Microeconomics Principles, Applications, and Tools

ISBN-10: 0131572830
ISBN-13: 9780131572836
Edition: 5th 2007
List price: $170.67
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Description: The book provides a clear, concise, and accessible presentation of key points.Its hallmark feature includes a focus on the 5 Key Principles of Economics1) Opportunity Cost, 2) The Marginal Principle (comparing marginal benefits and marginal costs),  More...

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Book details

List price: $170.67
Edition: 5th
Copyright year: 2007
Publisher: Prentice Hall PTR
Publication date: 11/29/2006
Binding: Paperback
Pages: 480
Size: 8.50" wide x 11.00" long x 0.75" tall
Weight: 2.156
Language: English

The book provides a clear, concise, and accessible presentation of key points.Its hallmark feature includes a focus on the 5 Key Principles of Economics1) Opportunity Cost, 2) The Marginal Principle (comparing marginal benefits and marginal costs), 3) Diminishing Returns, 4) The Spillover Principle (for externalities in production and consumption), 5) The Reality Principle (distinguishing real from nominal magnitudes).For financial professionals and analysts.

Arthur O'Sullivan is a professor of economics at Lewis and Clark College in Portland, Oregon. After receiving his B.S. in economics at the University of Oregon, he spent two years in the Peace Corps, working with city planners in the Philippines. He received his Ph.D. in economics from Princeton University in 1981 and has taught at the University of California, Davis, and Oregon State University, winning several teaching awards at both schools. He recently accepted an endowed professorship at Lewis and Clark College, where he teaches microeconomics and urban economics. He is the author of the best-selling textbook, Urban Economics, currently in its sixth edition. Professor O'Sullivan's research explores economic issues concerning urban land use, environmental protection, and public policy. His articles have appeared in many economics journals, including theJournal of Urban Economics, Journal of Environmental Economics and Management, National Tax Journal, Journal of Public Economics, andJournal of Law and Economics. Professor O'Sullivan lives with his family in Lake Oswego, Oregon. For recreation, he enjoys hiking, boogie-boarding, paragliding, and squash.Steven M. Sheffrin is dean of the division of social sciences and professor of economics at the University of California, Davis. He has been a visiting professor at Princeton University,Oxford University, and the London School of Economics and has served as a financial economist with the Office of Tax Analysis of the United States Department of Treasury. He has been on the faculty of the University of California, Davis, since 1976 and has served as the chairman of the department of economics. He received his B.A. from Wesleyan University and his Ph.D. in economics from the Massachusetts Institute of Technology. Professor Sheffrin is the author of 10 other books and monographs and over 100 articles in the fields of macroeconomics, public finance, and international economics. His most recent books include Rational Expectations (second edition) and Property Taxes and Tax Revolts: The Legacy of Proposition 13 (with Arthur O'Sullivan and Terri Sexton). Professor Sheffrin has taught macroeconomics at all levels, from large introduction to principles classes (enrollments of 400) to graduate classes for doctoral students. He is the recipient of the Thomas Mayer Distinguished Teaching Award in economics. He lives with his wife Anjali (also an economist) in Davis, California, and has two daughters who have studied economics. In addition to a passion for current affairs and travel, he plays a tough game of tennis.Stephen Perez is chair of the economics department at California State University, Sacramento. After receiving his B.A. in economics at the University of California, San Diego, he received his Ph.D. in economics from the University of California, Davis, in 1994. He taught economics at Virginia Commonwealth University and Washington State University before coming to California State University, Sacramento, in 2001. He teaches macroeconomics at all levels as well as econometrics, sports economics, labor economics, and mathematics for economists. Professor Perez's research explores most macroeconomic topics. In particular, he is interested in evaluating the ability of econometric techniques to discover the truth, issues of causality in macroeconomics, and sports economics. His articles have appeared in many economics journals, including the Journal of Monetary Economics, Econometrics Journal, Economics Letters, Journal of Economic Methodology, Public Finance and Management, Journal of Economics and Business, Oxford Bulletin of Economics and Statistics, Journal of Money, Credit, and Banking, Applied Economics, and Journal of Macroeconomics.

Preface
Introduction and Key Principles
Introduction: What Is Economics?
What Is Economics?
Positive Versus Normative Analysis
The Three Key Economic Questions: What, How, and Who?
Economic Models
Economic Analysis and Modern Problems
Economic View of Traffic Congestion
Economic View of Poverty in Africa
Economic View of Japan's Economic Problems
The Economic Way of Thinking
Use Assumptions to Simplify
Isolate Variables-Ceteris Paribus
Think at the Margin
Rational People Respond to Incentives
Pedaling for Television Time
Preview of Coming Attractions: Macroeconomics
To Understand Why Economies Grow
London Solves its Congestion Problem
To Understand Economic Fluctuations
To Make Informed Business Decisions
Preview of Coming Attractions: Microeconomics
To Understand Markets and Predict Changes
To Make Personal and Managerial Decisions
To Evaluate Public Policies
Summary
Key Terms
Exercise
Using Graphs and Percentages
Using Graphs
Computing Percentage Changes and Using Equations
The Key Principles of Economics
The Principle of Opportunity Cost
The Cost of College
The Opportunity Costs of Time and Invested Funds
Opportunity Cost and the Production Possibilities Curve
The Marginal Principle
The Opportunity Cost of Military Spending
How Many Movie Sequels?
Renting College Facilities
Automobile Emissions Standards
Continental Airlines Uses the Marginal Principle
The Principle of Voluntary Exchange
Exchange and Markets
Online Games and Market Exchange
The Principle of Diminishing Returns
Tiger Woods and Weeds
Diminishing Returns from Sharing a Production Facility
Fertilizer and Crop Yields
The Real-Nominal Principle
The Declining Real Minimum Wage
Repaying Student Loans
Summary
Key Terms
Exercises
Economic Experiment
Exchange and Markets
Comparative Advantage and Exchange
Specialization and the Gains from Trade
Comparative Advantage Versus Absolute Advantage
The Division of Labor and Exchange
Comparative Advantage and International Trade
Moving Jobs to Different States and Different Countries
Movie Exports
Candy Cane Makers Move to Mexico for Cheap Sugar
Markets
Virtues of Markets
Markets in a Prisoner of War Camp
Market Failure and the Role of Government
Government Enforces the Rules of Exchange
Government Can Reduce Economic Uncertainty
Summary
Key terms
Exercises
Demand, Supply, and Market Equilibrium
The Demand Curve
The Individual Demand Curve and the Law of Demand
From Individual Demand to Market Demand
The Supply Curve
The Individual Supply Curve and the Law of Supply
Why Is the Individual Supply Curve Positively Sloped?
From Individual Supply to Market Supply
Why Is the Market Supply Curve Positively Sloped?
Market Equilibrium: Bringing Demand and Supply Together
Excess Demand Causes the Price to Rise
Excess Supply Causes the Price to Drop
Market Effects of Changes in Demand
Change in Quantity Demanded Versus Change in Demand
Increases in Demand Shift the Demand Curve
Decreases in Demand Shift the Demand Curve
A Decrease in Demand Decreases the Equilibrium Price
Market Effects of Changes in Supply
Change in Quantity Supplied Versus Change in Supply
Increases in Supply Shift the Supply Curve
An Increase in Supply Decreases the Equilibrium Price
Decreases in Supply Shift the Supply Curve
A Decrease in Supply Increases the Equilibrium Price
Simultaneous Changes in Demand and Supply
Predicting and Explaining Market Changes
Applications of Demand and Supply
Hurricane Katrina and Baton Rouge Housing Prices
Ted Koppel Tries to Explain Lower Drug Prices
Electricity from the Wind
The Bouncing Price of Vanilla Beans
Platinum, Jewelry, Catalytic Converters
Summary
Key Terms
Exercises
Economic Experiment
A Closer Look at Demand and Supply
Elasticity: A Measure of Responsiveness
The Price Elasticity of Demand
Computing Percentage Changes and Elasticities
Price Elasticity and the Demand Curve
Elasticity and the Availability of Substitutes
Other Determinants of the Price Elasticity of Demand
Using Price Elasticity to Predict Changes in Quantity
Beer Taxes and Highway Deaths
Subsidized Medical Care in Cote d'Ivoire and Peru
Price Elasticity and Total Revenue
How to Cut Teen Smoking by 60 Percent
Elastic Versus Inelastic Demand
Market Elasticity Versus Elasticity for a Firm
Transit Fares and Deficits
A Bumper Crop Is Bad News for Farmers
Drug Prices and Property Crime
Elasticity and Total Revenue for a Linear Demand Curve
Price Elasticity Along a Linear Demand Curve
Elasticity and Total Revenue for a Linear Demand Curve
Other Elasticities of Demand
Income Elasticity of Demand
Cross-Price Elasticity of Demand
The Price Elasticity of Supply
What Determines the Price Elasticity of Supply?
The Role of Time: Short-Run Versus Long-Run Supply Elasticity
Extreme Cases: Perfectly Inelastic Supply and Perfectly Elastic Supply
Predicting Changes in Quantity Supplied
Using Elasticities to Predict Changes in Equilibrium Price
The Price Effects of a Change in Demand
The Price Effects of a Change in Supply
Metropolitan Growth and Housing Prices
An Import Ban and Shoe Prices
Summary
Key Terms
Exercises
Market Efficiency and Government Intervention
Consumer Surplus and Producer Surplus
The Demand Curve and Consumer Surplus
The Supply Curve and Producer Surplus
Market Equilibrium and Efficiency
Total Surplus Is Lower with a Price Below the Equilibrium Price
Total Surplus Is Lower with a Price Above the Equilibrium Price
Efficiency and the Invisible Hand
Government Intervention in Efficient Markets
Controlling Prices-Maximum and Minimum Prices
Setting Maximum Prices
Rent Control
Milk Mountains
Setting Minimum Prices
Controlling Quantities-Licensing and Import Restrictions
Taxi Medallions
Licensing and Market Efficiency
Winners and Losers from Licensing
Import Restrictions
U.S. and European Consumers Pay for Import Restrictions
Who Really Pays Taxes?
Tax Shifting: Forward and Backward
Supply and Demand for Human Organs
Tax Shifting and the Price Elasticity of Demand
Cigarette Taxes and Tobacco Land
Tax Burden and Deadweight Loss
Boat Workers and the Tax on Luxury Boats
Taxes and December Babies
Summary
Key Terms
Exercises
Economic Experiment
Consumer Choice Using Utility Theory
Total and Marginal utility
Consumer Choice
Consumer Constraints: The Budget Line
Making Choices Using the Equimarginal Rule
New Zealand's Tax on Light Spirits
Online Music Stores and Piracy
The Individual Demand Curve
The Income and Substitution Effects of a Price Change
Points on the Demand Curve
The Substitution Effect of a Gas Tax Decreases Gas Consumption
Application of Consumer Choice
Inflation Doesn't Change Consumption or Utility
Television Versus Radio Advertising
Summary
Key Terms
Exercises
Consumer Choice with Indifference Curves
Consumer Constraints and Preferences
Maximizing Utility
What's Your MRS?
Online Music and Piracy
Inflation Doesn't Change Consumption or Utility
Drawing the Individual Demand Curve
The Substitution Effect of a Gas Tax Decreases Gas Consumption
Summary
Exercises
Key Terms
Market Structures and Pricing
Production Technology and Cost
Economic Cost and Economic Profit
A Firm with a Fixed Production Facility: Short-Run Costs
Production and Marginal Product
Short-Run Total Cost
Short-Run Average Costs
Short-Run Marginal Cost
The Relationship Between Marginal Cost and Average Cost
Production and Cost in the Long Run
Expansion and Replication
Reducing Output with Indivisible Inputs
Scaling Down and Labor Specialization
Economies of Scale
Diseconomies of Scale
Actual Long-Run Average-Cost Curves
Short-Run Versus Long-Run Average Cost
Applications of Production Cost
The Production Cost of an iPod Nano
Indivisible inputs and the Cost of Fake Killer Whales
Scale Economies in Wind Power
Information Goods and First-Copy Cost
The Average Cost of Producing Airplanes
Summary
Key Terms
Exercises
Perfect Competition
Preview of the Four Market Structures
The Firm's Short-Run Output Decision
The Total Approach: Computing Total Revenue and Total Cost
The Marginal Approach
Economic Profit and the Break-Even Price
The Firm's Shut-Down Decision
Total Revenue, Variable Cost, and the Shut-Down Decision
The Shut-Down Price
Fixed Costs and Sunk Costs
The Break-Even Price for a Corn Farmer
Short-Run Supply Curves
The Firm's Short-Run Supply Curve
The Short-Run Market Supply Curve
Market Equilibrium
Wireless Women in Pakistan
The Long-Run Supply Curve for an Increasing-Cost Industry
Production Cost and Industry Size
Drawing the Long-Run Market Supply Curve
Wolfram Miners Obey the Law of Supply
The Worldwide Supply of Sugar
Short-Run and Long-Run Effects of Changes in Demand
The Short-Run Response to an Increase in Demand
The Long-Run Response to an Increase in Demand
Zoning, Land Prices, and the Supply Curve for Apartments
Long-Run Supply for a Constant-Cost Industry
Long-Run Supply Curve for a Constant-Cost Industry
Hurricane Andrew and the Price of Ice
Summary
Key Terms
Exercises
Monopoly and Price Discrimination
The Monopolist's Output Decision
Total Revenue and Marginal Revenue
A Formula for Marginal Revenue
Using the Marginal Principle
The Social Cost of Monopoly
Deadweight Loss from Monopoly
Rent Seeking: Using Resources to Get Monopoly Power
Monopoly and Public Policy
Ending the Monopoly on Internet Registration
Patents and Monopoly Power
Incentives for Innovation
Trade-Offs from Patents
Price Discrimination
Bribing the Makers of Generic Drugs
Senior Discounts in Restaurants
Price Discrimination and the Elasticity of Demand
Paying for a Cold Soft Drink on a Hot Day
The Pricing of Movie Admission and Popcorn
Hardback Books Are Relatively Expensive
Summary
Key Terms
Exercises
Economic Experiment
Market Entry and Monopolistic Competition
The Effects of Market Entry
Entry Squeezes Profits from Three Sides
Woofer, Tweeter, and the Stereo Business
Deregulation and Entry in Trucking
Name Brands Versus Store Brands
Monopolistic Competition
When Entry Stops: Long-Run Equilibrium
Differentiation by Location
Trade-Offs with Entry and Monopolistic Competition
Average Cost and Variety
Opening a Dunkin' Donuts Shop
Monopolistic Competition Versus Perfect Competition
Advertising for Product Differentiation
Celebrity Endorsements and Signaling
Advertising and Movie Buzz
Summary
Key Terms
Exercises
Economic Experiment
Oligopoly and Strategic Behavior
What Is an Oligopoly?
Cartel Pricing and the Duopolists' Dilemma
Price-Fixing and the Game Tree
Equilibrium of the Price-Fixing Game
Nash Equilibrium
Overcoming the Duopolists' Dilemma
Low-Price Guarantees
Vitamin Inc. Gets Busted
Repeated Pricing Games with Retaliation for Underpricing
Low-Price Guarantees and Empty Promises
Price-Fixing and the Law
Alternative Models of Oligopoly Pricing
Price Leadership
The Kinked Demand Curve Mode
Simultaneous Decision Making and the Payoff Matrix
Simultaneous Price-Fixing Game
The Prisoners' Dilemma
The Insecure Monopolist and Entry Deterrence
The Passive Approach
Entry Deterrence and Limit Pricing
Legal and Illegal Entry Deterrence
Examples: Microsoft Windows and Campus Bookstores
Entry Deterrence and Contestable Markets
When Is the Passive Approach Better?
The Advertisers' Dilemma
Reynolds International Takes the Money and Leaves the Market
Summary
Key Terms
Exercises
Economic Experiment
Controlling Market Power: Antitrust and Regulation
Natural Monopoly
Picking an Output Level
Will a Second Firm Enter?
Price Controls for a Natural Monopoly
XM and Sirius Satellite Radio
A Decrease in Demand Increases The Price of Cable TV
Antitrust Policy
Breaking Up Monopolies
Blocking Mergers
Merger Remedy for Wonder Bread
Heinz and Beech-Nut Battle for Second Place
Regulating Business Practices: Price-Fixing, Tying, and Cooperative Agreements
Xidex Recovers Its Acquisition Cost in Two Years
The Microsoft Cases
A Brief History of U.S. Antitrust Policy
Deregulation: Airlines, Telecommunications, and Electricity
Deregulation of Airlines
Deregulation of Telecommunication Services
Deregulation of Electricity
Electricity Deregulation in California
Electricity Deregulation in Other U.S. States
Summary
Key Terms
Exercises
Externalities and Information
Imperfect Information: Adverse Selection and Moral Hazard
The Lemons Problem
Uninformed Buyers and Knowledgeable Sellers
Equilibrium with All Low-Quality Goods
A Thin Market: Equilibrium with Some High-Quality Goods
Responding to the Lemons Problem
Buyers Invest in Information
Consumer Satisfaction Scores from ValueStar and eBay
Guarantees and Lemons Laws
Evidence of the Lemons Effect
The Resale Value of a Week-Old Car
Used Pickup Trucks
Regulation of the California Kiwifruit Market
Baseball Pitchers Are Like Used Cars
Uninformed Sellers and Knowledgeable Buyers: Insurance
Health Insurance
Equilibrium with All High-Cost Consumers
Responding to Adverse Selection in Insurance: Group Insurance
The Uninsured
Genetic Testing Benefits Low-Risk People
Other Types of Insurance
Insurance and Moral Hazard
Deposit Insurance for Savings & Loans
People with Insurance Take More Risks
Summary
Key Terms
Exercises
Economic Experiments
Public Goods and Public Choice
External Benefits and Public Goods
Public Goods and the Free-Rider Problem
Free Riders and the Three-Clock Tower
Overcoming the Free-Rider Problem
Paying Landowners to Host Wolves
Asteroid Diversion as a Public Good
Private Goods with External Benefits
External Benefits from Education
External Benefits and the Marginal Principle
Other Private Goods That Generate External Benefits
External Benefits from LoJack
Public Choice
Voting and the Median-Voter Rule
Alternative Models of Government: Self-Interest and Special Interests
Politicians Are Like Ice-Cream Sellers
Which Theory Is Correct?
Summary
Key Terms
Exercises
Economic Experiment
External Costs and Environmental Policy
The Optimal Level of Pollution
Using the Marginal Principle
The Optimal of Level Sulfur Dioxide Emissions
Taxing Pollution
A Firm's Response to a Pollution Tax
The Market Effects of a Pollution Tax
Traditional Regulation
Uniform Abatement with Permits
The Effects of a Carbon Tax
Command and Control
Market Effects of Pollution Regulations
Marketable Pollution Permits
Dear Abby and Environmental Policy
Voluntary Exchange and Marketable Permits
Supply, Demand, and the Price of Marketable Permits
External Costs from Automobiles
External Costs from Pollution
Marketable Permits for Sulfur Dioxide
Chicago Climate Exchange
External Costs from Congestion
External Costs from Collisions
Young Drivers and Collisions
Summary
Key Terms
Exercises
Economic experiment
The Labor Market and Income Distribution
The Labor Market, Income, and Poverty
The Demand for Labor
Labor Demand by an Individual Firm in the Short Run
Market Demand for Labor in the Short Run
Labor Demand in the Long Run
Short-Run Versus Long-Run Demand
The Supply of Labor
The Individual Labor-Supply Decision: How Many Hours?
Different Responses to a Higher Wage
The Market Supply Curve for Labor
Labor Market Equilibrium
Changes in Demand and Supply
The Market Effects of the Minimum Wage
Codes of Conduct and Living Wages
Trade-Offs from Immigration
Explaining Differences in Wages and Income
Why Do Wages Differ Across Occupations?
The Gender Pay Gap
Wage Premiums for Dangerous Jobs
Racial Discrimination
Why Do College Graduates Earn Higher Wages?
Lakisha Washington Versus Emily Walsh
The Distribution of Income
Income Distribution Facts
Recent Changes in the Distribution of Income
Changes in the Top End of Income Distribution: 1920-1998
Poverty and Public Policy
Poverty Rates for Different Groups
Redistribution Programs for the Poor
Welfare Reform and TANF
Welfare and Work Incentives
Summary
Key Terms
Exercises
Unions, Monopsony, and Imperfect Information
Labor Unions
A Brief History of Labor Unions in the United States
Labor Unions and Wages
Truckers Trade Off Wages and Jobs
Market Structure and the Wage-Jobs Trade-Off
The Effects of Unions on Worker Productivity and Turnover
Competition Reduces Trucker Wages
Monopsony Power
Marginal Labor Cost Exceeds the Wage
Picking a Quantity of Labor and a Wage
Monopsony Versus Perfect Competition
Monopsony and a Minimum Wage
Monopsony and the Real World
Pubs and the Labor-Supply Curve
Imperfect Information and Efficiency Wages
The Mixed Market for Labor
Efficiency Wages at Ford Motor Company
Summary
Key Terms
Exercises
The International Economy
International Trade and Public Policy
Benefits from Specialization and Trade
Production Possibilities Curve
Comparative Advantage and the Terms of Trade
The Consumption Possibilities Curve
How Free Trade Affects Employment
Protectionist Policies
Import Bans
Quotas and Voluntary Export Restraints
Responses to Protectionist Policies
The Impact of Tariff31s on the Poor
What Are the Rationales for Protectionist Policies?
To Shield Workers from Foreign Competition
To Nurture Infant Industries
Measuring the Costs of Protecting Jobs
To Help Domestic Firms Establish Monopolies in World Markets
Protection for Candle Makers
A Brief History of International Tariff and Trade Agreements
Ongoing Trade Negotiations
Recent Policy Debates and Trade Agreements
Are Foreign Producers Dumping Their Products?
Do Trade Laws Inhibit Environmental Protection?
Do Outsourcing and Trade Cause Inequality?
Why Do People Protest Against Free Trade?
Summary
Key Terms
Exercises
Glossary
Photo Credits
Index

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