Microeconomics, Concise Edition (with InfoTrac)

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ISBN: 9780324315011 | 0324315015
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Copyright: 1/5/2006

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Roger Arnold's PRINCIPLES OF MICROECONOMICS text has set a standard for student readability, engaging examples and applications, and solid theoretical content for 7 editions. With Microeconomics, Concise Edition, 1e, Arnold presents the same readability, relatable examples, and solid theory in a text that is pared down to the key concepts that instructors most want their students to understand. The 15 chapter text also includes access to iLrn Economics and a wealth of strong student and instructor supplements. In addition, the text is fully integrated with Aplia allowing instructors to utilize this key technology tool should they choose to do so. This is the trademark Arnold solid foundation and real-world relevance distilled into concise coverage at an affordable price.

Preface	p. xvi
Student Learning Guide	p. xxv
An Introduction to Economics
Economics: The Science of Scarcity
What Economics Is About	p. 1
Features
Economics in Everyday Life: Blogging	p. 8
Economics in Popular Culture: Why LeBron James Isn't in College	p. 9
Definitions of Economics	p. 2
Economic Categories	p. 2
Positive and Normative Economics	p. 3
Microeconomics and Macroeconomics	p. 3
Key Concepts in Economics	p. 4
Thinking in Terms of Scarcity and Its Effects	p. 4
Thinking in Terms of Opportunity Cost	p. 6
Thinking in Terms of Costs and Benefits	p. 8
Thinking in Terms of Efficiency	p. 10
Thinking in Terms of Unintended Effects	p. 12
Thinking in Terms of Equilibrium	p. 13
Thinking in Terms of the Ceteris Paribus Assumption	p. 14
Thinking in Terms of the Difference Between Association and Causation	p. 15
Thinking in Terms of the Difference Between the Group and Individual	p. 15
Economists Build and Test Theories	p. 16
What Is a Theory?	p. 16
Building and Testing a Theory	p. 17
A Reader Asks	p. 19
Chapter Summary	p. 20
Key Terms and Concepts	p. 21
Questions and Problems	p. 21
Working with Diagrams	p. 23
Two-Variable Diagrams	p. 23
Slope of a Line	p. 24
Slope of a Line Is Constant	p. 24
Slope of a Curve	p. 26
The 45[degree] Line	p. 26
Pie Charts	p. 27
Bar Graphs	p. 27
Line Graphs	p. 28
Appendix Summary	p. 30
Questions and Problems	p. 30
Should You Major in Economics?	p. 32
Five Myths About Economics and an Economics Major	p. 33
What Awaits You as an Economics Major?	p. 35
What Do Economists Do?	p. 36
Places to Find More Information	p. 37
Concluding Remarks	p. 38
Economic Activities: Producing and Trading	p. 39
Features
Economics in Everyday Life: Liberals, Conservatives, and the PPF	p. 46
Economics in Popular Culture: Elvis, Comparative Advantage, and Specialization	p. 53
Economics in Popular Culture: Jerry Seinfeld, the Doorman, and Adam Smith	p. 54
The Production Possibilities Frontier	p. 40
The Straight-Line PPF: Constant Opportunity Costs	p. 40
The Bowed-Outward (Concave-Downward) PPF: Increasing Opportunity Costs	p. 41
Law of Increasing Opportunity Costs	p. 42
Economic Concepts Within a PPF Framework	p. 43
Trade or Exchange	p. 47
The Purpose of Trade	p. 47
Periods Relevant to Trade	p. 47
Trade and the Terms of Trade	p. 48
Costs of Trades	p. 48
Production, Trade, and Specialization	p. 50
Producing and Trading	p. 50
Profit and a Lower Cost of Living	p. 52
A Reader Asks	p. 60
Chapter Summary	p. 60
Key Terms and Concepts	p. 61
Questions and Problems	p. 61
Working With Numbers and Graphs	p. 62
Supply and Demand: Theory	p. 63
Features
Economics in the World: U4E (((H)))	p. 5
Yours Forever, Big Hug, High Five	p. 67
Economics in Everyday Life: Getting to Class on Time	p. 73
Economics in Everyday Life: Supply and Demand on a Freeway	p. 89
A Note About Theory	p. 64
Demand	p. 64
The Law of Demand	p. 64
Four Ways to Represent the Law of Demand	p. 65
Absolute and Relative Price	p. 66
Why Quantity Demanded Goes Down as Price Goes Up	p. 66
Individual Demand Curve and Market Demand Curve	p. 67
A Change in Quality Demanded Versus a Change in Demand	p. 68
What Factors Cause the Demand Curve to Shift	p. 70
Supply	p. 73
The Law of Supply	p. 74
Why Most Supply Curves Are Upward-Sloping	p. 74
The Market Supply Curve	p. 75
Changes in Supply Mean Shifts in Supply Curves	p. 75
What Factors Cause the Supply Curve to Shift?	p. 75
The Market: Putting Supply and Demand Together	p. 79
Supply and Demand at Work at an Auction	p. 79
The Language of Supply and Demand: A Few Important Terms	p. 80
Moving to Equilibrium: What Happens to Price When There Is a Surplus or Shortage	p. 80
Speed of Moving to Equilibrium	p. 80
Moving to Equilibrium: Maximum and Minimum Prices	p. 82
Equilibrium in Terms of Consumers' and Producers' Surplus	p. 83
What Can Change Equilibrium Price and Quantity?	p. 84
Price Controls	p. 86
Price Ceiling: Definition and Effects	p. 86
Do Buyers Prefer Lower Prices to Higher Prices?	p. 89
Price Floor: Definition and Effects	p. 90
Surpluses	p. 90
Fewer Exchanges	p. 90
A Reader Asks	p. 91
Chapter Summary	p. 91
Key Terms and Concepts	p. 92
Questions and Problems	p. 92
Working With Numbers and Graphs	p. 93
Microeconomics
Microeconomic Fundamentals
Elasticity	p. 95
Features
Economics in Everyday Life: Drug Busts and Crime	p. 102
Economics in Everyday Life: Will High Taxes on Cigarettes Reduce Smoking?	p. 104
Economics in Popular Culture: Why Do Companies Hire Celebrities?	p. 109
Elasticity: Part 1	p. 96
Price Elasticity of Demand	p. 96
Elasticity Is Not Slope	p. 97
From Perfectly Elastic to Perfectly Inelastic Demand	p. 98
Price Elasticity of Demand and Total Revenue (Total Expenditure)	p. 100
Elasticity: Part 2	p. 103
Price Elasticity of Demand Along a Straight-Line Demand Curve	p. 103
Determinants of Price Elasticity of Demand	p. 105
Other Elasticity Concepts	p. 108
Cross Elasticity of Demand	p. 108
Income Elasticity of Demand	p. 110
Price Elasticity of Supply	p. 111
Price Elasticity of Supply and Time	p. 112
The Relationship Between Taxes and Elasticity	p. 113
A Reader Asks	p. 116
Chapter Summary	p. 116
Key Terms and Concepts	p. 117
Questions and Problems	p. 117
Working With Numbers and Graphs	p. 118
Consumer Choice: Maximizing Utility and Behavioral Economics	p. 119
Features
Economics in the World: Cuban Cigars	p. 123
Economics in Everyday Life: How You Pay for Good Weather	p. 128
Utility Theory	p. 120
Utility, Total and Marginal	p. 120
Law of Diminishing Marginal Utility	p. 120
The Millionaire and the Pauper: What Law Says and Doesn't Say	p. 123
The Solution to the Diamond-Water Paradox	p. 124
Is Gambling Worth the Effort?	p. 124
Consumer Equilibrium and Demand	p. 125
Equating Marginal Utilities per Dollar	p. 125
Consumer Equilibrium and the Law of Demand	p. 126
Income and Substitution Effects	p. 127
Should the Government Provide the Necessities of Life for Free?	p. 129
Behavioral Economics	p. 131
Are People Willing to Reduce Others' Incomes?	p. 131
Is $1 Always $1?	p. 132
Coffee Mugs and the Endowment Effect	p. 133
Does the Endowment Effect Hold Only for New Traders?	p. 134
A Reader Asks	p. 135
Chapter Summary	p. 135
Key Terms and Concepts	p. 136
Questions and Problems	p. 136
Working With Numbers and Graphs	p. 137
Production and Costs	p. 138
Features
Economics in Everyday Life: High School Students and Staying Out Late, and More	p. 147
Economics in the World: What Matters to Global Competitiveness?	p. 153
The Firm's Objective: Maximizing Profit	p. 139
Accounting Profit Versus Economic Profit	p. 139
Zero Economic Profit Is Not so Bad as It Sounds	p. 140
Production	p. 141
Production in the Short Run	p. 142
Marginal Physical Product and Marginal Cost	p. 143
Average Productivity	p. 146
Costs of Production: Total, Average, Marginal	p. 146
The AVC and ATC Curves in Relation to the MC Curve	p. 149
Tying Short-Run Production to Costs	p. 151
One More Cost Concept: Sunk Cost	p. 151
Production and Costs in the Long Run	p. 155
Long-Run Average Total Cost Curve	p. 155
Economics of Scale, Diseconomies of Scale, and Constant Returns to Scale	p. 156
Why Economies of Scale?	p. 157
Why Diseconomies of Scale?	p. 157
Shifts in Cost Curves	p. 157
Taxes	p. 157
Input Prices	p. 157
Technology	p. 158
A Reader Asks	p. 158
Chapter Summary	p. 158
Key Terms and Concepts	p. 159
Questions and Problems	p. 159
Working With Numbers and Graphs	p. 160
Product Markets
Perfect Competition	p. 161
Features
Economics in Popular Culture: What Do Audrey Hepburn, Lucille Ball, and Bugs Bunny Have in Common?	p. 174
Economics in Everyday Life: Do Churches Compete?	p. 175
Market Structures	p. 162
The Theory of Perfect Competition	p. 162
A Perfectly Competitive Firm Is a Price Taker	p. 162
The Demand Curve for a Perfectly Competitive Firm is Horizontal	p. 163
The Marginal Revenue Curve of a Perfectly Competitive Firm Is the Same as Its Demand Curve	p. 164
Theory and Real-World Markets	p. 165
Perfect Competition in the Short Run	p. 166
What Level of Output Does the Profit-Maximizing Firm Produce?	p. 166
The Perfectly Competitive Firm and Resource Allocative Efficiency	p. 167
To Produce or Not to Produce: That Is the Question	p. 168
The Perfectly Competitive Firm's Short-Run Supply Curve	p. 171
From Firm to Market (Industry) Supply Curve	p. 171
Why Is the Market Supply Curve Upward-Sloping?	p. 171
Perfect Competition in the Long Run	p. 173
The Conditions of Long-Run Competitive Equilibrium	p. 173
The Perfectly Competitive Firm and Productive Efficiency	p. 175
Industry Adjustment to an Increase in Demand	p. 175
What Happens as Firms Enter an Industry in Search of Profits?	p. 178
Industry Adjustment to a Decrease in Demand	p. 179
Differences in Cost, Differences in Profits: Now You See It, Now You Don't	p. 180
Profit and Discrimination	p. 181
A Reader Asks	p. 182
Chapter Summary	p. 182
Key Terms and Concepts	p. 183
Questions and Problems	p. 183
Working With Numbers and Graphs	p. 184
Monopoly	p. 185
Features
Economics in Everyday Life: Monopoly and the Boston Tea Party	p. 188
Economics in Everyday Life: Amazon and Price Discrimination	p. 200
Economics in Everyday Life: Why Do District Attorneys Plea Bargain?	p. 202
The Theory of Monopoly	p. 186
Barriers to Entry: A Key to Understanding Monopoly	p. 186
What Is the Difference Between a Government Monopoly and a Market Monopoly?	p. 187
Monopoly Pricing and Output Decisions	p. 188
The Monopolist's Demand and Marginal Revenue	p. 188
The Monopolist's Demand and Marginal Revenue Curves Are Not the Same: Why Not?	p. 190
Price and Output for a Profit-Maximizing Monopolist	p. 190
If a Firm Maximizes Revenue, Does It Automatically Maximize Profit Too?	p. 191
Perfect Competition and Monopoly	p. 193
Price, Marginal Revenue, and Marginal Cost	p. 193
Monopoly, Perfect Competition, and Consumers' Surplus	p. 193
Monopoly or Nothing	p. 194
The Case Against Monopoly	p. 195
The Deadweight Loss of Monopoly	p. 195
Rent Seeking	p. 196
X-Inefficiency	p. 197
Price Discrimination	p. 198
Types of Price Discrimination	p. 198
Why a Monopolist Wants to Price Discriminate	p. 198
Conditions of Price Discrimination	p. 199
Moving to P=MC Through Price Discrimination	p. 199
You Can Have the Comics, Just Give Me the Coupons	p. 201
A Reader Asks	p. 203
Chapter Summary	p. 203
Key Terms and Concepts	p. 204
Questions and Problems	p. 204
Working With Numbers and Graphs	p. 204
Monopolistic Competition and Oligopoly	p. 205
Features
Economics in Everyday Life: How Is a New Year's Resolution Like a Cartel Agreement?	p. 214
Economics in Everyday Life: An Economic Theory of the Mafia	p. 221
Economics in Technology: The Industry Standard Path to Monopoly	p. 222
The Theory of Monopolistic Competition	p. 206
The Monopolistic Competitor's Demand Curve	p. 206
The Relationship Between Price and Marginal Revenue for a Monopolistic Competitor	p. 206
Output, Price, and Marginal Cost for the Monopolistic Competitor	p. 206
Will There Be Profits in the Long Run?	p. 207
Excess Capacity: What Is It, and Is It "Good" or "Bad"?	p. 208
The Monopolist Competitor and Two Types of Efficiency	p. 209
Advertising and Designer Labels	p. 209
Oligopoly: Assumptions and Real-World Behavior	p. 210
Price and Output Under Three Oligopoly Theories	p. 211
The Cartel Theory	p. 211
The Kinked Demand Curve Theory	p. 213
The Price Leadership Theory	p. 215
Game Theory, Oligopoly, and Contestable Markets	p. 217
Prisoner's Dilemma	p. 217
Oligopoly Firms, Cartels, and Prisoner's Dilemma	p. 219
Are Markets Contestable?	p. 220
A Review of Market Structures	p. 223
Applications of Game Theory	p. 224
Grades and Partying	p. 224
The Arms Race	p. 225
Speed Limit Laws	p. 226
A Reader Asks	p. 227
Chapter Summary	p. 227
Key Terms and Concepts	p. 228
Questions and Problems	p. 228
Working With Numbers and Graphs	p. 229
Factor Markets and Related Issues
Factor Markets	p. 230
Features
Economics in the World: Why Jobs Don't Always Move to the Low-Wage Country	p. 240
Economics in Technology: How May Crime, Outsourcing, and Multitasking Be Related?	p. 241
Economics in Everyday Life: What Is the Wage Rate for a Street-Level Pusher in a Drug Gang?	p. 246
Factor Markets	p. 231
The Demand for a Factor	p. 231
Marginal Revenue Product: Two Ways to Calculate It	p. 231
The MRP Curve Is the Firm's Factor Demand Curve	p. 232
Value Marginal Product	p. 233
An Important Question: Is MRP =VMP?	p. 233
Marginal Factor Cost	p. 233
How Many Units of a Factor Should a Firm Buy?	p. 235
When There Is More Than One Factor, How Much of Each Factor Should the Firm Buy?	p. 236
The Labor Market	p. 237
Shifts in a Firm's MRP, or Factor Demand, Curve	p. 237
Market Demand for Labor	p. 238
Market Supply of Labor	p. 242
An Individual's Supply of Labor	p. 242
Shifts In the Labor Supply Curve	p. 243
Putting Supply and Demand Together	p. 243
Why Do Wage Rates Differ?	p. 244
Why Demand and Supply Differ In Different Labor Markets	p. 245
Why Did You Choose the Major That You Chose?	p. 246
Labor Markets and Information	p. 247
Screening Potential Employees	p. 247
Promoting From Within	p. 248
Is It Discrimination or Is It an Information Problem?	p. 248
A Reader Asks	p. 249
Chapter Summary	p. 250
Key Terms and Concepts	p. 250
Questions and Problems	p. 250
Working With Numbers and Graphs	p. 251
Interest, Rent, and Profit	p. 252
Features
Economics in Popular Culture: Lotteries, Art, and Old Age	p. 259
Economics in Everyday Life: Is the Car Worth Buying?	p. 260
Economics in Everyday Life: What Does Present Value Have to Do With a Divorce?	p. 261
Interest	p. 253
Loanable Funds: Demand and Supply	p. 253
The Price for Loanable Funds and the Return on Capital Goods Tend to Equality	p. 255
Why Do Interest Rates Differ?	p. 255
Nominal and Real Interest Rates	p. 256
Present Value: What Is Something Tomorrow Worth Today?	p. 257
Deciding Whether or Not to Purchase a Capital Good	p. 258
Rent	p. 259
David Ricardo, the Price of Grain, and Land Rent	p. 260
The Supply Curve of Land Can Be Upward-Sloping	p. 261
Economic Rent and Other Factors of Production	p. 262
Economic Rent and Baseball Players: The Perspective from Which the Factor Is Viewed Matters	p. 262
Competing for Artificial and Real Rents	p. 263
Do People Overestimate Their Worth to Others, or Are They Simply Seeking Economic Rent?	p. 263
Profit	p. 264
Theories of Profit	p. 264
What Is Entrepreneurship?	p. 265
What Do a Microwave Oven and an Errand Runner Have in Common?	p. 265
Profit and Loss as Signals	p. 266
A Reader Asks	p. 267
Chapter Summary	p. 267
Key Terms and Concepts	p. 268
Questions and Problems	p. 268
Working With Numbers and Graphs	p. 268
The Distribution of Income and Poverty	p. 269
Features
Economics in Everyday Life: Winner-Take-All Markets	p. 280
Economics in Popular Culture: Monks, Blessings, and Free Riders	p. 286
Some Facts About Income Distribution	p. 270
Who Are the Rich and How Rich Are They?	p. 270
Adjusting the Income Distribution	p. 270
The Effect of Age on the Income Distribution	p. 272
A Simple Equation	p. 273
Measuring Income Equality	p. 274
The Lorenz Curve	p. 274
The Gini Coefficient	p. 276
A Limitation of the Gini Coefficient	p. 277
Why Income Inequality Exists	p. 278
Factors Contributing to Income Inequality	p. 278
Income Differences: Some Are Voluntary, Some Are Not	p. 279
Normative Standards of Income Distribution	p. 281
The Marginal Productivity Normative Standard	p. 281
The Absolute Income Equality Normative Standard	p. 283
The Rawislan Normative Standard	p. 283
Size of the Income Pies	p. 284
Poverty	p. 284
What Is Poverty?	p. 284
Limitations of the Official Poverty Income Statistics	p. 285
Who Are the Poor?	p. 285
What Is the Justification for Government Redistributing Income?	p. 285
A Reader Asks	p. 287
Chapter Summary	p. 288
Key Terms and Concepts	p. 289
Questions and Problems	p. 289
Working With Numbers and Graphs	p. 289
Market Failure and Public Choice
Market Failure: Externalities and Public Goods	p. 290
Features
Economics in Technology: Software, Switching Costs and Benefits, and Market Failure	p. 300
Economics in Everyday Life: Finding Economics in College Life	p. 302
Market Failure	p. 291
Externalities	p. 291
Cost and Benefits of Activities	p. 291
Marginal Costs and Benefits of Activities	p. 292
Social Optimality of Efficiency Conditions	p. 292
Three Categories of Activities	p. 292
Externalities in Consumption and in Production	p. 293
Diagram of a Negative Externality	p. 293
Diagram of a Positive Externality	p. 295
Internalizing Externalities	p. 297
Persuasion	p. 297
Taxes and Subsidies	p. 297
Assigning Property Rights	p. 298
Voluntary Agreements	p. 299
Combining Property Rights Assignments and Voluntary Agreements	p. 299
Beyond Internalizing: Setting Regulations	p. 301
Dealing With a Negative Externality in the Environment	p. 301
Is No Pollution Worse Than Some Pollution?	p. 303
Two Methods to Reduce Air Pollution	p. 303
Public Goods: Excludable and Nonexcludable	p. 305
Goods	p. 305
The Free Rider	p. 306
Nonexcludable Versus Nonrivalrous	p. 307
A Reader Asks	p. 308
Chapter Summary	p. 309
Key Terms and Concepts	p. 309
Questions and Problems	p. 309
Working With Numbers and Graphs	p. 310
Public Choice	p. 311
Features
Economics in Everyday Life: Are You Rationally Ignorant?	p. 318
Economics in Everyday Life: Inheritance, Heirs, and Why the Firstborn Became King or Queen	p. 322
Public Choice Theory	p. 312
The Political Market	p. 312
Moving Toward the Middle: The Median Voter Model	p. 312
What Does the Theory Predict?	p. 313
Voters and Rational Ignorance	p. 314
The Costs and Benefits of Voting	p. 314
Rational Ignorance	p. 316
Special Interest Groups	p. 317
Information and Lobbying Efforts	p. 317
Congressional Districts as Special Interest Groups	p. 319
Public Interest Talk, Special Interest Legislation	p. 319
Special Interest Groups and Rent Seeking	p. 320
Government Bureaucracy	p. 323
A View of Government	p. 324
A Reader Asks	p. 324
Chapter Summary	p. 325
Key Terms and Concepts	p. 325
Questions and Problems	p. 325
Working With Numbers and Graphs	p. 326
The World Economy
International Economics: Theory and Policy
International Trade and Finance	p. 327
Features
Economics in Everyday Life: Dividing Up the Work	p. 332
Economics in Popular Culture: Offshore Outsourcing or Offshoring	p. 337
International Trade Theory	p. 238
How Do Countries Know What to Trade?	p. 328
How Do Countries Know When They Have a Comparative Advantage?	p. 331
Trade Restrictions	p. 331
The Distributional Effects of International Trade	p. 331
Consumers' and Producers' Surplus	p. 333
The Benefits and Costs of Trade Restrictions	p. 334
If Free Trade Results in Net Gain, Why Do Nations Sometimes Restrict Trade?	p. 337
The Saving-Domestic-Jobs Argument	p. 339
The Foreign Exchange Market	p. 340
The Demand for and Supply of Currencies	p. 341
Flexible Exchange Rates	p. 343
The Equilibrium Exchange Rate	p. 343
Changes in the Equilibrium Exchange Rate	p. 343
Factors That Affect the Equilibrium Exchange Rates	p. 344
Fixed Exchange Rates	p. 346
Fixed Exchange Rates and Overvalued/Undervalued Currency	p. 346
What Is so Bad About an Overvalued Dollar?	p. 348
Government Involvement in a Fixed Exchange Rate System	p. 349
Options Under a Fixed Exchange Rate System	p. 349
The Gold Standard	p. 350
Fixed Exchange Rates Versus Flexible Exchange Rates	p. 352
Promoting International Trade	p. 352
A Reader Asks	p. 355
Chapter Summary	p. 355
Key Terms and Concepts	p. 356
Questions and Problems	p. 357
Working With Numbers and Graphs	p. 357
Self-Test Appendix	p. 359
Glossary	p. 369
Index	p. 375
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