Intermediate Microeconomics: A Modern Approach

Cover
Table of Contents
Preface
Chapter 1 - The Market
1.1 Constructing a Model
1.2 Optimization and Equilibrium
1.3 The Demand Curve
1.4 The Supply Curve
1.5 Market Equilibrium
1.6 Comparative Statics
1.7 Other Ways to Allocate Apartments
The Discriminating Monopolist
The Ordinary Monopolist
Rent Control
1.8 Which Way Is Best?
1.9 Pareto Efficiency
1.10 Comparing Ways to Allocate Apartments
1.11 Equilibrium in the Long Run
Summary
REVIEW QUESTIONS
Chapter 2 - Budget Constraint
2.1 The Budget Constraint
2.2 Two Goods Are Often Enough
2.3 Properties of the Budget Set
2.4 How the Budget Line Changes
2.5 The Numeraire
2.6 Taxes, Subsidies, and Rationing
2.7 Budget Line Changes
Summary
REVIEW QUESTIONS
Chapter 3 - Preferences
3.1 Consumer Preferences
3.2 Assumptions about Preferences
3.3 Indifference Curves
3.4 Examples of Preferences
Perfect Substitutes
Perfect Complements
Bads
Neutrals
Satiation
Discrete Goods
3.5 Well-Behaved Preferences
3.6 The Marginal Rate of Substitution
3.7 Other Interpretations of the MRS
3.8 Behavior of the MRS
Summary
REVIEW QUESTIONS
Chapter 4 - Utility
4.1 Cardinal Utility
4.2 Constructing a Utility Function
4.3 Some Examples of Utility Functions
Perfect Substitutes
Perfect Complements
Quasilinear Preferences
Cobb-Douglas Preferences
4.4 Marginal Utility
4.5 Marginal Utility and MRS
4.6 Utility for Commuting
Summary
REVIEW QUESTIONS
APPENDIX
Chapter 5 - Choice
5.1 Optimal Choice
5.2 Consumer Demand
5.3 Some Examples
Perfect Substitutes
Perfect Complements
Neutrals and Bads
Discrete Goods
Concave Preferences
Cobb-Douglas Preferences
5.4 Estimating Utility Functions
5.5 Implications of the MRS Condition
5.6 Choosing Taxes
Summary
APPENDIX
Chapter 6 - Demand
6.1 Normal and Inferior Goods
6.2 Income Offer Curves and Engel Curves
6.3 Some Examples
Perfect Substitutes
Perfect Complements
Cobb-Douglas Preferences
Homothetic Preferences
Quasilinear Preferences
6.4 Ordinary Goods and Giffen Goods
6.5 The Price Offer Curve and the Demand Curve
6.6 Some Examples
Perfect Substitutes
Perfect Complements
A Discrete Good
6.7 Substitutes and Complements
6.8 The Inverse Demand Function
Summary
REVIEW QUESTIONS
APPENDIX
Chapter 7 - Revealed Preference
7.1 The Idea of Revealed Preference
7.2 From Revealed Preference to Preference
7.3 Recovering Preferences
7.4 The Weak Axiom of Revealed Preference
7.5 Checking WARP
7.6 The Strong Axiom of Revealed Preference
7.7 How to Check SARP
7.8 Index Numbers
7.9 Price Indices
Summary
REVIEW QUESTIONS
Chapter 8 - Slutsky Equation
8.1 The Substitution Effect
8.2 The Income Effect
8.3 Sign of the Substitution Effect
8.4 The Total Change in Demand
8.5 Rates of Change
8.6 The Law of Demand
8.7 Examples of Income and Substitution Effects
8.8 Another Substitution Effect
8.9 Compensated Demand Curves
Summary
REVIEW QUESTIONS
APPENDIX
Chapter 9 - Buying and Selling
9.1 Net and Gross Demands
9.2 The Budget Constraint
9.3 Changing the Endowment
9.4 Price Changes
9.5 Offer Curves and Demand Curves
9.6 The Slutsky Equation Revisited
9.7 Use of the Slutsky Equation
9.8 Labor Supply
The Budget Constraint
9.9 Comparative Statics of Labor Supply
Summary
REVIEW QUESTIONS
APPENDIX
Chapter 10 - Intertemporal Choice
10.1 The Budget Constraint
10.2 Preferences for Consumption
10.3 Comparative Statics
10.4 The Slutsky Equation and Intertemporal Choice
10.5 Inflation
10.6 Present Value: A Closer Look
10.7 Analyzing Present Value for Several Periods
10.8 Use of Present Value
10.9 Bonds
10.10 Taxes
10.11 Choice of the Interest Rate
Summary
Chapter 11 - Asset Markets
11.1 Rates of Return
11.2 Arbitrage and Present Value
11.3 Adjustments for Differences among Assets
11.4 Assets with Consumption Returns
11.5 Taxation of Asset Returns
11.6 Market Bubbles
11.7 Applications
Depletable Resources
When to Cut a Forest
11.8 Financial Institutions
Summary
REVIEW QUESTIONS
APPENDIX
Chapter 12 - Uncertainty
12.1 Contingent Consumption
12.2 Utility Functions and Probabilities
12.3 Expected Utility
12.4 Why Expected Utility Is Reasonable
12.5 Risk Aversion
12.6 Diversification
12.7 Risk Spreading
12.8 Role of the Stock Market
Summary
REVIEW QUESTIONS
APPENDIX
Chapter 13 - Risky Assets
13.1 Mean-Variance Utility
13.2 Measuring Risk
13.3 Counterparty Risk
13.4 Equilibrium in a Market for Risky Assets
13.5 How Returns Adjust
Summary
REVIEW QUESTIONS
14.1 Demand for a Discrete Good
14.2 Constructing Utility from Demand
14.3 Other Interpretations of Consumer’s Surplus
14.4 From Consumer’s Surplus to Consumers’ Surplus
14.5 Approximating a Continuous Demand
14.6 Quasilinear Utility
14.7 Interpreting the Change in Consumer’s Surplus
14.8 Compensating and Equivalent Variation
14.9 Producer’s Surplus
14.10 Benefit-Cost Analysis
Rationing
14.11 Calculating Gains and Losses
Summary
REVIEW QUESTIONS
APPENDIX
Chapter 15 - Market Demand
15.1 From Individual to Market Demand
15.2 The Inverse Demand Function
15.3 Discrete Goods
15.4 The Extensive and the Intensive Margin
15.5 Elasticity
15.6 Elasticity and Demand
15.7 Elasticity and Revenue
15.8 Constant Elasticity Demands
15.9 Elasticity and Marginal Revenue
15.10 Marginal Revenue Curves
15.11 Income Elasticity
Summary
REVIEW QUESTIONS
APPENDIX
Chapter 16 - Equilibrium
16.1 Supply
16.2 Market Equilibrium
16.3 Two Special Cases
16.4 Inverse Demand and Supply Curves
16.5 Comparative Statics
16.6 Taxes
16.7 Passing Along a Tax
16.8 The Deadweight Loss of a Tax
16.9 Pareto Efficiency
Summary
REVIEW QUESTIONS
Chapter 17 - Measurement
17.1 Summarize data
17.2 Test
17.3 Estimating demand using experimental data
17.4 Effect of treatment
17.5 Estimating demand using observational data
Functional form
Statistical model
Estimation
17.6 Identification
17.7 What can go wrong?
17.8 Policy evaluation
Summary
REVIEW QUESTIONS
Chapter 18 - Auctions
18.1 Classification of Auctions
Bidding Rules
18.2 Auction Design
18.3 Other Auction Forms
18.4 Position Auctions
Two Bidders
More Than Two Bidders
Quality Score
18.5 Should you advertise on your brand?
18.6 Auction revenue and number of bidders
18.7 Problems with Auctions
18.8 The Winner’s Curse
18.9 Stable Marriage Problem
18.10 Mechanism Design
Summary
REVIEW QUESTIONS
Chapter 19 - Technology
19.1 Inputs and Outputs
19.2 Describing Technological Constraint
19.3 Examples of Technology
Fixed Proportions
Perfect Substitutes
Cobb-Douglas
19.4 Properties of Technology
19.5 The Marginal Product
19.6 The Technical Rate of Substitution
19.7 Diminishing Marginal Product
19.8 Diminishing Technical Rate of Substitution
19.9 The Long Run and the Short Run
19.10 Returns to Scale
Summary
REVIEW QUESTIONS
Chapter 20 - Profit Maximization
20.1 Profits
20.2 The Organization of Firms
20.3 Profits and Stock Market Value
20.4 The Boundaries of the Firm
20.5 Fixed and Variable Factors
20.6 Short-Run Profit Maximization
20.7 Comparative Statics
20.8 Profit Maximization in the Long Run
20.9 Inverse Factor Demand Curves
20.10 Profit Maximization and Returns to Scale
20.11 Revealed Profitability
20.12 Cost Minimization
Summary
REVIEW QUESTIONS
APPENDIX
Chapter 21 - Cost Minimization
21.1 Cost Minimization
21.2 Revealed Cost Minimization
21.3 Returns to Scale and the Cost Function
21.4 Long-Run and Short-Run Costs
21.5 Fixed and Quasi-Fixed Costs
21.6 Sunk Costs
Summary
REVIEW QUESTIONS
APPENDIX
Chapter 22 - Cost Curves
22.1 Average Costs
22.2 Marginal Costs
22.3 Marginal Costs and Variable Costs
22.4 Cost Curves for Online Auctions
22.5 Long-Run Cost
22.6 Discrete Levels of Plant Size
22.7 Long-Run Marginal Costs
Summary
REVIEW QUESTIONS
APPENDIX
Chapter 23 - Firm Supply
23.1 Market Environments
23.2 Pure Competition
23.3 The Supply Decision of a Competitive Firm
23.4 An Exception
23.5 Another Exception
23.6 The Inverse Supply Function
23.7 Profits and Producer’s Surplus
23.8 The Long-Run Supply Curve of a Firm
23.9 Long-Run Constant Average Costs
Summary
REVIEW QUESTIONS
Chapter 24 - Industrial Supply
24.1 Short-Run Industry Supply
24.2 Industry Equilibrium in the Short Run
24.3 Industry Equilibrium in the Long Run
24.4 The Long-Run Supply Curve
24.5 The Meaning of Zero Profits
24.6 Fixed Factors and Economic Rent
24.7 Economic Rent
24.8 Rental Rates and Prices
24.9 The Politics of Rent
24.10 Energy Policy
Two-Tiered Oil Pricing
Price Controls
The Entitlement Program
24.11 Carbon Tax Versus Cap and Trade
Optimal Production of Emissions
A Carbon Tax
Cap and Trade
Summary
REVIEW QUESTIONS
Chapter 25 - Monopoly
25.1 Maximizing Profits
25.2 Linear Demand Curve and Monopoly
25.3 Markup Pricing
25.4 Inefficiency of Monopoly
25.5 Deadweight Loss of Monopoly
25.6 Natural Monopoly
25.7 What Causes Monopolies?
Summary
REVIEW QUESTIONS
APPENDIX
Chapter 26 - Monopoly Behavior
26.1 Price Discrimination
26.2 First-Degree Price Discrimination
26.3 Second-Degree Price Discrimination
26.4 Third-Degree Price Discrimination
26.5 Bundling
26.6 Two-Part Tariffs
26.7 Monopolistic Competition
26.8 A Location Model of Product Differentiation
26.9 Product Differentiation
26.10 More Vendors
Summary
REVIEW QUESTIONS
Chapter 27 - Factor Markets
27.1 Monopoly in the Output Market
27.2 Monopsony
27.3 Upstream and Downstream Monopolies
Summary
REVIEW QUESTIONS
APPENDIX
Chapter 28 - Oligopoly
28.1 Choosing a Strategy
28.2 Quantity Leadership
The Follower’s Problem
The Leader’s Problem
28.3 Price Leadership
28.4 Comparing Price Leadership and Quantity Leadership
28.5 Simultaneous Quantity Setting
28.6 An Example of Cournot Equilibrium
28.7 Adjustment to Equilibrium
28.8 Many Firms in Cournot Equilibrium
28.9 Simultaneous Price Setting
28.10 Collusion
28.11 Punishment Strategies
28.12 Comparison of the Solutions
Summary
REVIEW QUESTIONS
Chapter 29 - Game Theory
29.1 The Payoff Matrix of a Game
29.2 Nash Equilibrium
29.3 Mixed Strategies
29.4 The Prisoner’s Dilemma
29.5 Repeated Games
29.6 Enforcing a Cartel
29.7 Sequential Games
29.8 A Game of Entry Deterrence
Summary
REVIEW QUESTIONS
Chapter 30 - Game Applications
30.1 Best Response Curves
30.2 Mixed Strategies
30.3 Games of Coordination
Battle of the Sexes
Prisoner’s Dilemma
Assurance Games
How to Coordinate
30.4 Games of Competition
30.5 Games of Coexistence
30.6 Games of Commitment
The Frog and the Scorpion
The Kindly Kidnapper
When Strength Is Weakness
Savings and Social Security
Hold Up
30.7 Bargaining
The Ultimatum Game
Summary
REVIEW QUESTIONS
Chapter 31 - Behavioral Economics
31.1 Framing Effects in Consumer Choice
The Disease Dilemma
Anchoring Effects
Bracketing
Too Much Choice
Constructed Preferences
31.2 Uncertainty
Law of Small Numbers
Asset Integration and Loss Aversion
31.3 Time
Discounting
Self-control
31.4 Strategic Interaction and Social Norms
Ultimatum Game
Fairness
31.5 Assessment of Behavioral Economics
Summary
REVIEW QUESTIONS
Chapter 32 - Exchange
32.1 The Edgeworth Box
32.2 Trade
32.3 Pareto Efficient Allocations
32.4 Market Trade
32.5 The Algebra of Equilibrium
32.6 Walras’ Law
32.7 Relative Prices
32.8 The Existence of Equilibrium
32.9 Equilibrium and Efficiency
32.10 The Algebra of Efficiency
32.11 Efficiency and Equilibrium
32.12 Implications of the First Welfare Theorem
32.13 Implications of the Second Welfare Theorem
Summary
REVIEW QUESTIONS
APPENDIX
Chapter 33 - Production
33.1 The Robinson Crusoe Economy
33.2 Crusoe, Inc.
33.3 The Firm
33.4 Robinson’s Problem
33.5 Putting Them Together
33.6 Different Technologies
33.7 Production and the First Welfare Theorem
33.8 Production and the Second Welfare Theorem
33.9 Production Possibilities
33.10 Comparative Advantage
33.11 Pareto Efficiency
33.12 Castaways, Inc.
33.13 Robinson and Friday as Consumers
33.14 Decentralized Resource Allocation
Summary
REVIEW QUESTIONS
APPENDIX
Chapter 34 - Welfare
34.1 Aggregation of Preferences
34.2 Social Welfare Functions
34.3 Welfare Maximization
34.4 Individualistic Social Welfare Functions
34.5 Fair Allocation
34.6 Envy and Equity
Summary
REVIEW QUESTIONS
APPENDIX
Chapter 35 - Externalities
35.1 Smokers and Nonsmokers
35.2 Quasilinear Preferences and the Coase Theorem
35.3 Production Externalities
35.4 Interpretation of the Conditions
35.5 Market Signals
35.6 The Tragedy of the Commons
35.7 Automobile Pollution
Summary
REVIEW QUESTIONS
Chapter 36 - Information Technology
36.1 Systems Competition
36.2 The Problem of Complements
Relationships among Complementors
36.3 Lock-In
A Model of Competition with Switching Costs
36.4 Network Externalities
36.5 Markets with Network Externalities
36.6 Market Dynamics
36.7 Implications of Network Externalities
36.8 Two-sided Markets
A Model of Two-sided Markets
36.9 Rights Management
36.10 Sharing Intellectual Property
Summary
REVIEW QUESTIONS
Chapter 37 - Public Goods
37.1 When to Provide a Public Good?
37.2 Private Provision of the Public Good
37.3 Free Riding
37.4 Different Levels of the Public Good
37.5 Quasilinear Preferences and Public Goods
37.6 The Free Rider Problem
37.7 Comparison to Private Goods
37.8 Voting
37.9 The Vickrey-Clarke-Groves Mechanism
Groves Mechanism
The VCG Mechanism
37.10 Examples of VCG
Vickrey Auction
Clarke-Groves Mechanism
37.11 Problems with the VCG
Summary
REVIEW QUESTIONS
APPENDIX
Chapter 38 - Asymmetric Information
38.1 The Market for Lemons
38.2 Quality Choice
Choosing the Quality
38.3 Adverse Selection
38.4 Moral Hazard
38.5 Moral Hazard and Adverse Selection
38.6 Signaling
38.7 Incentives
38.8 Asymmetric Information
Summary
REVIEW QUESTIONS
Mathematical Appendix
A.1 Functions
A.2 Graphs
A.3 Properties of Functions
A.4 Inverse Functions
A.5 Equations and Identities
A.6 Linear Functions
A.7 Changes and Rates of Change
A.8 Slopes and Intercepts
A.9 Absolute Values and Logarithms
A.10 Derivatives
A.11 Second Derivatives
A.12 The Product Rule and the Chain Rule
A.13 Partial Derivatives
A.14 Optimization
A.15 Constrained Optimization
Answers
Index
Instructors Manual
CONTENTS
Part I Chapter Highlights
Chapter 1 The Market
Chapter 2 Budget Constraint
Chapter 3 Preferences
Chapter 4 Utility
Chapter 5 Choice
Chapter 6 Demand
Chapter 7 Revealed Preference
Chapter 8 Slutsky Equation
Chapter 9 Buying and Selling
Chapter 10 Intertemporal Choice
Chapter 11 Asset Markets
Chapter 12 Uncertainty
Chapter 13 Risky Assets
Chapter 14 Consumer’s Surplus
Chapter 15 Market Demand
Chapter 16 Equilibrium
Chapter 17 Measurement
Chapter 18 Auctions
Chapter 19 Technology
Chapter 20 Profit Maximization
Chapter 21 Cost Minimization
Chapter 22 Cost Curves
Chapter 23 Firm Supply
Chapter 24 Industry Supply
Chapter 25 Monopoly
Chapter 26 Monopoly Behavior
Chapter 27 Factor Markets
Chapter 28 Oligopoly
Chapter 29 Game Theory
Chapter 30 Game Applications
Chapter 31 Behavioral Economics
Chapter 32 Exchange
Chapter 33 Production
Chapter 34 Welfare
Chapter 35 Externalities
Chapter 36 Information Technology
Chapter 37 Public Goods
Chapter 38 Information
Part II Answers to Workouts
Chapter 1 The Market
Chapter 2 Budget Constraint
Chapter 3 Preferences
Chapter 4 Utility
Chapter 5 Choice
Chapter 5 Choice
Chapter 6 Demand
Chapter 7 Revealed Preference
Chapter 8 Slutsky Equation
Chapter 9 Buying and Selling
Chapter 10 Intertemporal Choice
Chapter 11 Asset Markets
Chapter 12 Uncertainty
Chapter 13 Risky Assets
Chapter 14 Consumer’s Surplus
Chapter 15 Market Demand
Chapter 16 Equilibrium
Chapter 17 Measurement
Chapter 18 Auctions
Chapter 19 Technology
Chapter 20 Profit Maximization
Chapter 21 Cost Minimization
Chapter 22 Cost Curves
Chapter 23 Firm Supply
Chapter 24 Industry Supply
Chapter 25 Monopoly
Chapter 26 Monopoly Behavior
Chapter 27 Factor Markets
Chapter 28 Oligopoly
Chapter 29 Game Theory
Chapter 30 Game Applications
Chapter 31 Behavioral Economics
Chapter 32 Exchange
Chapter 33 Production
Chapter 34 Welfare
Chapter 35 Externalities
Chapter 36 Information Technology
Chapter 37 Public Goods
Chapter 38 Asymmetric Information