Test Bank for Microeconomics, 3rd Edition: Hubbard

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Product Details:

• ISBN-10 ‏ : ‎ 0132479370
• ISBN-13 ‏ : ‎ 978-0132479370
• Author:   R. Glenn Hubbard (Author), Anthony Patrick O’Brien (Author)

Still Keeping it Real and More Accessible Than Ever!

Hubbard & O’Brien keeps it real in the third edition with updated examples, data, and end-of-chapter problems, providing the most up-to-date discussion on the recession/financial crisis and the monetary and fiscal policy response.

Hubbard & O’Brien is the only book that motivates students to learn economics through real business examples.

The #1 question students of economics ask themselves is:  “Why am I here, and will I ever use this?”  Hubbard/O’Brien answer this question by demonstrating that real businesses use economics to make real decisions daily.  This is motivating to all students, whether they are business majors or not.  All students can relate to businesses they encounter in their everyday lives.  Whether they open an art studio, do social work, trade on Wall Street, work for the government, or bartend at the local pub, students will benefit from understanding the economic forces behind their work.

The book motivates users by demonstrating how real businesses use economics to make real decisions on a daily basis.  Covers the different Market Structures in an intuitive fashion so that readers of all backgrounds and fields can grasp the importance and flow of these concepts.  Chapter opening cases, examples and figures motivate the economic principles covered, while Solved Problems provide models of how to solve an econommic problem – keeping readers focused on the main ideas of each chapter, and preventing them from getting bogged down due to a lack of basic math or “word problem” skills.

Table of Content:

Preface

xx

Acknowledgments

xxxvi

PART 1: Introduction

Economics: Foundations and Models

2(34)

Microsoft Versus the U.S. Congress on Worker Visas

3(1)

Three Key Economic Ideas

4(3)

People Are Rational

5(1)

People Respond to Economic Incentives

5(1)

Making the Connection: Will Women Have More Babies if the Government Pays Them To?

5(1)

Optimal Decisions Are Made at the Margin

6(1)

Solved Problem 1-1: Apple Computer Makes a Decision at the Margin

7(1)

The Economic Problem that Every Society Must Solve

7(4)

What Goods and Services Will Be Produced?

8(1)

How Will the Goods and Services Be Produced?

8(1)

Who Will Receive the Goods and Services Produced?

8(1)

Centrally Planned Economies versus Market Economies

9(1)

The Modern “Mixed” Economy

9(1)

Efficiency and Equity

10(1)

Economic Models

11(3)

The Role of Assumptions in Economic Models

11(1)

Forming and Testing Hypotheses in Economic Models

11(1)

Normative and Positive Analysis

12(1)

Don’t Let This Happen to You! Don’t Confuse Positive Analysis with Normative Analysis

13(1)

Economics as a Social Science

13(1)

Making the Connection: Should the Federal Government Have Increased Restrictions on the Immigration of Skilled Workers?

13(1)

Microeconomics and Macroeconomics

14(1)

A Preview of Important Economic Terms

15(1)

Conclusion

16(8)

An Inside Look at Policy: Do Immigrants Displace or Complement Domestic Workers?

18(2)

Key Terms, Summary, Review Questions, Problems and Applications

20(4)

Appendix: Using Graphs and Formulas

24(1)

Graphs of One Variable

25(1)

Graphs of Two Variables

26(6)

Slopes of Lines

26(2)

Taking into Account More Than Two Variables on a Graph

28(1)

Positive and Negative Relationships

29(1)

Determining Cause and Effect

29(2)

Are Graphs of Economic Relationships Always Straight Lines?

31(1)

Slopes of Nonlinear Curves

31(1)

Formulas

32(4)

Formula for a Percentage Change

32(1)

Formulas for the Areas of a Rectangle and a Triangle

33(1)

Summary of Using Formulas

34(1)

Problems and Applications

34(2)

Trade-offs, Comparative Advantage, and the Market System

36(28)

Managers Making Choices at BMW

37(1)

Production Possibilities Frontiers and Opportunity Costs

38(6)

Graphing the Production Possibilities Frontier

38(2)

Solved Problem 2-1: Drawing a Production Possibilities Frontier for Rosie’s Boston Bakery

40(1)

Making the Connection: Facing the Trade-offs in Health Care Spending

41(1)

Increasing Marginal Opportunity Costs

42(1)

Economic Growth

43(1)

Comparative Advantage and Trade

44(5)

Specialization and Gains from Trade

44(2)

Absolute Advantage versus Comparative Advantage

46(1)

Comparative Advantage and the Gains from Trade

47(1)

Don’t Let This Happen to You! Don’t Confuse Absolute Advantage and Comparative Advantage

47(1)

Solved Problem 2-2: Comparative Advantage and the Gains from Trade

48(1)

The Market System

49(6)

The Circular Flow of Income

50(1)

The Gains from Free Markets

50(2)

The Market Mechanism

52(1)

Making the Connection: A Story of the Market System in Action: How Do You Make an iPod?

52(1)

The Role of the Entrepreneur

53(1)

The Legal Basis of a Successful Market System

53(1)

Making the Connection: Property Rights in Cyberspace: YouTube, Facebook, and MySpace

54(1)

Conclusion

55(9)

An Inside Look: Detroit Challenges Hybrids with New Technology

56(2)

Key Terms, Summary, Review Questions, Problems and Applications

58(6)

Where Prices Come From: The Interaction of Demand and Supply

64(32)

Red Bull and the Market for Energy Drinks

65(1)

The Demand Side of the Market

66(8)

Demand Schedules and Demand Curves

66(1)

The Law of Demand

67(1)

What Explains the Law of Demand?

67(1)

Holding Everything Else Constant: The Ceteris Paribus Condition

68(1)

Variables That Shift Market Demand

68(1)

Making the Connection: Are Big Macs an Inferior Good?

69(1)

Making the Connection: The Aging of the Baby Boom Generation

70(1)

A Change in Demand versus a Change in Quantity Demanded

71(2)

Making the Connection: Red Bull and the Future Demand for Energy Drinks

73(1)

The Supply Side of the Market

74(4)

Supply Schedules and Supply Curves

74(1)

The Law of Supply

75(1)

Variables That Shift Market Supply

75(1)

A Change in Supply versus a Change in Quantity Supplied

76(2)

Market Equilibrium: Putting Demand and Supply Together

78(3)

How Markets Eliminate Surpluses and Shortages

78(1)

Demand and Supply Both Count

79(1)

Solved Problem 3-3: Demand and Supply Both Count: A Tale of Two Letters

80(1)

The Effect of Demand and Supply Shifts on Equilibrium

81(6)

The Effect of Shifts in Supply on Equilibrium

81(1)

Making the Connection: The Falling Price of LCD Televisions

81(2)

The Effect of Shifts in Demand on Equilibrium

83(1)

The Effect of Shifts in Demand and Supply over Time

83(1)

Solved Problem 3-4: High Demand and Low Prices in the Lobster Market?

84(2)

Don’t Let This Happen to You! Remember: A Change in a Good’s Price Does Not Cause the Demand or Supply Curve to Shift

86(1)

Shifts in a Curve versus Movements along a Curve

87(1)

Conclusion

87(9)

An Inside Look: How Does Advertising Help Red Bull Increase Demand for Its Energy Drink?

88(2)

Key Terms, Summary, Review Questions, Problems and Applications

90(6)

Economic Efficiency, Government Price Setting, and Taxes

96(36)

Should the Government Control Apartment Rents?

97(1)

Consumer Surplus and Producer Surplus

98(4)

Consumer Surplus

98(2)

Making the Connection: The Consumer Surplus from Broadband Internet Service

100(1)

Producer Surplus

101(1)

What Consumer Surplus and Producer Surplus Measure

102(1)

The Efficiency of Competitive Markets

102(3)

Marginal Benefit Equals Marginal Cost in Competitive Equilibrium

103(1)

Economic Surplus

103(1)

Deadweight Loss

104(1)

Economic Surplus and Economic Efficiency

105(1)

Government Intervention in the Market: Price Floors and Price Ceilings

105(7)

Price Floors: Government Policy in Agricultural Markets

105(1)

Making the Connection: Price Floors in Labor Markets: The Debate over Minimum Wage Policy

106(2)

Price Ceilings: Government Rent Control Policy in Housing Markets

108(1)

Don’t Let This Happen to You! Don’t Confuse “Scarcity” with a “Shortage”

109(1)

Black Markets

109(1)

Solved Problem 4-3: What’s the Economic Effect of a Black Market for Apartments?

109(1)

Making the Connection: Does Holiday Gift Giving Have a Deadweight Loss?

110(1)

The Results of Government Price Controls: Winners, Losers, and Inefficiency

111(1)

Positive and Normative Analysis of Price Ceilings and Price Floors

111(1)

The Economic Impact of Taxes

112(5)

The Effect of Taxes on Economic Efficiency

112(1)

Tax Incidence: Who Actually Pays a Tax?

113(1)

Solved Problem 4-4: When Do Consumers Pay All of a Sales Tax Increase?

114(1)

Making the Connection: Is the Burden of the Social Security Tax Really Shared Equally between Workers and Firms?

115(2)

Conclusion

117(10)

An Inside Look at Policy: Is Rent Control a Lifeline or Stranglehold?

118(2)

Key Terms, Summary, Review Questions, Problems and Applications

120(7)

Appendix: Quantitative Demand and Supply Analysis

127(1)

Demand and Supply Equations

127(1)

Calculating Consumer Surplus and Producer Surplus

128(4)

Review Questions

130(1)

Problems and Applications

130(2)

PART 2: Markets in Action

Externalities, Environmental Policy, and Public Goods

132(34)

Economic Policy and the Environment

133(1)

Externalities and Economic Efficiency

134(3)

The Effect of Externalities

134(2)

Externalities and Market Failure

136(1)

What Causes Externalities?

136(1)

Private Solutions to Externalities: The Coase Theorem

137(1)

The Economically Efficient Level of Pollution Reduction

137(6)

Making the Connection: The Clean Air Act: How a Government Policy Reduced Infant Mortality

138(2)

The Basis for Private Solutions to Externalities

140(1)

Don’t Let This Happen to You! Remember That It’s the Net Benefit That Counts

141(1)

Making the Connection: The Fable of the Bees

141(1)

Do Property Rights Matter?

142(1)

The Problem of Transactions Costs

142(1)

The Coase Theorem

142(1)

Government Policies to Deal with Externalities

143(5)

Solved Problem 5-3: Using a Tax to Deal with a Negative Externality

144(1)

Command and Control versus Market-Based Approaches

145(1)

Are Tradable Emissions Allowances Licenses to Pollute?

146(1)

Making the Connection: Can a Cap-and-Trade System Reduce Global Warming?

146(2)

Four Categories of Goods

148(9)

Making the Connection: Should the Government Run the Health Care System?

149(2)

The Demand for a Public Good

151(1)

The Optimal Quantity of a Public Good

152(1)

Solved Problem 5-4: Determining the Optimal Level of Public Goods

153(2)

Common Resources

155(2)

Conclusion

157(9)

An Inside Look at Policy: The Carbon Cap Dilemma

158(2)

Key Terms, Summary, Review Questions, Problems and Applications

160(6)

Elasticity: The Responsiveness of Demand and Supply

166(36)

Do People Respond to Changes in the Price of Gasoline?

167(1)

The Price Elasticity of Demand and its Measurement

168(6)

Measuring the Price Elasticity of Demand

168(1)

Elastic Demand and Inelastic Demand

169(1)

An Example of Computing Price Elasticities

169(1)

The Midpoint Formula

170(1)

Solved Problem 6-1: Calculating the Price Elasticity of Demand

171(1)

When Demand Curves Intersect, the Flatter Curve Is More Elastic

172(1)

Polar Cases of Perfectly Elastic and Perfectly Inelastic Demand

172(2)

Don’t Let This Happen to You! Don’t Confuse Inelastic with Perfectly Inelastic

174(1)

The Determinants of the Price Elasticity of Demand

174(3)

Availability of Close Substitutes

174(1)

Passage of Time

175(1)

Luxuries versus Necessities

175(1)

Definition of the Market

175(1)

Share of a Good in a Consumer’s Budget

175(1)

Some Estimated Price Elasticities of Demand

175(1)

Making the Connection: The Price Elasticity of Demand for Breakfast Cereal

176(1)

The Relationship between Price Elasticity of Demand and Total Revenue

177(6)

Elasticity and Revenue with a Linear Demand Curve

178(1)

Solved Problem 6-3: Price and Revenue Don’t Always Move in the Same Direction

179(1)

Estimating Price Elasticity of Demand

180(1)

Making the Connection: Determining the Price Elasticity of Demand through Market Experiments

180(1)

Other Demand Elasticities

181(1)

Cross-Price Elasticity of Demand

181(1)

Income Elasticity of Demand

182(1)

Making the Connection: Price Elasticity, Cross-Price Elasticity, and Income Elasticity in the Market for Alcoholic Beverages

183(2)

Using Elasticity to Analyze the Disappearing Family Farm

183(1)

Solved Problem 6-5: Using Price Elasticity to Analyze Policy toward Illegal Drugs

184(1)

The Price Elasticity of Supply and its Measurement

185(5)

Measuring the Price Elasticity of Supply

186(1)

Determinants of the Price Elasticity of Supply

186(1)

Making the Connection: Why Are Oil Prices So Unstable?

186(1)

Polar Cases of Perfectly Elastic and Perfectly Inelastic Supply

187(2)

Using Price Elasticity of Supply to Predict Changes in Price

189(1)

Conclusion

190(2)

An Inside Look: Consumers Change Their Behavior in Response to the Gas Prices

192(2)

Key Terms, Summary, Review Questions, Problems and Applications

194(8)

PART 3: Firms in the Domestic and International Economies

Firms, the Stock Market, and Corporate Governance

202(34)

Facebook: From Dorm Room to Wall Street

203(1)

Types of Firms

204(2)

Who Is Liable? Limited and Unlimited Liability

204(1)

Corporations Earn the Majority of Revenue and Profits

205(1)

Making the Connection: How Important Are Small Businesses to the U.S. Economy?

206(1)

The Structure of Corporations and the Principal-Agent Problem

206(2)

Corporate Structure and Corporate Governance

207(1)

Solved Problem 7-2: Does the Principal-Agent Problem Apply to the Relationship between Managers and Workers?

207(1)

How Firms Raise Funds

208(5)

Sources of External Funds

208(2)

Stock and Bond Markets Provide Capital—and Information

210(1)

Don’t Let This Happen to You! When Google Shares Change Hands, Google Doesn’t Get the Money

210(1)

Why Do Stock Prices Fluctuate So Much?

211(1)

Making the Connection: Following Abercrombie & Fitch’s Stock Price in the Financial Pages

212(1)

Using Financial Statements to Evaluate a Corporation

213(2)

The Income Statement

214(1)

The Balance Sheet

215(1)

Corporate Governance Policy

215(4)

The Accounting Scandals of the Early 2000s

215(1)

Solved Problem 7-5: What Makes a Good Board of Directors?

216(1)

The Financial Meltdown of the Late 2000s

217(1)

Making the Connection: Was the Principal-Agent Problem at the Heart of the Financial Crisis?

218(1)

Conclusion

219(8)

An Inside Look: The Principal-Agent Problem at Facebook

220(2)

Key Terms, Summary, Review Questions, Problems and Applications

222(5)

Appendix: Tools to Analyze Firms’ Financial Information

227(1)

Using Present Value to Make Investment Decisions

227(2)

Solved Problem 7A-1: How to Receive Your Contest Winnings

229(3)

Using Present Value to Calculate Bond Prices

230(1)

Using Present Value to Calculate Stock Prices

230(1)

A Simple Formula for Calculating Stock Prices

231(1)

Going Deeper into Financial Statements

232(4)

Analyzing Income Statements

232(1)

Analyzing Balance Sheets

233(1)

Key Terms, Review Questions, Problems and Applications

234(2)

Comparative Advantage and the Gains from International Trade

236(42)

Is a Government “Buy American” Policy a Good Idea for U.S. Firms Like Caterpillar?

237(1)

The United States in the International Economy

238(3)

The Importance of Trade to the U.S. Economy

238(1)

U.S. International Trade in a World Context

239(1)

Making the Connection: How Caterpillar Depends on International Trade

240(1)

Comparative Advantage in International Trade

241(2)

A Brief Review of Comparative Advantage

241(1)

Comparative Advantage in International Trade

242(1)

How Countries Gain from International Trade

243(6)

Increasing Consumption through Trade

243(1)

Solved Problem 8-3: The Gains from Trade

244(2)

Why Don’t We See Complete Specialization?

246(1)

Does Anyone Lose as a Result of International Trade?

246(1)

Don’t Let This Happen to You! Remember That Trade Creates Both Winners and Losers

246(1)

Where Does Comparative Advantage Come From?

247(1)

Making the Connection: Why Is Dalton, Georgia, the Carpet-Making Capital of the World?

248(1)

Comparative Advantage Over Time: The Rise and Fall—and Rise—of the U.S. Consumer Electronics Industry

248(1)

Government Policies that Restrict International Trade

249(6)

Tariffs

250(1)

Quotas and Voluntary Export Restraints

251(1)

Measuring the Economic Effect of the Sugar Quota

252(1)

Solved Problem 8-4: Measuring the Economic Effect of a Quota

253(1)

The High Cost of Preserving Jobs with Tariffs and Quotas

254(1)

Gains from Unilateral Elimination of Tariffs and Quotas

255(1)

Other Barriers to Trade

255(1)

The Arguments Over Trade Policies and Globalization

255(6)

Why Do Some People Oppose the World Trade Organization?

256(1)

Making the Connection: The Unintended Consequences of Banning Goods Made with Child Labor

257(2)

Dumping

259(1)

Positive versus Normative Analysis (Once Again)

259(1)

Making the Connection: The Obama Administration Develops a Trade Policy

260(1)

Conclusion

261(11)

An Inside Look at Policy: Caterpillar and Other Exporters Oppose “Buy American” Provision

262(2)

Key Terms, Summary, Review Questions, Problems and Applications

264(8)

Appendix: Multinational Firms

272(1)

A Brief History of Multinational Enterprises

272(1)

Strategic Factors in Moving from Domestic to Foreign Markets

273(2)

Making the Connection: Have Multinational Corporations Reduced Employment and Lowered Wages in the United States?

275(1)

Challenges to U.S. Firms in Foreign Markets

276(1)

Competitive Advantages of U.S. Firms

276(2)

Key Terms, Review Questions, Problems and Applications

277(1)

PART 4: Microeconomic Foundations: Consumers and Firms

Consumer Choice and Behavioral Economics

278(46)

Can Oprah Get You to Buy a Kindle?

279(1)

Utility and Consumer Decision Making

280(8)

The Economic Model of Consumer Behavior in a Nutshell

280(1)

Utility

280(1)

The Principle of Diminishing Marginal Utility

281(1)

The Rule of Equal Marginal Utility per Dollar Spent

281(3)

Solved Problem 9-1: Finding the Optimal Level of Consumption

284(1)

What if the Rule of Equal Marginal Utility per Dollar Does Not Hold?

285(1)

Don’t Let This Happen to You! Equalize Marginal Utilities per Dollar

286(1)

The Income Effect and Substitution Effect of a Price Change

287(1)

Where Demand Curves Come from

288(3)

Making the Connection: Are There Any Upward-Sloping Demand Curves in the Real World?

290(1)

Social Influences on Decision Making

291(5)

The Effects of Celebrity Endorsements

291(1)

Making the Connection: Why Do Firms Pay Tiger Woods to Endorse Their Products?

292(1)

Network Externalities

292(1)

Does Fairness Matter?

293(2)

Making the Connection: Professor Krueger Goes to the Super Bowl

295(1)

Behavioral Economics: Do People Make Their Choices Rationally?

296(5)

Ignoring Nonmonetary Opportunity Costs

296(1)

Failing to Ignore Sunk Costs

297(1)

Making the Connection: A Blogger Who Understands the Importance of Ignoring Sunk Costs

298(1)

Being Unrealistic about Future Behavior

298(1)

Making the Connection: Why Don’t Students Study More?

299(1)

Solved Problem 9-4: How Do You Get People to Save More of Their Income?

299(2)

Conclusion

301(8)

An Inside Look: The Power of Oprah’s Kindle Endorsement

302(2)

Key Terms, Summary, Review Questions, Problems and Applications

304(5)

Appendix: Using Indifference Curves and Budget Lines to Understand Consumer Behavior

309(1)

Consumer Preferences

309(1)

Indifference Curves

309(2)

The Slope of an Indifference Curve

310(1)

Can Indifference Curves Ever Cross?

311(1)

The Budget Constraint

311(1)

Choosing the Optimal Consumption of Pizza and Coke

312(7)

Making the Connection: Dell Determines the Optimal Mix of Products

313(1)

Deriving the Demand Curve

314(2)

Solved Problem 9A-1: When Does a Price Change Make a Consumer Better Off?

316(1)

The Income Effect and the Substitution Effect of a Price Change

317(1)

How a Change in Income Affects Optimal Consumption

318(1)

The Slope of the Indifference Curve, the Slope of the Budget Line, and the Rule of Equal Marginal Utility per Dollar Spent

319(5)

The Rule of Equal Marginal Utility per Dollar Spent Revisited

320(1)

Key Terms, Review Questions, Problems and Applications

321(3)

Technology, Production, and Costs

324(42)

Sony Uses a Cost Curve to Determine the Price of Radios

325(1)

Technology: An Economic Definition

326(1)

Making the Connection: Improving Inventory Control at Wal-Mart

326(1)

The Short Run and the Long Run in Economics

327(4)

The Difference between Fixed Costs and Variable Costs

327(1)

Making the Connection: Fixed Costs in the Publishing Industry

328(1)

Implicit Costs versus Explicit Costs

328(1)

The Production Function

329(1)

A First Look at the Relationship between Production and Cost

330(1)

The Marginal Product of Labor and the Average Product of Labor

331(4)

The Law of Diminishing Returns

331(1)

Graphing Production

332(1)

Making the Connection: Adam Smith’s Famous Account of the Division of Labor in a Pin Factory

333(1)

The Relationship between Marginal and Average Product

333(1)

An Example of Marginal and Average Values: College Grades

334(1)

The Relationship between Short-Run Production and Short-Run Cost

335(1)

Marginal Cost

335(1)

Why Are the Marginal and Average Cost Curves U-Shaped?

335(3)

Solved Problem 10-4: The Relationship between Marginal Cost and Average Cost

337(1)

Graphing Cost Curves

338(1)

Costs in the Long Run

338(6)

Economies of Scale

339(1)

Long-Run Average Total Cost Curves for Bookstores

340(1)

Solved Problem 10-6: Using Long-Run Average Cost Curves to Understand Business Strategy

341(1)

Making the Connection: The Colossal River Rouge: Diseconomies of Scale at Ford Motor Company

342(1)

Don’t Let This Happen to You! Don’t Confuse Diminishing Returns With Diseconomies of Scale

343(1)

Conclusion

344(11)

An Inside Look: Sony Gambles on the Future Cost of the Next Generation of TVs

346(2)

Key Terms, Summary, Review Questions, Problems and Applications

348(7)

Appendix: Using Isoquants and Isocosts to Understand Production and Cost

355(1)

Isoquants

355(1)

An Isoquant Graph

355(1)

The Slope of an Isoquant

356(1)

Isocost Lines

356(1)

Graphing the Isocost Line

356(2)

The Slope and Position of the Isocost Line

356(2)

Choosing the Cost-Minimizing Combination of Capital and Labor

358(1)

Different Input Price Ratios Lead to Different Input Choices

358(5)

Making the Connection: The Changing Input Mix in Walt Disney Film Animation

359(1)

Another Look at Cost Minimization

360(1)

Solved Problem 10A-1: Determining the Optimal Combination of Inputs

361(1)

Making the Connection: Do National Football League Teams Behave Efficiently?

362(1)

The Expansion Path

363(3)

Key Terms, Review Questions, Problems and Applications

364(2)

PART 5: Market Structure and Firm Strategy

Firms in Perfectly Competitive Markets

366(34)

Perfect Competition in the Market for Organic Apples

367(2)

Perfectly Competitive Markets

369(1)

A Perfectly Competitive Firm Cannot Affect the Market Price

369(1)

The Demand Curve for the Output of a Perfectly Competitive Firm

370(1)

Don’t Let This Happen to You! Don’t Confuse the Demand Curve for Farmer Parker’s Wheat with the Market Demand Curve for Wheat

370(1)

How a Firm Maximizes Profit in a Perfectly Competitive Market

371(3)

Revenue for a Firm in a Perfectly Competitive Market

371(1)

Determining the Profit-Maximizing Level of Output

372(2)

Illustrating Profit or Loss on the Cost Curve Graph

374(5)

Showing a Profit on the Graph

375(1)

Solved Problem 11-3: Determining Profit-Maximizing Price and Quantity

375(2)

Don’t Let This Happen to You! Remember that Firms Maximize Their Total Profits, Not Their Profits per Unit

377(1)

Illustrating When a Firm Is Breaking Even or Operating at a Loss

378(1)

Making the Connection: Losing Money in the Medical Screening Industry

378(1)

Deciding Whether to Produce or to Shut Down in the Short Run

379(3)

Making the Connection: When to Close a Laundry

380(1)

The Supply Curve of a Firm in the Short Run

381(1)

The Market Supply Curve in a Perfectly Competitive Industry

381(1)

“If Everyone Can Do It, You Can’t Make Money at It”: The Entry and Exit of Firms in the Long Run

382(7)

Economic Profit and the Entry or Exit Decision

382(4)

Long-Run Equilibrium in a Perfectly Competitive Market

386(1)

The Long-Run Supply Curve in a Perfectly Competitive Market

386(1)

Making the Connection: Easy Entry Makes the Long Run Pretty Short in the Apple iPhone Apps Store

387(1)

Increasing-Cost and Decreasing-Cost Industries

388(1)

Perfect Competition and Efficiency

389(2)

Productive Efficiency

389(1)

Solved Problem 11-6: How Productive Efficiency Benefits Consumers

389(2)

Allocative Efficiency

391(1)

Conclusion

391(9)

An Inside Look at Policy: It Isn’t Easy—or Cheap—to be Green

392(2)

Key Terms, Summary, Review Questions, Problems and Applications

394(6)

Monopolistic Competition: The Competitive Model in a More Realistic Setting

400(30)

Starbucks: The Limits to Growth Through Product Differentiation

401(1)

Demand and Marginal Revenue for a Firm in a Monopolistically Competitive Market

402(2)

The Demand Curve for a Monopolistically Competitive Firm

402(1)

Marginal Revenue for a Firm with a Downward-Sloping Demand Curve

402(2)

How a Monopolistically Competitive Firm Maximizes Profits in the Short Run

404(3)

Solved Problem 12-2: Does Minimizing Cost Maximize Profits?

406(1)

What Happens to Profits in the Long Run?

407(5)

How Does the Entry of New Firms Affect the Profits of Existing Firms?

407(1)

Don’t Let This Happen to You! Don’t Confuse Zero Economic Profit with Zero Accounting Profit

408(2)

Making the Connection: The Rise and Decline of Starbucks

410(1)

Is Zero Economic Profit Inevitable in the Long Run?

410(1)

Solved Problem 12-3: Can It Be Profitable to Be the High-Price Seller?

411(1)

Comparing Perfect Competition and Monopolistic Competition

412(2)

Excess Capacity under Monopolistic Competition

412(1)

Is Monopolistic Competition Inefficient?

413(1)

How Consumers Benefit from Monopolistic Competition

413(1)

Making the Connection: Abercrombie & Fitch: Can the Product Be Too Differentiated?

414(1)

How Marketing Differentiates Products

414(2)

Brand Management

415(1)

Advertising

415(1)

Making the Connection: Google Tries (and Fails) to Measure the Effectiveness of Radio Advertising

415(1)

Defending a Brand Name

416(1)

What Makes a Firm Successful?

416(2)

Making the Connection: Is Being the First Firm in the Market a Key to Success?

417(1)

Conclusion

418(12)

An Inside Look: Starbucks Faces McCompetition

420(2)

Key Terms, Summery, Review Questions, Problems and Applications

422(8)

Oligopoly: Firms in Less Competitive Markets

430(30)

Competition in the Computer Market

431(1)

Oligopoly and Barriers to Entry

432(3)

Barriers to Entry

433(2)

Using Game Theory to Analyze Oligopoly

435(8)

A Duopoly Game: Price Competition between Two Firms

435(1)

Firm Behavior and the Prisoner’s Dilemma

436(1)

Don’t Let This Happen to You! Don’t Misunderstand Why Each Firm Ends Up Charging a Price of $1,000

437(1)

Solved Problem 13-2: Is Advertising a Prisoner’s Dilemma for Coca-Cola and Pepsi?

437(1)

Making the Connection: Is There a Dominant Strategy for Bidding on eBay?

438(1)

Can Firms Escape the Prisoner’s Dilemma?

439(1)

Making the Connection: American Airlines and Northwest Airlines Fail to Cooperate on a Price Increase

440(1)

Cartels: The Case of OPEC

441(2)

Sequential Games and Business Strategy

443(3)

Deterring Entry

443(1)

Solved Problem 13-3: Is Deterring Entry Always a Good Idea?

444(1)

Bargaining

445(1)

The Five Competitive Forces Model

446(3)

Competition from Existing Firms

446(1)

The Threat from Potential Entrants

447(1)

Competition from Substitute Goods or Services

447(1)

The Bargaining Power of Buyers

448(1)

The Bargaining Power of Suppliers

448(1)

Making the Connection: Can We Predict Which Firms Will Continue to Be Successful?

448(1)

Conclusion

449(11)

An Inside Look: Hewlett-Packard Uses New Technology to Boost Sales of Personal Computers

450(2)

Key Terms, Summary, Review Questions, Problems and Applications

452(8)

Monopoly and Antitrust Policy

460(32)

Is Cable Television a Monopoly?

461(1)

Is Any Firm Ever Really a Monopoly?

462(1)

Making the Connection: Is Xbox 360 a Close Substitute for Playstation 3?

462(1)

Where Do Monopolies Come From?

463(6)

Entry Blocked by Government Action

463(1)

Making the Connection: The End of the Christmas Plant Monopoly

464(1)

Control of a Key Resource

465(1)

Making the Connection: Are Diamond Profits Forever? The De Beers Diamond Monopoly

465(1)

Network Externalities

466(1)

Natural Monopoly

467(1)

Solved Problem 14-2: Is the OpenTable Web Site a Natural Monopoly?

468(1)

How Does a Monopoly Choose Price and Output?

469(4)

Marginal Revenue Once Again

469(2)

Profit Maximization for a Monopolist

471(1)

Solved Problem 14-3: Finding Profit-Maximizing Price and Output for a Monopolist

472(1)

Does Monopoly Reduce Economic Efficiency?

473(3)

Comparing Monopoly and Perfect Competition

473(1)

Don’t Let This Happen to You! Don’t Assume That Charging a Higher Price Is Always More Profitable for a Monopolist

474(1)

Measuring the Efficiency Losses from Monopoly

474(1)

How Large Are the Efficiency Losses Due to Monopoly?

475(1)

Market Power and Technological Change

476(1)

Government Policy Toward Monopoly

476(7)

Antitrust Laws and Antitrust Enforcement

476(1)

Mergers: The Trade-off between Market Power and Efficiency

477(2)

The Department of Justice and FTC Merger Guidelines

479(1)

Making the Connection: Have Google and Microsoft Violated the Antitrust Laws?

480(1)

Regulating Natural Monopolies

481(2)

Conclusion

483(9)

An Inside Look at Policy: The End of the Cable TV Monopoly?

484(2)

Key Terms, Summary, Review Questions, Problems and Applications

486(6)

Pricing Strategy

492(28)

Getting into Walt Disney World: One Price Does not Fit All

493(1)

Pricing Strategy, the Law of One Price, and Arbitrage

494(2)

Arbitrage

494(1)

Solved Problem 15-1: Is Arbitrage Just a Rip-off?

495(1)

Why Don’t All Firms Charge the Same Price?

495(1)

Price Discrimination: Charging Different Prices for the Same Product

496(9)

Don’t Let This Happen to You! Don’t Confuse Price Discrimination with Other Types of Discrimination

496(1)

The Requirements for Successful Price Discrimination

497(1)

Solved Problem 15-2: How Apple Uses Price Discrimination to Increase Profits

498(1)

Airlines: The Kings of Price Discrimination

499(2)

Making the Connection: How Colleges Use Yield Management

501(1)

Perfect Price Discrimination

501(2)

Price Discrimination across Time

503(1)

Can Price Discrimination Be Illegal?

503(1)

Making the Connection: Price Discrimination with a Twist at Netflix

504(1)

Other Pricing Strategies

505(6)

Odd Pricing: Why Is the Price $2.99 Instead of $3.00?

505(1)

Why Do Firms Use Cost-Plus Pricing?

506(1)

Making the Connection: Cost-Plus Pricing in the Publishing Industry

506(2)

Why Do Some Firms Use Two-Part Tariffs?

508(3)

Conclusion

511(9)

An Inside Look: Paying for the Right to Pay to See “America’s Team”

512(2)

Key Terms, Summary, Review Questions, Problems and Applications

514(6)

PART 6: Markets for Factors of Production

The Markets for Labor and Other Factors of Production

520(38)

Why are the New York Giants Paying CC Sabathia $161 Million?

521(1)

The Demand for Labor

522(4)

The Marginal Revenue Product of Labor

522(2)

Solved Problem 16-1: Hiring Decisions by a Firm That Is a Price Maker

524(1)

The Market Demand Curve for Labor

525(1)

Factors That Shift the Market Demand Curve for Labor

525(1)

The Supply of Labor

526(2)

The Market Supply Curve of Labor

528(1)

Factors That Shift the Market Supply Curve of Labor

528(1)

Equilibrium in the Labor Market

528(4)

The Effect on Equilibrium Wages of a Shift in Labor Demand

529(1)

Making the Connection: Will Your Future Income Depend on Which Courses You Take in College?

530(1)

The Effect on Equilibrium Wages of a Shift in Labor Supply

531(1)

Explaining Differences in Wages

532(10)

Don’t Let This Happen to You! Remember That Prices and Wages Are Determined at the Margin

532(1)

Making the Connection: Technology and the Earnings of “Superstars”

533(1)

Compensating Differentials

534(1)

Making the Connection: Are U.S. Firms Handicapped by Paying for Their Employees’ Health Insurance?

535(1)

Discrimination

536(2)

Solved Problem 16-4: Is Passing “Comparable Worth” Legislation a Good Way to Close the Gap between Men’s and Women’s Pay?

538(3)

Labor Unions

541(1)

Personnel Economics

542(2)

Should Workers’ Pay Depend on How Much They Work or on How Much They Produce?

542(1)

Making the Connection: Raising Pay, Productivity, and Profits at Safelite AutoGlass

543(1)

Other Considerations in Setting Compensation Systems

543(1)

The Markets for Capital and Natural Resources

544(3)

The Market for Capital

544(1)

The Market for Natural Resources

545(1)

Monopsony

545(1)

The Marginal Productivity Theory of Income Distribution

546(1)

Conclusion

547(11)

An Inside Look: Basketball Coaches’ Salaries: A March to Madness?

548(2)

Key Terms, Summary, Review Questions, Problems and Applications

550(8)

PART 7: Information, Taxes, and the Distribution of Income

The Economics of Information

558(20)

Why Does State Farm Charge Young Men So Much More than Young Women for Auto Insurance?

559(1)

Asymmetric Information

560(4)

Adverse Selection and the Market for “Lemons”

560(1)

Reducing Adverse Selection in the Car Market: Warranties and Reputations

561(1)

Asymmetric Information in the Market for Insurance

561(1)

Reducing Adverse Selection in the Insurance Market

561(1)

Making the Connection: Does Adverse Selection Explain Why Some People Do Not Have Health Insurance?

562(1)

Moral Hazard

563(1)

Don’t Let This Happen to You! Don’t Confuse Adverse Selection with Moral Hazard

564(1)

Adverse Selection and Moral Hazard in Financial Markets

564(2)

Reducing Adverse Selection and Moral Hazard in Financial Markets

565(1)

Making the Connection: Moral Hazard, Big Time: Bernie Madoff’s “Ponzi” Scheme

565(1)

Adverse Selection and Moral Hazard in Labor Markets

566(2)

Solved Problem 17-3: Changing Workers’ Compensation to Reduce Adverse Selection and Moral Hazard

567(1)

The Winner’s Curse: When Is It Bad to Win an Auction?

568(3)

Making the Connection: Is There a Winner’s Curse in the Marriage Market?

569(1)

When Does the Winner’s Curse Apply?

569(1)

Solved Problem 17-4: Auctions, Available Information, and the Winner’s Curse

570(1)

Making the Connection: Want to Make Some Money? Try Auctioning a Jar of Coins

570(1)

Conclusion

571(7)

An Inside Look at Policy: Pay Less for Car Insurance! (But We’ll Be Watching How You Drive)

572(2)

Key Terms, Summary, Review Questions, Problems and Applications

574(4)

Public Choice, Taxes, and the Distribution of Income

578

Should the Government Use the Tax System to Reduce Inequality?

579(1)

Public Choice

580(4)

How Do We Know the Public Interest? Models of Voting

580(2)

Government Failure?

582(2)

Is Government Regulation Necessary?

584(1)

The Tax System

584(8)

An Overview of the U.S. Tax System

585(1)

Progressive and Regressive Taxes

586(1)

Making the Connection: Which Groups Pay the Most in Federal Taxes?

587(1)

Marginal and Average Income Tax Rates

587(1)

The Corporate Income Tax

588(1)

International Comparison of Corporate Income Taxes

588(1)

Evaluating Taxes

589(1)

Making the Connection: Should the United States Shift from an Income Tax to a Consumption Tax?

590(2)

Tax Incidence Revisited: The Effect of Price Elasticity

592(3)

Don’t Let This Happen to You! Remember Not to Confuse Who Pays the Tax with Who Bears the Burden of the Tax

592(1)

Making the Connection: Do Corporations Really Bear the Burden of the Federal Corporate Income Tax?

593(1)

Solved Problem 18-3: The Effect of Price Elasticity on the Excess Burden of a Tax

594(1)

Income Distribution and Poverty

595(4)

Measuring the Income Distribution and Poverty

595(1)

Explaining Income Inequality

596(2)

Showing the Income Distribution with a Lorenz Curve

598(1)

Problems in Measuring Poverty and the Distribution of Income

599(4)

Solved Problem 18-4: Are Many Individuals Stuck in Poverty?

600(1)

Income Distribution and Poverty around the World

601(2)

Conclusion

603

An Inside Look at Policy: Should the Government Use a Tax on Soda to Pay For an Overhaul of Health Care?

604(2)

Key Terms, Summary, Review Questions, Problems and Applications

606

Glossary

1(1)

Company Index

1(2)

Subject Index

3

Credits

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