Microeconomics: Theory and Applications / Edition 5

Microeconomics: Theory and Applications / Edition 5

by Dominick Salvatore
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Oxford University Press
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Microeconomics: Theory and Applications / Edition 5

Fully revised and expanded, this fifth edition of Microeconomics: Theory and Applications presents all the standard topics of traditional microeconomic theory while offering a modern approach that reflects the many exciting recent developments in the field. With its student-friendly writing style and clear presentation of graphs, this is an ideal text for undergraduate courses in intermediate microeconomics and business programs.

Features of the Fifth Edition
*Offers a balance of traditional microeconomic topics while addressing contemporary issues and concerns
*Introduces an important international dimension to microeconomics, reflecting the strong trend toward globalization in tastes, production, and distribution in today's world
*Presents an "at the Frontier" section in each chapter that highlights the most exciting recent examples of more advanced theoretical developments in microeconomics

New and Expanded Treatment in the Fifth Edition
*Includes electronic commerce, behavioral economics, auctioning airwaves, effect of outsourcing on employment and wages in the United States, fields of education and lifetime earnings, effect of taxation on business decisions
*Provides more than 130 new and updated real-world examples of how microeconomic theory can be used to analyze and possibly resolve important present-day economic problems
*Offers expanded treatment of important topics such as game theory; financial microeconomics; the new international economies of scale; economics of information; and market structure, efficiency, and regulation
*Features Internet site addresses for the most important topics in each chapter

Website A companion website is now available at www.oup.com/us/salvatore. This practical learning tool offers updated material, additional examples, and PowerPointR lecture slides for each textbook chapter

Product Details

ISBN-13: 9780195336108
Publisher: Oxford University Press
Publication date: 10/10/2008
Edition description: New Edition
Pages: 768
Sales rank: 278,705
Product dimensions: 8.30(w) x 10.10(h) x 1.30(d)

Table of Contents

Each chapter ends with at least one of the following: summary, key terms, review questions, problems, and Internet site addresses.
1.1 Wants and Scarcity.
Can Human Wants Ever Be Fully Satisfied?
Scarcity: The Pervasive Economic Problem
Example 1-1: More Health Care Means Less of Other Goods and Services
1.2 Functions of an Economic System.
1.3 Microeconomic Theory and the Price System.
The Circular Flow of Economic Activity
Determination and Function of Prices
Example 1-2: Bad Weather and High Demand Send Wheat Prices Soaring
What Role for the Government?
Example 1-3: Economic Inefficiencies Cause Collapse of Communist Regimes
1.4 The Margin: The Key Unifying Concept in Microeconomics.
The Crucial Importance of the Concept of the Margin
Example 1-4: Marginal Analysis in TV Advertising
Some Clarifications on the Use of the Margin
1.5 Specialization, Exchange, and the International Framework of Microeconomics.
Specialization and Exchange
The International Framework of Microeconomics
Example 1-5: Dell and Other PCs Sold in the United States Are Everything but American!
1.6 Models, Methodology, and Value Judgments.
Models and Methodology
Positive and Normative Analysis
At the Frontier: Do Economists Ever Agree on Anything?
2.1 Market Analysis.
2.2 Market Demand.
Demand Schedule and Demand Curve
Changes in Demand
2.3 Market Supply.
Supply Schedule and Supply Curve
Changes in Supply
2.4 When Is a Market in Equilibrium?.
Example 2-1: Equilibrium Price by Auction
2.5 Adjustment to Changes in Demand and Supply: Comparative Static Analysis.
Adjustment to Changes in Demand
Adjustment to Changes in Supply
Example 2-2: Changes in Demand and Supply and Coffee Prices
2.6 Domestic Demand and Supply, Imports, and Prices.
Example 2-3: The Large U.S. Automotive Trade Deficit Keeps U.S. Auto Prices Down
2.7 Interfering With Versus Working Through the Market.
Example 2-4: Rent Control Harms the Housing Market
Example 2-5: The Economics of U.S. Farm Support Programs
Example 2-6: Working Through the Market with an Excise Tax
Example 2-7: Fighting the Drug War by Reducing Demand and Supply
At the Frontier: Nonclearing Markets Theory
Appendix: The Algebra of Demand, Supply, and Equilibrium
Market Equilibrium Algebraically
Shifts in Demand and Supply and in Equilibrium
The Effect of an Excise Tax
3.1 Utility Analysis.
Total and Marginal Utility
Cardinal or Ordinal Utility
Example 3-1: Does Money Buy Happiness?
3.2 Consumer's Tastes: Indifference Curves.
Indifference Curves-What Do They Show?
Characteristics of Indifference Curves
The Marginal Rate of Substitution
Some Special Types of Indifference Curves
Example 3-2: How Ford Decided on the Characteristics of Its Taurus
3.3 International Convergence of Tastes.
Example 3-3: Gillette Introduces the Sensor and Mach3 Razors-Two Truly Global Products
3.4 The Consumer's Income and Price Constraints: The Budget Line.
Definition of the Budget Line
Changes in Income and Prices and the Budget Line
Example 3-4: Time as a Constraint
3.5 Consumer's Choice.
Utility Maximization
Example 3-5: Uility Maximization and Government Warnings on Junk Food Corner Solutions
Example 3-6: Water Rationing in the West
Marginal Utility Approach to Utility Maximization
At the Frontier: The Theory of Revealed Preference
4.1 Changes in Income and the Engel Curve.
Income-Consumption Curve and Engel Curve
Example 4-1: Engel's Law After a Century
Normal and Inferior Goods
Example 4-2: Many People Are Blowing Their Pension Money Long Before Retirement
4.2 Changes in Price and the Individual Demand Curve.
Example 4-3: Higher Alcohol Prices Would Sharply Reduce Youth Alcohol Use and Traffic Deaths
4.3 Substitution Effect and Income Effect.
How Are the Substitution Effect and the Income Effect Separated?
Example 4-4: Substitution and Income Effect of a Gasoline Tax
Substitution Effect and Income Effect for Inferior Goods
Example 4-5: Giffen Behavior Found!
4.4 Substitution Between Domestic and Foreign Goods.
Example 4-6: What Is an "American" Car?
4.5 Some Applications of Indifference Curve Analysis.
Is a Cash Subsidy Better Than Food Stamps?
Consumer Surplus Measures Unpaid Benefits
Benefits from Exchange
At the Frontier: The Characteristics Approach to Consumer Theory
Appendix: Index Numbers and Changes in Consumer Welfare
Expenditure, Laspeyres, and Paasche Indices
How Are Changes in Consumer Wealth Measured?
Example 4-7: The Consumer Price Index, Inflation, and Changes in the Standard of Living
Example 4-8: Comparing the Standard of Living of Various Countries
5.1 The Market Demand for a Commodity.
Example 5-1: Demand for Big Macs
5.2 Price Elasticity of Market Demand.
Measuring the Price Elasticity of Demand
Price Elasticity Graphically
Price Elasticity and Total Expenditures
What Determines Price Elasticity?
Example 5-2: Price Elasticity for Clothing Increases with Time
5.3 Income Elasticity of Demand.
Example 5-3: European Cars Are Luxuries, Flour Is an Inferior Good
5.4 Cross Elasticity of Demand.
Example 5-4: Margarine and Butter Are Substitutes, Entertainment and Food Are Complements
5.5 Price Elasticity and Income Elasticity of Imports and Exports.
Example 5-5: Price Elasticity and Income Elasticity for Imports and Exports in the Real World
5.6 Marginal Revenue and Elasticity.
Demand, Total Revenue, and Marginal Revenue
Geometry of Marginal Revenue Determination
Marginal Revenue, Price, and Elasticity
Example 5-6: U.S. Consumer Demand for Alcoholic Beverages
At the Frontier: The Marketing Revolution with Micromarketing
Appendix: Empirical Estimation of Demand by Regression Analysis
Example 5-7: Estimating and Forecasting U.S. Demand for Electricity
6.1 Risk and Uncertainty in Demand Choices.
Example 6-1: The Risk Faced by Coca-Cola in Changing Its Secret Formula
6.2 Measuring Risk.
Probability Distributions
The Standard Deviation
Example 6-2: Risk and Crime Deterrence
6.3 Utility Theory and Risk Aversion.
Different Preferences Toward Risk
Maximizing Expected Utility
Example 6-3: America's Gambling Craze
6.4 Insurance and Gambling.
Why Do Some Individuals Buy Insurance?
Why Do Some Individuals Gamble?
Example 6-4: Gambling and Insuring by the Same Individual-A Seeming Contradiction
6.5 Risk Aversion and Indifference Curves.
Example 6-5: Spreading Risks in the Choice of a Portfolio
6.6 Reducing Risk and Uncertainty.
Gathering More Information
Example 6-6: Some Disasters as Nondiversifiable Risks
6.7 Behavioral Economics.
Example 6-7: Behavioral Economics in Finance
At the Frontier: Foreign-Exchange Risks and Hedging
7.1 Relating Outputs to Inputs.
Organization of Production
Classification of Inputs
7.2 Production with One Variable Input.
Total, Average, and Marginal Product
The Geometry of Average and Marginal Product Curves
The Law of Diminishing Returns
Example 7-1: Economics-The Dismal Science Because of Diminishing Returns
7.3 Production with Two Variable Inputs.
What do Isoquants Show?
Derivation of Total Product Curves from the Isoquant Map
7.4 The Shape of Isoquants.
Characteristics of Isoquants
Economic Reign of Production
Fixed-Proportions Production Functions
Example 7-2: Trading Traveling Time for Gasoline Consumption on the Nation's Highways
7.5 Constant, Increasing, and Decreasing Returns to Scale.
Example 7-3: General Motors Decides Smaller Is Better
7.6 Technological Progress and International Competitiveness.
Meaning and Importance of Innovations
Example 7-4: How Do Firms Get New Technology?
7.7 Open Innovation Model.
Example 7-5: Open Innovations at Procter & Gamble
Innovations and the International Competitiveness of U.S. Firms
Example 7-6: How Xerox Lost and Regained Market Share but Is Now Struggling to Remain Internationally Competitive
At the Frontier: The New Computer-Aided Production Revolution and the International Competitiveness of U.S. Firms
Appendix: The Cobb-Douglas Production Function
The Formula
Empirical Estimation
Example 7-7: Output Elasticity of Labor and Capital and Returns to Scale in U.S. and Canadian Manufacturing
8.1 The Nature of Production Costs.
Example 8-1: Cost of Attending College
8.2 Cost in the Short Run.
Total Costs
Per-Unit Costs
Geometry of Per-Unit Cost Curves
Example 8-2: Per-Unit Cost Curves in Corn Production and in Traveling
8.3 Cost in the Long Run.
Isocost Lines
Least-Cost Input Combination
Cost Minimization in the Long Run and in the Short Run
Example 8-3: Least-Cost Combination of Gasoline and Driving Time
8.4 Expansion Path and Long-Run Cost Curves.
Expansion Path and the Long-Run Total Cost Curve
Derivation of the Long-Run Average and Marginal Cost Curves
The Relationship Between Short- and Long-Run Average Cost Curves
Example 8-4: Long-Run Average Cost Curve in Electricity Generation
8.5 Shape of the Long-Run Average Cost Curve.
Example 8-5: Shape of the Long-Run Average Curves in Various Industries
Example 8-6: Minimum Efficient Scale in Various U.S. Food Industries
8.6 Multiproduct Firms and Dynamic Changes in Costs.
Economies of Scope
The Learning Curve
Example 8-7: Learning Curve for the Lockheed L-1011 Aircraft and for Semiconductors
At the Frontier: Minimizing Costs Internationally-The New Economies of Scale
Appendix: Extensions and Uses of Production and Cost Analysis
Derivation of the Total Variable Cost Curve from the Total Product Curve
Input Substitution in Production to Minimize Costs
Example 8-8: Elasticity of Substitution in Japanese Manufacturing Industries
Input Prices and the Firm's Cost Curves
9.1 Market Structure: Perfect Competition.
Example 9-1: Competition in the New York Stock Market
9.2 Price Determination in the Market Period.
9.3 Short-Run Equilibrium of the Firm.
Total Approach: Maximizing the Positive Difference Between Total Revenue and Total Costs
Marginal Approach: Equating Marginal Revenue and Marginal Cost
Profit Maximization or Loss Minimization?
9.4 Short-Run Supply Curve and Equilibrium.
Short-Run Supply Curve of the Firm and the Industry
Example 9-2: Supply Curve of Petroleum from Tar Sands
Example 9-3: Short-Run World Supply Curve of Copper
Short-Run Equilibrium of the Industry and the Firm
9.5 Long-Run Equilibrium of the Firm and the Industry.
Long-Run Equilibrium of the Firm
Long-Run Equilibrium of the Industry and the Firm
Efficiency Implications of Perfect Competition
Example 9-4: Long-Run Adjustment in the U.S. Cotton Textile Industry
9.6 Constant-, Increasing-, and Decreasing-Cost Industries.
Constant-Cost Industries
Increasing-Cost Industries
Decreasing-Cost Industries
9.7 International Competition in the Domestic Economy.
9.8 Analysis of Competitive Markets.
Producer Surplus
Consumers' and Producers' Surplus, and the Efficiency of Perfect Competition
Welfare Effects of an Excise Tax
Effects of an Import Tariff
At the Frontier (1): New Markets and New Competition on the Internet
At the Frontier (2): Auctioning Airwaves
Appendix: The Foreign-Exchange Market and the Dollar Exchange Rate
10.1 Pure Monopoly-The Opposite Extreme from Perfect Competition.
Definition and Sources of Monopoly
Example 10-1: Barriers to Entry and Monopoly by Alcoa
The Monopolist Faces the Market Demand Curve for the Commodity
Example 10-2: De Beers Abandons Its Diamond Monopoly
10.2 Short-Run Equilibrium Price and Output.
Total Approach: Maximizing the Positive Difference Between Total Revenue and Total Costs
Marginal Approach: Equating Marginal Revenue and Marginal Cost
Profit Maximization or Loss Minimization?
Short-Run Marginal Cost and Supply
10.3 Long-Run Equilibrium and Price and Output.
Profit Maximization in the Long Run
Example 10-3: Monopoly Profits in the New York City Taxi Industry
Comparison with Perfect Competition: The Social Cost of Monopoly
Example 10-4: Estimates of the Social Cost of Monopoly in the United States
10.4 Profit Maximization by the Multiplant Monopolist.
Short-Run Equilibrium
Long-Run Equilibrium
10.5 Price Discrimination-A Monopolist's Method of Increasing Profits.
Changing Different Prices for Different Quantities
Example 10-5: First-Degree Price Discrimination in Undergraduate Financial Aid at American Colleges
Changing Different Prices in Different Markets
Example 10-6: Price Discrimination by Con Edison
10.6 International Price Discrimination and Dumping.
Example 10-7: Kodak Antidumping Victory over Fuji-But Kodak Still Faces Competitive Problems
10.7 Two-Part Tariffs, Tying, and Bundling.
Two-Part Tariffs
Tying and Bundling
Example 10-8: Bundling in the Leasing of Movies
10.8 Analysis of Monopoly Markets.
Per-Unit Tax: Perfect Competition and Monopoly compared
Price Discrimination and the Existence of the Industry
Do Monopolists Suppress Inventions?
At the Frontier: Near-Monopoly Lands Microsoft in the Courts
11.1 Monopolistic Competition: Many Sellers of a Differentiated Product.
11.2 Monopolistic Competition: Short-Run and Long-Run Analysis.
Price and Output Decisions Under Monopolistic Competition
Product Variation and Selling Expenses
Example 11-1: Advertisers Are Taking on Competitors by Name and Are Being Sued
How Useful Is the Theory of Monopolistic Competition?
11.3 Oligopoly: Interdependence Among the Few Producers in the Industry.
Example 11-2: Industrial Concentration in the United States
11.4 The Cournot and the Kinked-Demand Curve Models.
The Cournot Model: Interdependence Not Recognized
The Kinked-Demand Curve Model: Interdependence Recognized
11.5 Collusion: Cartels and Price Leadership Models.
A Centralized Cartel Operates as a Monopolist
Example 11-3: The Organization of Petroleum Exporting Countries (OPEC) Cartel
Market-Sharing Cartel
Example 11-4: The Market-Sharing Ivy League Cartel and Financial-Aid Leveraging
Price Leadership
11.6 Long-Run Adjustments and Efficiency Implications of Oligopoly.
Long-Run Adjustments in Oligopoly
Nonprice Competition Among Oligopolists
Welfare Effects of Oligopoly
Example 11-5: Firm Size and Profitability
11.7 Other Oligopolistic Pricing Practices.
Limit Pricing as a Barrier to Entry
Cost-Plus Pricing: A Common Shortcut Pricing Practice
At the Frontier: The Art of Devising Airfares
11.8 The March of Global Oligopolists.
Example 11-6: Globalization of the Automobile Industry
Example 11-7: Rising Competition in Global Banking
Example 11-8: Globalization of the Pharmaceutical Industry
Appendix: The Cournot and Stackelberg Models
The Cournot Model-An Extended Treatment
The Stackelberg Model
12.1 Game Theory: Definition, Objectives, and Usefulness.
Example 12.1: Military Strategy and Strategic Business Decisions
12.2 Dominant Strategy and Nash Equilibrium.
Dominant Strategy
Nash Equilibrium
Example 12-2: Dell Computers and Nash Equilibrium
12.3 The Prisoners' Dilemma, Price and Nonprice Competition, and Cartel Cheating.
The Prisoners' Dilemma: Definition and Importance
Price and nonprice Competition, Cartel Cheating, and the Prisoners' Dilemma
Example 12-3: The Airlines' Fare War and the Prisoners' Dilemma
12.4 Repeated Games and Tit-for-Tat Strategy.
12.5 Strategic Moves.
Threats, Commitments, and Credibility
Entry Deterrence
Example 12-4: Wal-Mart's Preemptive Expansion Marketing Strategy
12.6 Strategic Moves and International Competitiveness.
Example 12-5: Strategic Moves and Countermoves by Airbus and Boeing
Example 12-6: Companies' Strategic Mistakes and Failures
At the Frontier: The Virtual Corporation
13.1 Market Structure and Efficiency.
13.2 Measuring Monopoly Power.
The Lerner Index as a Measure of Monopoly Power
Concentration and Monopoly Power: The Herfindahl Index
Contestable Markets: Effective Competition Even with Few Firms
At the Frontier: Functioning of Markets and Experimental Economics
13.3 Social Costs and Dynamic Benefits of Monopoly Power.
13.4 Controlling Monopoly Power: Antitrust Policy.
Example 13-1: Antitrust Policy in Action-The Breakup of AT&T and the Creation of Competition in Long-Distance Telephone Service
Example 13-2: Regulation and the Price of International Telephone Calls in Europe
13.5 Public-Utility Regulation.
Public Utilities as Natural Monopolies
Difficulties in Public-Utility Regulation
Example 13-3: Regulated Electricity Rates for Con Edison
13.6 The Deregulation Movement.
Example 13-4: Deregulation of the Airline Industry: An Assessment
Example 13-5: Antitrust and the new Merger Boom
13.7 Regulating International Competition: Voluntary Export Restraints.
Example 13-6: Voluntary Restraints on Export of Japanese Automobiles to the United States
13.8 Some Applications of Market Structure, Efficiency, and Regulation.
Regulating Monopoly Price
Regulation and Peak-Load Pricing
Regulation and Transfer Pricing
14.1 Profit Maximization and Optimal Input Employment.
14.2 The Demand Curve of a Firm for an Input.
The Demand Curve of a Firm for One Variable Input
The Demand Curve of a Firm for One of Several Variable Inputs
14.3 The Market Demand Curve for an Input and Its Elasticity.
The Market Demand Curve for an Input
Example 14-1: The Increase in the demand for Temporary Workers
Determinants of the Price Elasticity of Demand for an Input
Example 14-2: Price Elasticity of Demand for Inputs in Manufacturing Industries
14.4 The Supply Curve of an Input.
The Supply of Labor by an Individual
Example 14-3: Leisure Time in the United States over the Past Century
Substitution and Income Effects of a Wage Increase
Example 14-4: Labor Force Participation Rates
The Market Supply Curve for an Input
Example 14-5: Backward-Bending Supply Curve of Physicians' Services and Other Labor
14.5 Pricing and Employment of an Input.
Example 14-6: Labor Productivity and Total Compensation in the United States and Abroad
14.6 Input Price Equalization Among Industries, Regions, and Countries.
Input Price Equalization Among Industries and Regions of a Country
Input Price Equalization Among Countries
Example 14-7: Convergence in Hourly Compensation in the Leading Industrial Countries
14.7 Economic Rent: An Unnecessary Payment to Bring Forth the Supply of an Input.
14.8 Analysis of Labor Markets Under Perfect Competition.
Substitution and Income Effects of a Wage Rate Change
Overtime Pay and the Supply of Labor Services
Example 14-8: Higher Tax Rates Reduce Hours of Work and Wage Differentials
Effect of Minimum Wages
At the Frontier: Do Minimum Wages Really Reduce Employment?
15.1 Profit Maximization and Optimal Input Employment.
15.2 The Demand Curve of a Firm for an Input.
The Demand Curve of a Firm for One Variable Input
The Demand Curve of a Firm for One of Several Variable Inputs
15.3 The Market Demand Curve and Input Price and Employment.
Example 15-1: The Dynamics of the Engineers Shortage
15.4 Monopsony: A Single Firm Hiring an Input.
Example 15-2: Occupational Licensing, Mobility, and Imperfect Labor Markets
15.5 Monopsony Pricing and Employment of One Variable Input.
Example 15-3: Monopsonistic Exploitation in Major League Baseball
15.6 Monopsony Pricing and Employment of Several Variable Inputs.
Example 15-4: Imperfect Competition in Labor markets and the Pay of the Top Executives
15.7 International Migration and the Brain Drain.
Example 15-5: British and Russian Brain Drain Is U.S. Brain Gain
Example 15-6: The Debate Over U.S. Immigration Policy
15.8 Analysis of Imperfect Input Markets.
Regulation of Monopsony
Bilateral Monopoly: A Monopsonistic Buyer Facing a Monopolistic Seller
Effect of Labor Unions on Wages
Economics of Discrimination in Employment
At the Frontier: Discrimination, and Gender and Race Wage Differentials
16.1 Lending-Borrowing Equilibrium.
The Market Rate of Interest with Borrowing and Lending
Example 16-1: Personal Savings in the United States
16.2 Saving-Investment Equilibrium.
Saving-Investment Equilibrium Without Borrowing and Lending
Saving-Investment Equilibrium with Borrowing and Lending
The Market Rate of Interest with Saving and Investment, Borrowing and Lending
Example 16-2: Personal and Business Savings and Gross and Net Private Domestic Investment in the United States
16.3 Investment Decisions.
Net Present Value Rule for Investment Decisions: The Two-Period Case
Net Present Value Rule for Investment Decisions: The Multiperiod Case
Example 16-3: Fields of Education and Higher Lifetime Earnings in the United States
16.4 Determinants of the Market Rates of Interest.
Example 16-4: Nominal and Real Interest Rates in the United States: 1990-2006
Example 16-5: Investment Risks and Returns in the United States
16.5 The Cost of Capital.
Cost of Debt
Cost of Equity Capital: The Risk-Free Rate Plus Premium
Cost of Equity Capital: The Dividend Valuation Model
Cost of Equity Capital: The Capital Asset Pricing Model (CAPM)
Weighted Cost of Capital
At the Frontier: Derivatives: Useful but Dangerous
16.6 Effects of Foreign Investments on the Receiving Nation.
Example 16-6: Fluctuations in the Flow of Foreign Direct Investments to the United States
16.7 Some Applications of Financial Microeconomics.
Investment in Human Capital
Investment in Human Capital and Hours of Work
Pricing of Exhaustible Resources
Management of Nonexhaustible Resources
17.1 Partial Versus General Equilibrium Analysis.
Example 17-1: Effect of a Reduction in Demand for Domestically Produced Automobiles in the United States
17.2 General Equilibrium of Exchange and Production.
General Equilibrium of Exchange
General Equilibrium of Production
Derivation of the Production-Possibilities Frontier
17.3 General Equilibrium of Prodcution and Exchange and Pareto Optimality.
Simultaneous General Equilibrium of Production and Exchange
Marginal Conditions for Economic Efficiency and Pareto Optimality
17.4 Perfect Competition, Economic Efficiency, and Equity.
Perfect Competition and Economic Efficiency
Efficiency and Equity
Example 17-2: Watering Down Efficiency in the Pricing of Water
17.5 General Equilibrium of Production and Exchange with International Trade.
Example 17-3: The Basics of the Gains from International Trade
17.6 Welfare Economics and Utility-Possibilities Frontiers.
The Meaning of Welfare Economics
Example 17-4: "The Painful Prescription: Rationing Hospital Care"
Utility-Possibilities Frontier
Grand Utility-Possibilities Frontier
Example 17-5: From Welfare to Work-The Success of Welfare Reform in the United States
17.7 Social Policy Criteria.
Measuring Changes in Social Welfare
Arrow's Impossibility Theorem
At the Frontier: The Hot Issue of Income Inequality in the United States
17.8 Trade Protection and Economic Welfare.
Example 17-6: Welfare Effects of Removing U.S. Trade Restrictions
18.1 Externalities.
Externalities Defined
Externalities and Market Failure
Example 18-1: The Case for Government Support for Basic Research
18.2 Externalities and Property Rights.
Example 18-2: Commercial Fishing: Fewer Boats but Exclusive Rights?
18.3 Public Goods.
Nature of Public Goods
Example 18-3: The Economics of a Lighthouse and Other Public Goods
Provision of Public Goods
At the Frontier: Efficiency Versus Equity in the U.S. Tax System
18.4 Benefit-Cost Analysis.
Example 18-4: Benefit-Cost Analysis and the SST
18.5 The Theory of Public Choice.
Meaning and Importance of Public-Choice Theory
The Public-Choice Process
Policy Implications of the Public Choice Theory
18.6 Strategic Trade Policy.
Example 18-5: Strategic Trade and Industrial Policies in the United States
18.7 Government Control and Regulation of Environmental Pollution.
Environmental Pollution
Optimal Pollution Control
Direct Regulation and Effluent Fees for Optimal Pollution Control
Example 18-6: The Market for Dumping Rights
Example 18-7: Congestion Pricing
19.1 The Economics of Search.
Search Costs
Searching for the Lowest Price
Search and Advertising
Example 19-1: No-Haggling Value Pricing in Car Buying
At the Frontier: The Internet and the Information Revolution
19.2 Asymmetric Information: The Market for Lemons and Adverse Selection.
Asymmetric Information and the Market for Lemons
The Insurance Market and Adverse Selection
19.3 Market Signaling.
19.4 The Problem of Moral Hazard.
Example 19-2: Increased Disability Payments Reduce Labor Force Participation
Example 19-3: Medicare and Medicaid and Moral Hazard
19.5 The Principal-Agent Problem.
Example 19-4: Do Golden Parachutes Reward Failure?
19.6 The Efficiency Wage Theory.
Example 19-5: The Efficiency Wage at Ford
Appendix A: Mathematical Appendix
Appendix B: Answers to Selected Problems
Appendix C: Glossary

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