Principles of Microeconomics

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ISBN: 9780538868204 | 0538868201
Cover: Paperback
Copyright: 7/1/1998

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Written for the 2-term principles of economics course offered at every 2- and 4-year school, this text conveys the principles of economics in a superb conversational style through a series of extended examples that students relate and respond to. Students are discouraged from simply memorizing facts and are engaged in active learning. This text focuses on presenting basic concepts in-depth and develops the analysis step-by-step, rather than covering hundreds of topics superficially. Split versions are available for the 1-term principles of macroeconomics or principles of microeconomics course.

Preface

xvii

Learning Guide

xxiv

Farewell

xxx

Author

xxxii

PART 1 THE BASICS OF ECONOMIC ANALYSIS

(64)

Introduction

(22)

No One Ever Made an Ounce of Earth

(3)

Are We Running Out of Natural Resources?

(1)

Renewable and Nonrenewable Natural Resources

(1)

Added Perspective: Coal...Then (1865) and Now (1998)

(1)

How Do You Satisfy Insatiable Wants?

(1)

Added Perspective: If Not the Depletion of Coal, Then Perhaps Oil

(1)

Scarcity Forces Us to make Choices

(1)

What Is Economics?

(5)

Economics Is Part of Social Science

(1)

Using Economic Models

(1)

Ceteris Paribus

(1)

The Circular Flow Model of Goods and Money

(2)

Micro-and Macroeconomics

(1)

Positive and Normative Economics

(1)

What Do Economists Know?

(6)

Economic Consultants: Economic Research and Analysis by Students for Professionals

(1)

Added Perspective: Economists, As Wizards of Odds, Are Usually Off

(1)

Chapter Review

(1)

Key Terms

(1)

Questions

(1)

Practice Test

(1)

Appendix On Reading Graphs

(1)

The Only Thing We Have to Fear Is Fear Itself

(3)

A Graphic Language

(1)

Know Your Point of Reference

(1)

Measuring Distances on Graphs

(1)

Graphing Relationships

(1)

Connecting Points to Form Curves

(1)

The Slope of a Curve

(4)

U-Shaped and Hill-Shaped Curves

(1)

Vertical and Horizontal Curves

(1)

Measuring the Slope of a Point on a Curve

(1)

Key Terms

(1)

Production Possibilities and Opportunity Costs

(19)

Factors of Production

(1)

Labor

(1)

Capital

(1)

Land

(1)

Entrepreneurship

(1)

Robinson Crusoe's Production Possibilities

(6)

Opportunity Cost

(1)

The Law of Increasing Costs

(1)

Added Perspective: Guns and Butter

(2)

Once Rich, It's Easy to Get Richer

(1)

Once Poor, It's Easy to Stay Poor

(1)

The Productive Power of Advanced Technology

(1)

The Indestructible Nature of Ideas

(1)

Possibilities, Impossibilities, and Less Than Possibilities

(2)

Added Perspective: The Destruction and Reconstruction of Rotterdam

(1)

Production Possibilities and Economic Specialization

(3)

Added Perspective: Chickens, Vaccines, and Pushing Out the Production Possibilities Curve

(1)

Specialization on the Island

(1)

International Specialization

(1)

The Principle of Comparative Advantage

(1)

The Universality of the Production Possibilities Model

(5)

Economic Consultants: Economic Research and Analysis by Students for Professionals

(1)

Chapter Review

(1)

Key Terms

(1)

Questions

(1)

Practice Problems

(1)

Practice Test

(1)

Demand and Supply

(22)

Measuring Consumer Willingness

(1)

Measuring Consumer Demand

(2)

Measuring Individual Demand

(1)

Measuring Market Demand

(1)

Measuring Supply

(1)

Market-Day Supply

(1)

Determining Equilibrium Price

(2)

Suppose the Price Is $8

(1)

Suppose the Price is $4

(1)

Price Always Tends Toward Equilibrium

(1)

Market-Day, Short-run, and Long-Run Supply

(2)

Changes in Demand

(4)

Changes in Income

(1)

Added Perspective: De Gustibus Non Est Disputandum

(1)

Changes in Taste

(1)

Changes in the Prices of Other Goods

(1)

Changes in Expectations About Future Prices

(1)

Changes in Population Size

(1)

A Change in Demand or a Change in Quantity Demanded?

(1)

Changes in Supply

(2)

Changes in Technology

(1)

Changes in Resource Prices

(1)

Changes in the Prices of Other Goods

(1)

Economic Consultants: Economic Research and Analysis by Students for Professionals

(1)

Changes in the Number of Suppliers

(1)

Why the Price of an Orange Is 30 Cents at the Supermarket

(2)

Price Serves as a Rationing Mechanism

(6)

Chapter Review

(1)

Key Terms

(1)

Questions

(1)

Practice Problems

(1)

Practice Test

(1)

PART 2 INTRODUCTION TO MICROECONOMICS

(90)

Elasticity

(24)

Demand Sensitivities and Insensitivities

(2)

Expressing Demand Sensitivity Graphically

(1)

Are Our Demand Sensitivities Alike?

(1)

What Factors Influence Demand Sensitivity?

(2)

Low-Priced Goods

(1)

Income Levels

(1)

Substitute Goods

(1)

Basic Goods

(1)

Linked Goods

(1)

Time to Adjust

(1)

Form Sensitivity to Elasticity

(1)

Deriving Price Elasticities of Demand

(3)

Added Perspective: Planes, Trains and Automobiles

(1)

Elasticity and Total Revenue

(1)

Estimates of Price Elasticities of Demand

(1)

Price Elasticities for Selected Agricultural and Nonagricultural Goods

(1)

Short-Run and Long-Run Elasticities

(1)

Cross Elasticity

(3)

Cross Elasticities Among Substitute Goods

(2)

Cross Elasticities Among Complementary Goods

(1)

Income Elasticity

(2)

Economic Consultants: Economic Research and Analysis by Students for Professionals

(1)

Income Elasticity of Inferior Goods

(1)

Supply Elasticity

(3)

Added Perspective: Cross Elasticities in the Sound Business

(1)

Market-Day Supply elasticity

(1)

Short-Run Supply Elasticity

(1)

Long-Run Supply Elasticity

(1)

Elasticities and Taxation

(6)

Per Unit Tax Shifts the Supply Curve

(1)

The Ultimate Per Unit Tax?

(1)

Chapter Review

(1)

Key Terms

(1)

Questions

(1)

Practice Problems

(1)

Practice Test

(1)

Marginal Utility and Consumer Choice

(26)

What Is Marginal Utility?

(3)

The More the Better, Up to a Point

(1)

The Law of Diminishing Marginal Utility

(2)

Added Perspective: Beauty and the Beast---An Economist's Abridged Version

(1)

The Water-Diamond Paradox

(1)

French Cuisine and Marginal Utility

(2)

Added Perspective: The Fat Principles

(1)

Understanding the Law of Demand

(4)

Making Selections from a Given Budget

(2)

The MU/P Equalization Principle

(1)

Added Perspective: Are White Rats Rational Consumers?

(1)

The MU/P Equalization Principle and the Law of Demand

(1)

The MU/P Guide to Auction Bidding

100

(1)

Economic Consultants: Economic Research and Analysis by Students for Professionals

101

(1)

Creating Consumer Surplus

101

(2)

Interpresonal Comparisons of Utility

103

(5)

Chapter Review

103

(1)

Key Terms

104

(1)

Questions

104

(1)

Practice Problems

105

(2)

Practice Test

107

(1)

Appendix The Indifference Curve Approach to Demand Curves

108

(1)

Identifying Equally Preferred Sets of Goods

108

(2)

Marginal Rate of Substitution

109

(1)

Constructing Indifference Maps

110

(1)

The Budget Constraint

110

(2)

Price Changes Shift the Budget Constraint

111

(1)

Income Changes, Too, Shift the Budget Constraint

112

(1)

Deriving the Demand Curve for Amusement Goods

112

(4)

Relating Quantity Demanded to Price

113

(1)

Appendix Review

114

(1)

Questions

115

(1)

Price Ceilings and Price Floors

116

(22)

The Fishing Economy, Once Again

117

(2)

Now, a National Security Crisis

117

(1)

Mobilizing Fishermen

117

(1)

Who can Afford a $10 Fish?

118

(1)

Setting a Ceiling on Price

119

(2)

Living with Chronic Excess Demand

119

(1)

Price Ceilings and Ration Coupons During World War II

120

(1)

Did the Price Control System Work?

120

(1)

There's Also Reason for Price Floors

121

(2)

Setting a Floor on Price

121

(1)

Living with Chronic Excess Supply

122

(1)

Agriculture's Technological Revolution

123

(2)

The Effect of Technological Change on Agricultural Supply

125

(1)

To Intervene or Not to Intervene: That Is the Question

126

(1)

Parity Pricing as a Price Floor

126

(7)

Economic Consultants: Economic Research and Analysis by Students for Professionals

127

(1)

The Invention of Parity Pricing

127

(2)

Deriving Parity Price Ratios

129

(1)

Living Under Parity

129

(1)

Added Perspective: Who Gets the farm Subsidies?

130

(1)

Target Prices and Deficiency Payments

131

(2)

Added Perspective: ``Crop'' Limitations of Another Kind

133

(1)

A Long Tradition of Price Ceilings and Price Floors

133

(5)

Chapter Review

134

(1)

Key Terms

135

(1)

Questions

135

(1)

Practice Problems

135

(2)

Practice Test

137

(1)

Business Ownership and Organization: Proprietorships, Partnerships, and Corporations

138

(17)

Sole Proprietorship

139

(1)

Partnership

140

(1)

Corporation

140

(5)

The Security of Limited Liability

140

(1)

Setting Up the Corporation

141

(1)

The Sky's the Limit in Stock Issues

142

(1)

Added Perspective: Want to Minimize Risk? Try a Mutual Fund

143

(2)

Economic Consultants: Economic Research and Analysis by Students for Professionals

145

(1)

How U.S. Business Is Organized

145

(1)

Profile of Stockholders

146

(2)

Indirect Stock Ownership

148

(1)

International and Multinational Corporations

148

(7)

Added Perspective: Multinational Are Becoming More and More Multi

149

(2)

Chapter Review

151

(1)

Key Terms

152

(1)

Questions

152

(2)

Practice Test

154

(1)

PART 3 THE MICROECONOMICS OF PRODUCT MARKETS

155

(166)

Costs of Production

157

(28)

Getting into the Fishing Business

158

(1)

Total Fixed Costs

158

(1)

Committing to Fixed Costs

158

(1)

Calculating Fixed Costs

159

(1)

Total Variable Costs

159

(7)

The Cost of Labor

161

(1)

Added Perspective: The Law of Diminishing Returns

162

(2)

Added Perspective: How Driving Costs can Vary

164

(1)

The Cost of Fuel

165

(1)

The Costs of Bait, Ice, and Equipment

165

(1)

Adding Up the Variable Costs

165

(1)

Total Costs

166

(1)

What's the Average Cost of Producing Fish?

167

(2)

Average Fixed and Average Variable Costs

167

(2)

Average total Cost

169

(1)

To Produce or Not to Produce, That Is the Question

169

(1)

Marginal Cost

169

(3)

Economies and Diseconomies of Scale

172

(3)

Added Perspective: Big, Bigger, Biggest

173

(2)

Long-Run and Short-Run Average Total Cost Curves

175

(3)

Rightsizing or Downsizing Along the Long-Run Average Total Cost Curve

176

(1)

What Is True for the Fishing Industry Is True for All Industries

177

(1)

Economic Consultants: Economic Research and Analysis by Students for Professionals

178

(1)

What Businesspeople Think About the Character of Their Average total Costs

178

(2)

Behind Every Cost Curve Is a Socioeconomic Environment

180

(5)

Chapter Review

181

(1)

Key Terms

182

(1)

Questions

182

(1)

Practice Problems

183

(1)

Practice Test

184

(1)

Maximizing Profit

185

(17)

Entrepreneurs and Profit Making

186

(1)

Profit-Maximizing Fishermen

186

(2)

Profit Depends on Price and Costs

186

(1)

Should Fishermen Produce More Fish?

187

(1)

The MR=MC rule

188

(2)

Thinking on the Margin

188

(1)

Total, Average, and Marginal Revenue

188

(2)

Applying the MR=MC Rule

190

(3)

Added Perspective: Maximizing Profit on Israel's Kibbutzim

192

(1)

How Much Profit Is Maximum Profit?

193

(1)

Maximizing Profit and Minimizing Loss

193

(2)

Do Firms Really Behave This Way?

195

(3)

The Lester-Machlup Controversy

195

(1)

Economic Consultants: Economic Research and Analysis by Students for Professionals

196

(1)

Empire Building

196

(1)

Added Perspective: Why Profit Maximization? Of the Origin of Ambition, and of the Distinction of Ranks

197

(1)

What Survives of Marginalism?

198

(4)

Chapter Review

199

(1)

Key Terms

199

(1)

Questions

199

(1)

Practice Problems

200

(1)

Practice Test

201

(1)

Identifying Markets and Market Structures

202

(24)

Defining the Relevant Market

203

(1)

Rose Is a Rose Is a Rose Is a Rose?

203

(1)

Movies and Entertainment

203

(1)

Automobiles and Transportation

203

(1)

Courts and Markets

204

(1)

Cross Elasticity Defines the Market

205

(2)

Cross Elasticities in the Flower Market

205

(1)

Added Perspective: Nike: From Shoes to Swoosh

206

(1)

How High Is a High Cross Elasticity?

207

(1)

Markets and Market Structures

207

(2)

The World of Monopoly

209

(3)

Size Is Not Important

209

(1)

The Firm Is the Industry

209

(1)

No Entry into the Industry

210

(2)

The World of Monopolistic Competition and Oligopoly

212

(7)

No Easy Entry, but Entry Nonetheless

212

(1)

Economic Consultants: Economic Research and Analysis by Students for Professionals

213

(1)

Firms Producing Close Substitutes

213

(2)

Added Perspective: It's Hard to Make a Profit When You're Competing Against Yourself

215

(1)

As More Firms Enter the Market, Firm Demand Curves Become More Elastic

215

(1)

Added Perspective: Who can Be Loyal to a Trash Bag?

216

(2)

The Role of Advertising

218

(1)

The World of Perfect Competition

219

(2)

Prefectly Competitive Firms Produce Perfect Substitutes

219

(1)

Perfectly Competitive Firms Have Insignificant Market Share

219

(1)

Perfectly Competitive Firms Have Free Entry

220

(1)

Perfectly Competitive Firms Cannot Influence Price

220

(1)

Putting Together a Scorecard on Market Structures

221

(5)

Chapter Review

222

(1)

Key Terms

223

(1)

Questions

223

(1)

Practice Problems

224

(1)

Practice Test

225

(1)

Price and Output in Monopoly, Monopolistic Competition, and Perfect Competition

226

(25)

Price and Output Under Monopoly

227

(3)

The MR=MC Rule Applied

227

(2)

Maximum Profit, but Less Than Maximum Efficiency

229

(1)

Price and Output in Monopolistic Competition

230

(4)

Product Differentiation in Monopolistic Competition

230

(1)

Economic Consultants: Economic Research and Analysis by Students for Professionals

230

(1)

Rudd's Short-Run Equilibrium Position in a Monopolistically Competitive Market

231

(1)

Rudd's Long-Run Equilibrium Position in a Monopolistically Competitive Market

232

(1)

Added Perspective: Consumers Face Flood of Products

233

(1)

Making Normal Profit

234

(1)

Price and Output in Perfect Competition

234

(4)

There's No Product Differentiation in Perfectly Competitive Markets

234

(1)

Added Perspective: Explicit and Implicit Costs

235

(1)

The Firm in Perfect Competition

236

(2)

Short-Run Equilibrium Price and Output for the Firm in Perfect Competition

238

(2)

Long-Run Equilibrium Price and Output for the Firm in Perfect Competition

240

(3)

Lowest Prices and Greatest Output

241

(1)

The Firm's Supply Curve

241

(1)

The Market's Supply Curve

242

(1)

Innovators and Imitators in the Perfectly Competitive Market

243

(1)

Does Competition Always Generate Lowest Prices and Highest Output?

244

(7)

The Schumpeter Hypothesis

244

(2)

Some, But Not All, Economists Agree

246

(1)

Chapter Review

247

(1)

Key Terms

248

(1)

Questions

248

(1)

Practice Problems

249

(1)

Practice Test

250

(1)

Price and Output Determination Under Oligopoly

251

(26)

Oligopoly and Concentration Ratios

252

(4)

Tracking Concentration Ratios Through the U.S. Economy

252

(1)

How Oligopolistic Is the U.S. Economy?

253

(1)

Is the U.S. Economy Becoming More Oligopolistic?

253

(1)

Added Perspective: A Cautionary Note on Concentration Ratios

254

(1)

Concentration Ratios and Market Power

254

(2)

Does the United States Have a Monopoly on Oligopoly?

256

(1)

Concentrating the Concentration

256

(5)

Horizontal Mergers

256

(1)

Added Perspective: The Herfindahl-Hirschman Index

257

(1)

Vertical Mergers

258

(1)

Conglomerate Mergers

259

(1)

Economic Consultants: Economic Research and Analysis by Students for Professionals

259

(1)

Cartels: Mergers Without Merging

260

(1)

Concentration Ratios and Oligopoly Prices

261

(1)

Theories of Oligopoly Pricing

261

(6)

Game Theory Pricing

262

(1)

Added Perspective: The Prisoners' Dilemma

263

(1)

Godfathers and Price Leadership

264

(1)

The Kinked Demand Curve

264

(3)

Oligopoly and Brand Multiplication

267

(2)

Added Perspective: When Patents Expire: Preparing for Market Segmentation

268

(1)

Why Oligopolists Sometimes Price Discriminate

269

(2)

Segmenting the Market

269

(1)

Price Discrimination Almost Everywhere

270

(1)

Gray Area of Price Discrimination

271

(1)

Cartel Pricing

271

(6)

Chapter Review

273

(1)

Key Terms

273

(1)

Questions

274

(1)

Practice Problems

274

(2)

Practice Test

276

(1)

Antitrust and Regulation

277

(24)

Learning to Cope Without Perfect Competition

278

(2)

Regulating Monopoly

278

(1)

Nationalizing the Industry

278

(1)

Taking a Laissez-Faire Approach

279

(1)

Encouraging Concentration

279

(1)

Splitting Up Monopoly

279

(1)

The Economics of Regulation

280

(5)

Regulating a City Bus Monopoly

280

(1)

Setting a ``Fair'' Price: P = ATC

281

(1)

Applying Marginal Costs Pricing: P = MC

282

(1)

Who Regulates the Regulators?

282

(1)

The Economics of Deregulation

283

(2)

The Economics of Nationalization

285

(2)

Price Options Facing Government

285

(1)

Can the Government Run Industry Efficiently?

285

(2)

The Economics of Laissez-Faire

287

(2)

The Theory of Contestable Markets

287

(1)

The Theory of Countervailing Power

287

(1)

The Theory of Creative Destruction

288

(1)

The Economics of Encouraging Monopoly

289

(1)

The Economics of Splitting Up Monopoly

290

(1)

The History of Antitrust Legislation

290

(3)

The Sherman Antitrust Act of 1890

290

(1)

The Clayton Act of 1914

291

(1)

The Federal Trade Commission Act of 1914

291

(1)

Added Perspective: Drug Firms Accused of Violating Antitrust Laws

292

(1)

Plugging the Loopholes

293

(1)

Funding Antitrust Legislation

293

(1)

Antitrust Goes to Court

293

(3)

The Rule of Reason

294

(1)

The Per Se Criterion

294

(1)

Rethinking the Reinterpretation

294

(1)

Economic Consultants: Economic Research and Analysis by Students for Professionals

295

(1)

Conglomerates and the Court

295

(1)

But FTC Justice Are Still in Business

296

(1)

Using the Herfindahl-Hirschman Index

296

(1)

Going After the Precedent

296

(1)

Do We Have a Policy on Monopoly?

296

(5)

Added Perspective: Consent Decree: The FTC's ``Managed Care'' of the Economy's competitiveness

297

(1)

Chapter Review

298

(1)

Key Terms

299

(1)

Questions

299

(1)

Practice Test

300

(1)

Externalities, Market Failure, And Public Choice

301

(20)

Economic Externalities

302

(1)

Identifying Negative Externalities

302

(1)

Identifying Positive Externalities

302

(1)

Externalities and Property Rights

302

(3)

Added Perspective: Celebrities and Property Rights: A Material View

303

(2)

Why Should Economists Be Interested in Externalities?

305

(3)

Defining Market Failure

305

(1)

Too Much Coal-Fired Electricity, Too Low a Price

306

(1)

Economic Consultants: Economic Research and Analysis by Students for Professionals

307

(1)

What About Acid Rain?

307

(1)

Correcting Market Failure

308

(3)

Government's Attempt to Correct Market Failure

308

(1)

Creating New Property Forms

308

(1)

Added Perspective: Coase Theorem and Market Failure

309

(1)

Levying a Pollution compensation Tax

309

(1)

Creating Obligatory Controls

310

(1)

The Environmental Protection Agency

310

(1)

Added Perspective: Living in an Imaginary Bubble

311

(1)

Externalities and Public Goods

311

(2)

Positive Externalities and Market Failure

312

(1)

Positive Externalities and Public Goods

312

(1)

Public Goods and Near-Public Goods

313

(1)

Public Goods and Public Choice

313

(8)

Voting Your Demand for Public Goods

314

(1)

Government Failure

314

(2)

Living with Government Failure

316

(1)

Chapter Review

316

(1)

Key Terms

317

(1)

Questions

317

(1)

Partical Problems

317

(2)

Practice Test

319

(2)

PART 4 THE MICROECONOMICS OF FACTOR MARKETS

321

(1)

Wage Rates in Competitive Labor Markets

323

(31)

You Load Sixteen Tons and What Do You Get?

324

(2)

Hiring Miners, One at a Time

324

(2)

Converting Tons into Revenue

326

(1)

Deriving the Firm's Demand for Labor

326

(4)

Deriving Marginal Labor Cost

326

(2)

Demanding Miners Until MRP =w

328

(1)

What Shifts the Demand for Labor?

329

(1)

Industry Demand for Labor

330

(1)

The Supply of Labor

331

(4)

Added Perspective: Wages and Technology

332

(1)

What Shifts the Supply Curve for Labor?

333

(1)

The Backward-bending Supply Curve

334

(1)

Deriving Equilibrium Wage Rates

335

(1)

Explaining Wage Rate Differentials

336

(4)

Narrowing Wage Rate Differences

336

(3)

Added Perspective: The Market Is Mightier Than the Sword

339

(1)

Persisting Wage Differentials

340

(1)

Economic Consultants: Economic Research and Analysis by Students for Professionals

341

(1)

The Economics of Minimum Wage Rates

341

(2)

The Ethics of w = MRP

343

(1)

The Efficiency Wages Theory

344

(5)

Chapter Review

344

(1)

Key Terms

345

(1)

Questions

345

(1)

Practice Problems

346

(2)

Practice Test

348

(1)

Appendix Who Earns What?

349

(1)

Productivity Counts

349

(1)

Education Counts

350

(1)

Minority Status Counts

351

(1)

Disparities According to Race

351

(1)

Disparities According to Sex

351

(1)

How Important Are Minimum Wages?

352

(2)

Key Terms

353

(1)

Wages and Employment: Monopsony and Labor Unions

354

(18)

Monoposony: When There's Only One Buyer of Labor

355

(2)

The Supply Curve of Labor as Seen by the Monopsony

355

(1)

Reading the Table in Exhibit 2

356

(1)

Choosing the Employment/Wage Rate Combination Under Monopsony

357

(1)

The Return of Monopsony Power

357

(1)

Enter the United Mine Workers' Union

358

(3)

Employment and Wages in A Unionized Labor Market

359

(1)

Added Perspective: The 1990s Have Been Tough Going for Unions: A Case in Point

360

(1)

The Dynamics of Collective Bargaining

360

(1)

Higher Wage Rates Versus More Employment

361

(3)

Monpsonist Demands More, Union Reluctant to Supply

362

(1)

Added Perspective: The UPS Strike Reflects Wide Worry About Part-Time Workers

363

(1)

Unions in the United States: A Brief History

364

(8)

The Knights of Labor

364

(1)

The American Federation of Labor

365

(1)

The Congress of Industrial Organizations

365

(1)

The AFL-CIO Merger: 1955

366

(1)

Labor, Congress, and the Courts

366

(2)

Economic Consultants: Economic Research and Analysis by Students for Professionals

368

(1)

Chapter Review

368

(1)

Key Terms

369

(1)

Questions

369

(1)

Practice Problems

370

(1)

Practice Test

371

(1)

Interest, Rent, and Profit

372

(21)

From Loanable Funds to Equipment Capital

374

(1)

Edward's Demand for Loanable Funds

374

(1)

The MRP=MFC Rule

375

(1)

Loanable Funds in the Economy: Demand and Supply

375

(1)

The Equilibrium Rate of Interest

376

(1)

The Ethics of Income from Interest

376

(2)

Somebody Did the Saving

377

(1)

Property and Property Rights

377

(1)

The Marxist View of Interest-Derived Income

378

(1)

Present Value

378

(3)

Effect of Changing Interest Rates on Property Values

378

(1)

Property Values and Price Floors

379

(1)

Economic Consultants: Economic Research and Analysis by Students for Professionals

380

(1)

Almost Anything Is Marketable Property

380

(1)

Income from Rent

381

(6)

The Derivation of Land Rent

381

(1)

Differential Rent

382

(1)

Added Perspective: The Corn Laws Controversy in 19th-Century England

383

(1)

Location Rent

384

(1)

Added Perspective: Big-Time Dreaming

385

(1)

Wage-Related Rents

386

(1)

Income from Profits

387

(6)

We Are a nation of Thomas Edisons

387

(1)

The Invisible Entrepreneurs at General Motors

388

(1)

Chapter Review

389

(1)

Key Terms

390

(1)

Questions

390

(1)

Practice Problems

391

(1)

Practice Test

392

(1)

Income Distribution and Poverty

393

(26)

Not Too Many Coal Miners Are Millionaires

394

(1)

Measuring Income Distribution

395

(3)

The Lorenz Curve

395

(2)

Gini Coefficients of Inequality

397

(1)

How Unequal Is Our Income Distribution?

398

(2)

Is Income More Unequal in the United States Than in Other Countries?

399

(1)

Distribution of Net Wealth

400

(1)

Is There an Optimal Income Distribution?

401

(8)

The Case for Equality

401

(1)

Added Perspective: Inequality and the Winner-Take-All Society

402

(4)

Added Perspective: Climbing Out of Poverty Is Becoming More Difficult

406

(1)

The Case for Inequality

407

(2)

Do We Have to Live with Poverty?

409

(2)

Defining Poverty

409

(1)

Who and How Many Air in Poverty?

410

(1)

Fighting the War on Poverty

411

(2)

Lyndon Johnson's War on Poverty

411

(1)

Making an Honest Effort?

411

(1)

Economic Consultants: Economic Research and Analysis by Students for Professionals

412

(1)

The Negative Income Tax Alternative

413

(6)

Chapter Review

414

(1)

Key Terms

415

(1)

Questions

415

(1)

Practice Problems

415

(1)

Practice Test

416

(3)

PART 5 THE WORLD ECONOMY

International Trade

419

(26)

Intrastate Trade

419

(2)

Illinois Corn for Illinois Oil

420

(1)

Oklahoma Corn for Oklahoma Oil

421

(1)

Interstate Trade

421

(2)

The Case for Geographic Specialization

421

(2)

Nobody Loses?

423

(1)

International Trade

423

(1)

Absolute and Comparative Advantage

424

(2)

Comparative Advantage

424

(1)

How Much Is Gained from Free Trade Depends on Price

425

(1)

Calculating Terms of Trade

426

(2)

The Dilemma of the Less-Developed Countries

426

(1)

Looking at Real-World Numbers

427

(1)

Who Trades with Whom? Tracking International Trade

428

(1)

The Major Leagues

429

(1)

Who Does the United State Trade With?

429

(1)

Do We Need Protection Against Free Trade?

430

(3)

The National Security Argument

430

(1)

The Infant-Industries Argument

431

(1)

The Cheap Foreign Labor Argument

431

(1)

The Diversity of Industry Argument

432

(1)

The Antidumping Argument

432

(1)

The Retaliation Argument

432

(1)

Economic Consultants: Economic Research and Analysis by Students for Professionals

433

(1)

The Economics of Trade Protection

433

(3)

Tariffs

433

(2)

Quotas

435

(1)

Other Nontariff Barriers

436

(1)

Negotiating Tariff Structures

436

(4)

Gatt

436

(1)

Added Perspective: How Much Do barriers to Imports Cost Japanese Consumers?

437

(1)

Gatt Concessions to Less-Developed Countries

438

(1)

Customs Unions

438

(1)

Free Trade Areas

439

(1)

The North American Free Trade Agreement

439

(1)

Tracking Tariffs Since 1860

440

(5)

Chapter Review

441

(1)

Key Terms

442

(1)

Questions

442

(1)

Practice Problems

443

(1)

Practice Test

444

(1)

Exchange Rates, Balance of Payments, and International Debt

445

(23)

The Money Tower of Bebel

446

(1)

The Foreign Exchange Market: The buying and Selling of Currencies

446

(3)

The Demand Curve for Yaps

446

(1)

The Supply Curve of Yaps

447

(1)

Shifts in the Demand Curve for Yaps

447

(1)

Shifts in the Supply Curve of Yaps

448

(1)

Floating Exchange Rates

449

(6)

Depreciation and Appreciation

449

(1)

Added Perspective: Tourists at the Mall

450

(1)

Economic Consultants: Economic Research and Analysis by Students for Professionals

451

(1)

Arbitrage Creates Mutually Consistent Exchange Rates

451

(1)

Problems with Floating Exchange Rates

452

(1)

Fixing Exchange Rates

452

(1)

What If the Government Runs Out of Foreign Exchange Reserves?

453

(1)

Added Perspective: Brazil Ponders Devaluation, Inflation, and the IMF

454

(1)

Balance of Payments

455

(4)

Balance on Current Account

455

(3)

Balance on Capital Account

458

(1)

What Is a Balance of Payments Problems?

459

(2)

Do Trade Imbalances Always Create Problems?

459

(1)

Added Perspective: Asian Crisis Prompts Drop in PC Prices

460

(1)

How Deficits on Current Account Develop

461

(1)

The Trouble with Being Popular

461

(1)

The High Cost of High Interest Rates

461

(1)

The High Cost of Budgetary Deficits

461

(1)

The High Cost of Low Productivity

461

(1)

International Debt

462

(1)

Will It All work Out Right in the Long Run?

463

(5)

Chapter Review

463

(1)

Key Terms

464

(1)

Questions

465

(1)

Practice Problems

465

(2)

Practice Test

467

(1)

The Economic Problems of Less-Developed Economies

468

(1)

Confronting National Poverty

469

(1)

The language of National Poverty

469

(1)

There Are Important Differences Among the Less-Developed Economies

469

(1)

LCD Per Capita Incomes

470

(2)

Other Indicators of the LCDs' Lack of Economic Well-Being

472

(1)

Economic Dualism

473

(1)

The Absence of Basic Prerequisites

474

(4)

Political Instability

475

(1)

Nonscientific Perceptions

475

(1)

The Absence of Infrastructure

476

(1)

Added Perspective: Wiring the World

477

(1)

Pursuing Strategies of Development

478

(5)

The Big Push

478

(1)

Economic Consultants: Economic Research and Analysis by Students for Professionals

479

(1)

The Unbalanced Development Strategy

480

(2)

Added Perspective: The Road to Better Farming

482

(1)

Foreign Direct Investment

483

(1)

Images from the Colonial Past

483

(1)

Foreign Economic Acid

484

(1)

Chapter Review

485

(1)

Key Terms

485

(1)

Questions

485

(2)

Practice Test

487

(1)

Practice Test Answer Key

AK-1

(1)

Glossary

G-1

(1)

Index

I-1

(1)

Photo Credits

PC-1

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Principles of Microeconomics

Summary

Table of Contents

Supplemental Materials