, 200, 325 Negative income tax, 31, 411–412, 412 Neoclassical theory of distribution, 374 Netflix, 26 Neumark, David, 120–121 Newton, Isaac, 18 New York Times, 348 Nigeria income inequality in, 401 living standards in, 11 Normal goods, 66, 200, 429, 430, 432, 435, 438, 442 income elasticity of demand and, 96 Normative statements, 25–27, 26 North American Free Trade Agreement (NAFTA), 181 Nozick, Robert, 409 O Obama, Barack, 198, 240, 414, 415, 463 Observation, 18–19 Oceans, common resources, 219 Office of Management and Budget, 28 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it 480 Index Oikonomos, Oligopoly, 318, 335 economics of cooperation, 341–347 equilibrium for, 338–339 markets with only a few sellers, 336–340 as prisoners’ dilemma, 342–343 public policy toward, 347–352 size of, affecting market outcome, 339–340 Omitted variable, 41, 42, 43, 383 OPEC See Organization of the Petroleum Exporting Countries Opportunity cost(s), 4, 50, 50–51, 244 comparative advantage and, 50–51 cost of capital as, 245 costs as, 244–245 economists vs accountants, 246 explicit and implicit costs, 245, 259 production possibilities frontier and, 21–24 Optimization consumer optimal choice, 428–429 deriving demand curve, 433–434 income changes and, 429–430 income effect, 432–433 price changes and, 430–431 substitution effect, 432–433 utility of, 430 Optimum, 155, 161, 174, 190, 191, 192, 193, 195, 300, 347, 428, 429, 430, 431, 432, 433, 435, 437, 440, 441 Ordered pair, 36 Oreopoulos, Philip, 389 Organization of the Petroleum Exporting Countries (OPEC), 343 and price of oil, 103–104 and world oil market, 343 world oil market and price ceilings and lines at gas pump, 112–113 Organs (human), market for, 145 Origin, of graph, 36, 425 Oster, Emily, 56–57 Ouellette, Lisa Larrimore, 306–307 Output effect, 293, 339 Output price, 362 P Pakistan, income inequality in, 401 Palestine, shifts in labor supply and, 366 Patent protection, 192–193 Payoff matrix, 341 Payroll taxes, 228 burden of, 123 Peltzman, Sam, PepsiCo, 308 Perception vs reality, 30–32 Perfect competition, 318–320 excess capacity, 324 markup over marginal cost, 324 vs monopolistic competition, 323–324 Perfect complements, 426–427, 427 Perfectly competitive markets, 62, 63, 264, 281, 318, 323, 325, 331 Perfectly elastic supply, 98, 278 Perfectly inelastic demand, 91, 92 Perfectly inelastic supply, 98, 199 Perfect price discrimination, 304, 305 Perfect substitutes, 89, 291, 298, 426, 427 Permanent income, 403, 403–404 Persico, Claudia, 386 Personal income, 225, 230, 233 Personal income taxes, 225, 227–229, 231, 236 Philbrick, Nathaniel, 317 Philippines, income inequality in, 401 Pie chart, 35 Pigou, Arthur, 194, 195 Pigovian taxes, 194 Piketty, Thomas, 400 Pin factory, 258 Political economy, 453, 453–457 Arrow’s impossibility theorem, 454–455 Condorcet voting paradox, 453–454 median voter theorem, 455–457 politicians’ behavior, 457 Political failure, 311 Politicians, behavior of, 457 Pollution clean air and water as common resource, 218 corrective taxes and, 194–200 Environmental Protection Agency (EPA), 194 gas tax, 196 as negative externality, 218 objections to economic analysis of, 200 regulation and, 194 social optimum and, 190 tradable pollution permits, 197–200 Porter, Eduardo, 414–415 Positive correlation, 37 Positive externalities, 188, 191–193 technology spillovers, industrial policy, and patent protection, 192–193 Positive statements, 25–27, 26 Poverty, 404–405 correlated with age, race, and family composition, 402 fighting, as public good, 214–215 income inequality and, 400–402 in-kind transfers, 412–413 policies to reduce, 410–415 Poverty line, 117, 400, 401, 402, 405 Poverty rate, 179, 400, 400–403, 405 Predatory pricing, 349–350 Preferences consumer choices, 423–427 marginal rate of substitution, 424 representing with indifference curves, 423–424 utility and, 430 Prevalence of monopolies, 311–312 Price(s) advertising affects, 327–328 allocation of resources and, 81–82 changes in consumer choices, 430–431 control on, 110–118 equilibrium, 73 higher price raises producer surplus, 140–141 input prices and supply, 71–72 lower price raises consumer surplus, 134–135 market-clearing, 73 natural disasters and, 80–81 output, 362 quantity demanded and, 63–64 quantity supplied and, 69–70 of related goods and demand, 66–67 rental, of land or capital, 371–372 shortages and, 74 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Index surplus and, 74 of trade, 52–53 when supply and demand shifts, 78–79 willingness to pay, 132–133 world, 169–170 Price ceiling, 110 binding constraint, 110 lines at gas pump, 112–113 market outcomes and, 110–111 not binding, 110 rent control, 113–114 Price controls, evaluating, 118 Price discrimination, 302 airline prices, 305 analytics of, 304–305 discount coupons, 305–306 examples of, 305–307 financial aid, 306–307 monopolies and, 302–308 movie tickets, 305 quantity discounts, 307 Supreme Court decisions, 306–307 welfare with and without, 304 Price effect, 293, 294, 339, 340 Price elasticity of demand, 88, 88–89 computing, 89 determinants of, 88–89 elasticity and total revenue along a linear demand curve, 94–96 midpoint method, 90 total revenue and, 93–94 variety of demand curves, 91–93 Price elasticity of supply, 97 computing, 98 determinants of, 97 variety of supply curves, 100–101 Price floor, 110 market outcomes and, 114–115 minimum wage, 116–117 Price gouging, 80–81, 82 Price maker, 287, 297, 317 Price takers, 62, 170, 264, 268, 269, 282, 287, 292, 294, 297, 317, 318, 319, 340, 359 Pricing congestion, 218 in monopoly, 302–303 predatory, 349–350 Pricing decisions, in monopolies, 291–298 Principals, 448, 448–449 Principles of Political Economy and Taxation (Ricardo), 53 Prisoners’ dilemma, 341, 341–346 arms races, 344 common resources, 345 cooperation and, 346–347 examples of, 344–345 oligopolies as, 342–343 tournament, 347 and the welfare of society, 345–346 Private goods, 210, 211, 214, 215, 217–220, 235 Producer surplus, 137–141, 138, 299 cost and willingness to sell, 137–138 evaluating market equilibrium, 142–145 higher price raises, 140–141 market efficiency and, 141–147 using supply curve to measure, 138–140 Product differentiation, 319, 327 Production cost of, 244 and costs, 247–249 factors of, 20–22, 357–378 resources, limited quantities of, 279 Production decisions, in monopolies, 291–298 Production function, 247, 360 from, to the total-cost curve, 249 marginal product of labor and, 359–361 total cost and, 247–249 Production possibilities frontier, 21, 21–24 economic growth and, 21–24 efficiency and, 22 gains from trade, 46–48 opportunity costs and, 21–24 trade-offs and, 23–24 Productivity, 11 relationship between living standards and, 11 wages and, 369 Product-variety externality, 325 Profit, 244, 244 accounting, 246 as area between price and average total cost, 274 economic, 246 481 measuring in graph for competitive firm, 274–275 in monopoly, 296–298 Profit maximization competitive firm’s supply curve and, 266–276 example of, 266–267 in monopoly, 295 Progressive tax, 236 Property rights, importance of, 221–222 technology and, 193 Property taxes, 225, 229 Proportional tax, 236, 412 Protection-as-a-bargaining-chip argument for trade restrictions, 180–182 Protectionism, 182–183 Public good(s), 210, 211 antipoverty programs, 214 basic research, 213–214 cost-benefit analysis, 215–216 free-rider problem, 212–213 importance of property rights, 221–222 lighthouses as, 214 national defense, 213 value of human life, 215–216 Public investment, schooling as, 386 Public ownership, monopolies and, 310 Public policy, 10, 452–453 See also Antitrust laws toward externalities, 193–201 toward monopolies, 308–311 toward oligopolies, 347–352 Public policymakers, 5, 189, 193 Purchase price, 371–372 Putnam, Howard, 348 Q Quality, advertising as a signal of, 328–329 Quality of life, 11 Quantity, equilibrium, 73 Quantity demanded, 63 change in, 77 relationship between price and, 63–64 Quantity discounts, price discrimination and, 307 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it 482 Index Quantity supplied, 69, 76 Quarterly Journal of Economics, 392, 440 Quintile ratio, 400 Quintiles, 237, 398, 399 Quotas, import, 30, 173, 175 Rivalry in consumption, 210 Road congestion, gasoline tax and, 195, 218 Roback, Jennifer, 390 Roth, Alvin E., 26 Russia, income inequality in, 401 S R Race discrimination in labor market, 389, 390 discrimination in sports, 391–392 median annual earnings by, 388 segregated streetcars and, 390–391 Rationality, behavioral economics and, 458–459, 462–463 Rational people, 4, 4–5, 136, 233, 248, 267, 281, 294, 361, 409 Rawls, John, 408, 416 Reagan, Ronald, 29, 161, 162, 239, 415 tax cuts under, 161–162 Reality, perception vs., 30–32 Regressive tax, 236, 414 Regulation of externalities, 193–194 Rental price, 371–373 Rent control, 30 evaluating price controls, 118 price ceiling, 113–114 in short run and long run, 113–114 Rent subsidies, 118 Resale price maintenance, 349 Resources common, 211, 217–221, 345 limited quantities of production, 279 monopoly, 289 prices and allocation of, 81–82 scarcity of, Restraint of trade, 347–349 Revenue See also Total revenue average, 266, 292 of competitive firm, 264–266 marginal, 264–266, 293 monopoly, 292–294 tax, 153 total, 292 Reverse causality, 41, 42–43 Rhodes, Cecil, 289 Ricardo, David, 53 Saez, Emmanuel, 400 Sales taxes, 229 Salinger, Michael, 80–81 Satisficers, 458 Scalia, Antonin, 352 Scalping, 32, 146–147 Scarcity, Scatterplot, 36, 37 Schmalensee, Richard, 351 Schumer, Chuck, 146 Scientific judgments, differences among economists, 29–30 Scientific method, 18–19 Screening, 452 Segregation, segregated streetcars and profit motive, 390–391 Seller(s) number of, and shifts in supply curve, 73 taxes on, affect market outcomes, 119–122 variables that influence, 73 Services, markets for, 20–21 Sex, median annual earnings by, 388 Shaw, George Bernard, 29 Sherman Antitrust Act, 308, 348 Shortage, 74 lines at gas pump, 112–113 price ceilings and, 110 Short run costs in, 256–258 increase in demand, 280 market supply with fixed number of firms, 276 monopolistic competitors in, 320–321 rent control, 113–114 shift in demand, 279 Shut down, 270 competitive firm’s short-run decision to, 270–271 near-empty restaurants and, 272 off-season miniature golf and, 272 Sierra Club, 201 Signaling, 450, 450–451 advertising, 384 education, 384–385 Simon, Herbert, 458 Skill-biased technological change, 382 Skills, increasing value of, 381–382 Slope, 39–41, 94, 249, 279–281, 435–436, 439 Smith, Adam, 7–9, 53, 82, 145, 187, 258, 348, 397, 452 Smith, Noah, 386–387 Smoking, reducing, 68–69 SNAP See Supplemental Nutrition Assistance Program Social Choice and Individual Values (Arrow), 455 Social cost, 190 monopoly’s profit as, 301–302 Social insurance, 408 Social insurance taxes, 228, 229 Social media, 220–221 Social Security, 124, 228, 237 tax, 158 Society decisions faced by, faces short-run trade-off between inflation and unemployment, 12 South Africa, income inequality in, 401 South Korea, unilateral approach to free trade, 181 Soviet Union, collapse of communism in, Specialization, 257 driving force of, 50–53 economies of scale and, 257–258 trade and, 48–50 Sports, discrimination in, 391–392 SSI See Supplemental Security Income Standard of living determinants of, 11 relationship between productivity and, 11 Starbucks, 21 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Index State government, taxes collected by, 229–230 Statistical discrimination, 392, 392–393 Stigler, George, 311 Stockman, David, 161 Stoll, John D., 352 Stone, Emma, 384, 385 Strike, 385 Subsidies market-based policy, 194–197 rent, 118 wage, 118 Substitutes, 66 cross-price elasticity of demand, 96 price elasticity of demand, 88 Substitution effect, 365, 432–433 Sullivan, James X., 404–405 Sunk costs, 270–272, 271 Superheroes, 350 Superstar phenomenon, 384–385 Supplemental Nutrition Assistance Program (SNAP), 214, 404, 412 Supplemental Security Income (SSI), 411 Supply, 69–73 applications of, 100–106 change in, 77 decrease in, 71, 78 elasticity of, 97–100 equilibrium of demand and, 74–75 excess, 74 increase in, 71, 101 individual, 70–71 inelastic, 97 input prices and, 71–72 of labor, 364–365 law of, 69 market vs individual, 70–71 number of sellers and, 73 perfectly elastic, 98 perfectly inelastic, 98 price elasticity of, 98, 99 relationship between price and quantity supplied, 69–70 shift in, and market equilibrium, 76 technology and, 72 Supply and demand, 73–79, 109–110 equilibrium of, 73–75 law of, 75 market forces of, 61–82 shift in, 78–79 versatility of, 359 Supply curve(s), 70 in competitive market, 276–281 price elasticity of supply, 98–100 shifts in, 71–73 shifts in vs movements along, 76 supply schedule and, 70, 139 using to measure producer surplus, 138–140 variety of, 98–100 Supply schedule, 70 supply curve and, 69–70, 139 Supply-side economics and Laffer curve, 161–162 Supply siders (economists), 162 Supreme court, price discrimination in, 306–307 Surplus, 74 See also Budget surplus; Consumer surplus; Total surplus price floors and, 116 producer (See Producer surplus) Sweden income inequality in, 401 Laffer curve, 162 Synergies, 309 T TANF See Temporary Assistance for Needy Families Tanzania, elephant poaching, 219 Tariff(s), 30, 173 compared to import quotas, 175 deadweight loss and, 174 effects of in international trade, 173–175 Tastes changes in, 365 shifts in the demand curve and, 66 Tax burden distributed, 237 divided, 126 Tax credits, 403 Tax cuts, under Reagan, 161–162 Tax equity, 238–239 483 Taxes, 119–126 ability-to-pay principle, 235–238 administrative burden, 232–233 benefits principle, 235 on buyers, market outcomes and, 122–124 carbon, 198–199 collected by state and local governments, 229–230 collected by the federal government, 227–229 consumption, 232 corporate income, 229, 238–239 corrective, 194–197 costs of, 151–165 cuts under Reagan, 161–162 deadweight losses, 231–232 deadweight loss of taxation, 152–156 and efficiency, 230–234 and equity, 234–239 excise, 229 gas, 195–196 incidence, 119 income or consumption debate, 231–232 on labor, 158–159 lump-sum, 233–234 luxury, 126 marginal tax rates vs average tax rates, 233 negative income, 411–412 payroll, 124, 228 personal income, 227–228 Pigovian, 194 progressive, 236 property, 229 proportional, 236 regressive, 236 sales, 229 on sellers, market outcomes and, 119–122 social insurance, 228 tax effects on market participants, 152–155 tax equity, 238–239 tax incidence, 238–239 Tax incidence, 119, 238–239 elasticity and, 125–126 Tax revenue, 153, 160–163 Tax systems, design of, 225–241 Tech companies, hiring economists, 26–27 Technological change, 363, 382 Technological knowledge, specific, 213 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it 484 Index Technology demand for skilled and unskilled labor and, 382 property rights and, 193 shifts in supply curve and, 72 spillovers, 192–193 Teenage labor market, minimum wage and, 117 Temporary Assistance for Needy Families (TANF), 214, 411, 414 Textile market, 168–173 Thaler, Richard H., 81, 462–463 Theory, 18–19 Theory of Justice, A (Rawls), 408 Ticket resellers, 146–147 Time horizon, price elasticity of demand, 89 Time-series graph, 35, 36 Tit-for-tat strategy, 347 Total-cost curve, 248, 249, 251 Total costs, 244, 244 average, 252, 259 Total revenue, 93, 244, 244 along a linear demand curve, 94–96 changes with price changes, 94 for competitive firm, 264–266 price elasticity of demand and, 93–94 Total surplus, 142, 143, 144, 154, 155, 160, 161, 170, 171, 172, 173, 174, 190, 231, 299, 300, 301, 303, 304, 305, 309, 325, 346, 452 Toyota, 311, 340 Tradable pollution permits, 197–200 Trade See also Free trade; Gains from trade; International trade agreements and World Trade Organization, 181–182 benefits of, comparative advantage and, 52 deadweight losses and gains from, 155–156 equilibrium without international, 168–169 interdependence and gains from, 45–56 price of, 52–53 restraint of, 347–349 restrictions (See Trade restrictions) specialization and, 48–50 as a tool for economic development, 178 Trade barriers, 31, 181, 355 Trade Expansion Act of 1962, 182 Trade-offs, 2–3 between equity and efficiency, 239–240 between inflation and unemployment, 12 policy decisions and, 27 production possibilities frontier and, 23–24 between work and leisure, 364–365 Trade policy, 182–183 Trade restrictions arguments for, 178–179 infant-industry argument, 180 jobs argument for, 178–179 national-security argument, 179–180 protection-as-a-bargaining-chip argument, 180–182 tariffs, 30 unfair-competition argument for, 180 Traffic, congested roads as public goods or common resources, 218–219 Tragedy of the Commons, 217, 217–218 Transaction costs, 203 Transitivity, 454, 455 Transitory income, 403–404 Transportation, 89, 194, 218, 405 Truman, Harry, 27, 28 Trump, Donald, 31, 162, 168, 182–183, 198, 199, 237, 239, 240, 352, 374, 375, 414 Trumponomics (Laffer and Moore), 162 Trusts, 308 Twitter, 220, 221 Tying, 350 U Uber, 9, 26, 430 Uganda, elephant poaching, 219 Ultimatum game, 459, 460 Underground economy, 159 Unemployment, short-run trade-off between inflation and, 12 Unfair-competition argument for trade restrictions, 180 Unions, 385 determinant of equilibrium wages, 385 United States carbon tax, 198–199 distribution of income in, 398–399 income inequality in, 398–399 inflation in, 12 international trade with, 54–55 living standards in, 11 NAFTA and, 181 various laws to manage use of fish and other wildlife, 219 United States Postal Service, 310 Unsafe at Any Speed (Nader), U-shaped average total cost, 253–254 Utilitarianism, 407, 407–409 Utility, 407 preferences and, 430 V Value-added tax (VAT), 232 Value of human life, cost-benefit analysis, 215–216 Value of marginal product, 361, 361–362 Values, differences among economists in, 30 Varadarajan, Tunku, 182–183 Variable costs, 251, 252, 259 average, 252, 259 Variables graphs of single, 35–36 graphs of two, 36–37 omitted, 42 that influence buyers, 67 that influence sellers, 73 Varian, Hal, 27 VAT See Value-added tax Verizon v Trinko, 352 Vertical equity, 235, 235–236, 239, 240 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Index Vertical mergers, 308 Volkswagen, 340 Voting systems Arrow’s impossibility theorem, 454–455 Condorcet voting paradox, 453–454 median voter theorem, 455–457 W Wages See also Income ability, effort, and chance, 382–383 above-equilibrium wages, 385 beauty and, 383 Black Death and, 373 compensating differentials, 380 determinants of equilibrium, 380 $15-an-hour, 120–121 education and, 384–385 efficiency, 385 human capital, 380–382 immigration and, 366–368 labor supply and, 436–439 minimum, 116–117 minimum-wage laws, unions, and efficiency wages, 385 productivity and, 369 signaling, 384–385 superstar phenomenon, 384–385 Wage subsidies, 118 Walmart, 352 Walsh, Emily, 389 Warhol, Andy, 178–179 War on Poverty, 404–405 Wealth of Nations, The (Smith), 8, 53, 258, 348 Welfare, 411 effects of free trade, 170 effects of tariffs, 173–175 policies to reduce poverty, 411 tax affects, 152–153 Welfare cost of monopolies, 299–302 Welfare economics, 132, 147, 148, 152, 189 Welfare of society monopolistic competition and, 324–325 prisoners’ dilemma and, 345 Whole Foods, 352 Willingness to pay, 5, 132, 132–133, 136, 142, 143, 153, 189, 197, 299, 300, 303–307, 329, 350, 383, 451 Willingness to sell, cost and, 137–138 Women, gender differences in competition, 383, 388 Work incentives, antipoverty programs and, 413–415 Work-leisure decision, 437 485 Work, trade-off between leisure and, 364–365 World Bank, 179 World price, 103, 169, 169–176, 368 World Trade Organization (WTO), 181–182 trade agreements and, 181–182 World War II, 344 WTO See World Trade Organization Wu, Timothy, 352–353 X X-coordinate, 36, 40 Y Yahoo, 27 Y-coordinate, 36, 40 Yukichi, Fukuzawa, 387 Z Zero profit competitive firms stay in business with, 278–279 equilibrium, 278 Zwolinski, Matt, 81 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Suggestions for SUMMER READING If you enjoyed the economics course that you just finished, you might like to read more about economic issues in the following books Daron Acemoglu and James A Robinson Kimberly Clausing Why Nations Fail: The Origins of Power, Prosperity, and Poverty Open: The Progressive Case for Free Trade, Immigration, and Global Capital (New York: Crown Publishing, 2012) (Cambridge, MA: Harvard University Press, 2019) An economist and political scientist argue that establishing the right institutions is the key toeconomic success An economist explains why Americans benefit from interacting with the rest of the world Abhijit Banerjee and Esther Duflo Avinash Dixit and Barry Nalebuff Poor Economics The Art of Strategy: A Game Theorist’s Guide to Success in Business and Life (New York: Public Affairs, 2011) (New York: Norton, 2008) Two prominent development economists offer their proposal on how to fight global poverty This introduction to game theory discusses how all people—from corporate executives to criminals under arrest—should and make strategic decisions Yoram Bauman and Grady Klein The Cartoon Introduction to Economics (New York: Hill and Wang, 2010) Basic economic principles, with humor Bryan Caplan The Myth of the Rational Voter: Why Democracies Choose Bad Policies William Easterly The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor (New York: Basic Books, 2013) A former World Bank economist examines the many attempts to help the world’s poorest nations and why these attempts have so often failed (Princeton, NJ: Princeton University Press, 2008) Milton Friedman An economist asks why elected leaders often fail to follow the policies that economists recommend Capitalism and Freedom (Chicago: University of Chicago Press, 1962) In this classic book, one of the most important economists of the 20th century argues that society should rely less on the government and more on the free market Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Robert L Heilbroner Burton G Malkiel The Worldly Philosophers A Random Walk Down Wall Street (New York: Touchstone, 1953, revised 1999) (New York: Norton, 2015) A classic introduction to the lives, times, and ideas of the great economic thinkers, including Adam Smith, David Ricardo, and John Maynard Keynes This introduction to stocks, bonds, and financial economics is not a “get rich quick” book, but it might help you get rich slowly Steven E Landsburg John McMillan The Armchair Economist: Economics and Everyday Life Reinventing the Bazaar: A Natural History of Markets (New York: Free Press, 2012) A deep and nuanced, yet still very readable, analysis of how society can make the best use of market mechanisms Why does popcorn cost so much at movie theaters? Steven Landsburg discusses this and other puzzles of economic life (New York: Norton, 2002) Branko Milanovic Steven D Levitt and Stephen J Dubner The Haves and the Have-Nots: A Brief and Idiosyncratic History of Global Inequality Freakonomics: A Rogue Economist Explores the Hidden Side of Everything (New York: Basic Books, 2011) (New York: Morrow, 2005) A series of provocative essays about economic inequality around the world Economic principles and clever data analysis applied to a wide range of offbeat topics, including drug dealing, online dating, and sumo wrestling Sendhil Mullainathan and Eldar Shafir Michael Lewis (New York: Times Books, 2013) The Big Short: Inside the Doomsday Machine (New York: Norton, 2010) Scarcity: Why Having Too Little Means So Much An economist and psychologist team up to examine the causes and consequences of our limited cognitive abilities How a few savvy investors managed to make money during the financial crisis of 2008 and 2009 Sylvia Nasar Roger Lowenstein (New York: Simon and Schuster, 2011) America’s Bank: The Epic Struggle to Create the Federal Reserve (New York: Penguin Press, 2015) A history of the founding of one of the most important policymaking institutions in the United States Grand Pursuit: The Story of Economic Genius A sweeping narrative that tells the story of economic discovery Roger W Spencer and David A Macpherson Lives of the Laureates (Cambridge, MA: MIT Press, 2014) Twenty-three winners of the Nobel Prize in Economics offer autobiographical essays about their lives and work Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part WCN 02-200-203 Copyright 2021 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it ... Versions of This Book Principles of Economics Brief Principles of Principles of Principles of Essentials of Microeconomics Macroeconomics Macroeconomics Economics Ten Principles of Economics... full development of the theory of supply and demand • Brief Principles of Macroeconomics This shortened macro version of 18 chapters contains only one chapter on the basics of supply and demand.. .Principles of Microeconomics: a Guided Tour Introduction 1 Ten Principles of Economics The study of economics is guided by a few big ideas 2 Thinking