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