Basic Economics (with InfoTrac? 1-Semester, Economic Applications Online Pr
Author: Frank V Mastrianna
Mastering economics has never been easier. BASIC ECONOMICS introduces you to macro and microeconomics in a streamlined, straightforward fashion that makes economics easier to understand. Your purchase includes two time-saving resources: access to InfoTrac College Edition's online university library and online study tools through Economic Applications! With Economic Applications, you'll have online access to study guides and review materials that will help you succeed in the course. And with InfoTrac College Edition, you'll save time, save money--and eliminate the trek to the library. Log in and access a library of more than 5,000 academic and popular magazines, newspapers, and journals.
Read also Russian Cookbook or United States of Arugula
Microeconomics (with Aplia ITS Card)
Author: William A McEachern
This very successful textbook is distinguished by a superior writing style that draws upon common reader experiences to introduce economic concepts, making economic theory more accessible and interesting. "Case Studies" and numerous examples take advantage of readers' intuitive knowledge of economics, building upon real-life situations. A streamlined design places pedagogy and illustrations directly within the flow of the text, making them less distracting and more useful for readers. A fully integrated program of technology enhancements sets this text apart by pairing the book with numerous online multimedia learning tools that have been developed to help the text better serve a wide range of learning styles. The text uniquely integrates classroom use of The Wall Street Journal by including in-text pedagogy to help readers learn to analyze the latest economic events as reported in the Journal.
Table of Contents:
Introduction to EconomicsThe Art and Science of Economic Analysis 1
The Economic Problem: Scarce Resources, Unlimited Wants 2
Resources 2
Goods and Services 3
Economic Decision Makers 4
A Simple Circular-Flow Model 4
The Art of Economic Analysis 6
Rational Self-Interest 6
Choice Requires Time and Information 6
Economic Analysis Is Marginal Analysis 7
Microeconomics and Macroeconomics 7
The Science of Economic Analysis 8
The Role of Theory 8
The Scientific Method 8
Normative Versus Positive 10
Economists Tell Stories 10
Case Study: A Yen for Vending Machines 11
Predicting Average Behavior 12
Some Pitfalls of Faulty Economic Analysis 12
If Economists Are So Smart, Why Aren't They Rich? 13
Case Study: College Major and Career Earnings 13
Understanding Graphs 18
Drawing Graphs 19
The Slopes of Straight Lines 20
The Slope, Units of Measurement, and Marginal Analysis 20
The Slopes of Curved Lines 22
Line Shifts 23
Some Tools of Economic Analysis 24
Choice and Opportunity Cost 25
Opportunity Cost 25
Case Study: The Opportunity Cost of College 25
Opportunity Cost Is Subjective 26
Sunk Cost and Choice 27
Comparative Advantage, Specialization, and Exchange 28
The Law of Comparative Advantage 28
Absolute Advantage Versus Comparative Advantage 28
Specialization and Exchange 29
Division of Labor and Gains from Specialization 30
Case Study: Specialization Abound 30
The Economy's Production Possibilities 31
Efficiency and the Production Possibilities Frontier 31
Inefficient and Unattainable Production 32
The Shape of the Production Possibilities Frontier 32
What Can Shift the Production Possibilities Frontier? 33
What Can We Learn from the PPF? 34
Three Questions Every Economic System Must Answer 35
Economic Systems 36
Pure Capitalism 36
Pure Command System 37
Mixed and Transitional Economies 38
Economies Based on Custom or Religion 38
Economic Decision Makers 40
The Household 41
The Evolution of the Household 41
Households Maximize Utility 41
Households as Resource Suppliers 42
Households as Demanders of Goods and Services 43
The Firm 43
The Evolution of the Firm 43
Types of Firms 44
Nonprofit Institutions 46
Why Does Household Production Still Exist? 46
Case Study: The Electronic Cottage 47
The Government 47
The Role of Government 48
Government's Structure and Objectives 49
The Size and Growth of Government 50
Sources of Government Revenue 51
Tax Principles and Tax Incidence 51
The Rest of the World 52
International Trade 52
Exchange Rates 54
Trade Restrictions 54
Case Study: Wheels of Fortune 34
Demand and Supply Analysis 57
Demand 58
The Law of Demand 58
The Demand Schedule and Demand Curve 59
Shifts of the Demand Curve 61
Changes in Consumer Income 61
Changes in the Prices of Related Goods 61
Changes in Consumer Expectations 62
Changes in the Number or Composition of Consumers 63
Changes in Consumer Tastes 63
Supply 63
The Supply Schedule and Supply Curve 64
Shifts of the Supply Curve 65
Changes in Technology 65
Changes in the Prices of Relevant Resources 65
Changes in the Prices of Alternative Goods 65
Changes in Producer Expectations 66
Changes in the Number of Producers 66
Demand and Supply Create a Market 67
Markets 67
Market Equilibrium 67
Changes in Equilibrium Price and Quantity 69
Shifts of the Demand Curve 69
Shifts of the Supply Curve 70
Simultaneous Shifts of Demand and Supply Curves 72
Case Study: The Market for Professional Basketball 73
Disequilibrium 74
Price Floors 74
Price Ceilings 74
Case Study: The Toy Business Is Not Child's Play 76
Introduction to the Market System
Elasticity of Demand and Supply 78
Price Elasticity of Demand 79
Calculating Price Elasticity of Demand 79
Categories of Price Elasticity of Demand 81
Elasticity and Total Revenue 81
Price Elasticity and the Linear Demand Curve 81
Constant-Elasticity Demand Curves 83
Determinants of the Price Elasticity of Demand 85
Availability of Substitutes 85
Proportion of the Consumer's Budget Spent on the Good 86
A Matter of Time 86
Elasticity Estimates 87
Case Study: Deterring Young Smokers 88
Price Elasticity of Supply 89
Constant Elasticity Supply Curves 90
Determinants of Supply Elasticity 92
Other Elasticity Measures 93
Income Elasticity of Demand 93
Case Study: The Market for Food and "The Farm Problem" 94
Cross-Price Elasticity of Demand 96
Price Elasticity and Tax Incidence 99
Demand Elasticity and Tax Incidence 99
Supply Elasticity and Tax Incidence 100
Consumer Choice and Demand 102
Utility Analysis 103
Tastes and Preferences 103
The Law of Diminishing Marginal Utility 104
Measuring Utility 104
Units of Utility 104
Utility Maximization in a World Without Scarcity 105
Utility Maximization in a World of Scarcity 106
Utility-Maximizing Conditions 107
Case Study: Water, Water, Everywhere 108
The Law of Demand and Marginal Utility 109
Consumer Surplus 111
Market Demand and Consumer Surplus 112
Case Study: The Marginal Value of Free Medical Care 114
The Role of Time in Demand 115
Indifference Curves and Utility Maximization 117
Consumer Preferences 117
The Budget Line 119
Consumer Equilibrium at the Tangency 120
Effects of a Change in Price 121
Income and Substitution Effects 122
Production and Cost in the Firm 124
Cost and Profit 125
Explicit and Implicit Costs 125
Alternative Measures of Profit 125
Production in the Short Run 127
Fixed and Variable Resources 127
The Law of Diminishing Marginal Returns 127
The Total and Marginal Product Curves 128
Costs in the Short Run 130
Total Cost and Marginal Cost in the Short Run 130
Average Cost in the Short Run 132
The Relationship Between Marginal Cost and Average Cost 133
Costs in the Long Run 134
The Long-Run Average Cost Curve 134
Economies of Scale 136
Diseconomies of Scale 136
Case Study: At the Movies 137
Economies and Diseconomies of Scale at the Firm Level 138
Case Study: Billions and Billions of Burgers 138
A Closer Look at Production and Costs 141
The Production Function and Efficiency 141
Isoquants 141
Isocost Lines 143
The Choice of Input Combinations 144
The Expansion Path 144
Market Structure and Pricing
Perfect Competition 146
An Introduction to Perfect Competition 147
Perfectly Competitive Market Structure 147
Demand Under Perfect Competition 148
Short-Run Profit Maximization 149
Total Revenue Minus Total Cost 149
Marginal Revenue Equals Marginal Cost 150
Economic Profit in the Short Run 152
Minimizing Short-Run Losses 152
Fixed Cost and Minimizing Losses 152
Marginal Revenue Equals Marginal Cost 153
Shutting Down in the Short Run 155
The Firm and Industry Short-Run Supply Curves 155
The Short-Run Firm Supply Curve 155
The Short-Run Industry Supply Curve 156
Firm Supply and Market Equilibrium 157
Case Study: Auction Markets 158
Perfect Competition in the Long Run 159
Zero Economic Profit in the Long Run 160
The Long-Run Adjustment to a Change in Demand 160
The Long-Run Industry Supply Curve 163
Constant-Cost Industries 163
Increasing-Cost Industries 164
Perfect Competition and Efficiency 166
Productive Efficiency: Making Stuff Right 166
Allocative Efficiency: Making the Right Stuff 166
What's So Perfect About Perfect Competition? 166
Case Study: Experimental Economics 168
Monopoly 171
Barriers to Entry 172
Legal Restrictions 172
Economies of Scale 173
Control of Essential Resources 173
Case Study: Is a Diamond Forever? 174
Revenue for the Monopolist 175
Demand, Average Revenue, and Marginal Revenue 175
The Gains and Loss from Selling One More Unit 176
Revenue Schedules 177
Revenue Curves 177
The Firm's Costs and Profit Maximization 179
Profit Maximization 179
Short-Run Losses and the Shutdown Decision 182
Long-Run Profit Maximization 182
Monopoly and the Allocation of Resources 183
Price and Output Under Perfect Competition 183
Price and Output Under Monopoly 184
Allocative and Distributive Effects 184
Problems Estimating the Deadweight Loss of Monopoly 185
Why the Deadweight Loss of Monopoly Might Be Lower 185
Why the Deadweight Loss Might Be Higher 185
Case Study: The Mail Monopoly 186
Price Discrimination 187
Conditions for Price Discrimination 187
A Model of Price Discrimination 187
Examples of Price Discrimination 188
Perfect Price Discrimination: The Monopolist's Dream 189
Monopolistic Competition and Oligopoly 192
Monopolistic Competition 193
Characteristics of Monopolistic Competition 193
Product Differentiation 193
Short-Run Profit Maximization or Loss Minimization 194
Zero Economic Profit in the Long Run 196
Case Study: Fast Forward 197
Monopolistic Competition and Perfect Competition Compared 198
An Introduction to Oligopoly 200
Varieties of Oligopoly 200
Case Study: The Unfriendly Skies 201
Economies of Scale 201
The High Cost of Entry 202
Crowding Out the Competition 202
Models of Oligopoly 203
Collusion and Cartels 203
Price Leadership 205
Game Theory 206
Comparison of Oligopoly and Perfect Competition 210
Resource Markets
Resource Markets 213
The Once-Over 214
Resource Demand 214
Resource Supply 214
The Demand and Supply of Resources 215
The Market Demand for Resources 215
The Market Supply of Resources 216
Temporary and Permanent Resource Price Differences 216
Opportunity Cost and Economic Rent 218
A Closer Look at Resource Demand 221
The Firm's Demand for a Resource 221
Marginal Revenue Product 222
Marginal Resource Cost 223
Shifts of the Demand for Resources 225
Case Study: The Derived Demand for Architects 226
The Optimal Use of More Than One Resource 227
Case Study: The McMinimum Wage 227
Labor Markets and Labor Unions 230
Labor Supply 231
Labor Supply and Utility Maximization 231
Wages and Individual Labor Supply 233
Nonwage Determinants of Labor Supply 234
Market Supply of Labor 236
Why Wages Differ 237
Case Study: Winner-Take-All Labor Markets 239
Unions and Collective Bargaining 241
Types of Unions 241
Collective Bargaining 242
The Strike 242
Union Wages and Employment 242
Inclusive, or Industrial, Unions: Negotiating a Higher Industry Wage 242
Exclusive, or Craft, Unions: Reducing Labor Supply 244
Increasing Demand for Union Labor 245
Recent Trends in Union Membership 246
Case Study: Unionizing Information Technology Workers 248
Capital, Interest, and Corporate Finance 251
The Role of Time in Production and Consumption 252
Production, Saving, and Time 252
Consumption, Saving, and Time 253
Optimal Investment 253
Case Study: The Value of a Good Idea-Intellectual Property 256
The Market for Loanable Funds 257
Why Interest Rates Differ 258
Present Value and Discounting 259
Present Value of Payment One Year Hence 260
Present Value for Payments in Later Years 260
Present Value of an Income Stream 261
Present Value of an Annuity 261
Case Study: The Million-Dollar Lottery? 262
Corporate Finance 263
Corporate Stock and Retained Earnings 263
Corporate Bonds 264
Securities Exchanges 264
Transaction Costs, Imperfect Information, and Market Behavior 266
Rationale for the Firm and Its Scope of Operation 267
The Firm Reduces Transaction Costs 267
The Boundaries of the Firm 268
Case Study: The Trend Towards Outsourcing 271
Economies of Scope 272
Market Behavior with Imperfect Information 272
Optimal Search with Imperfect Information 273
The Winner's Curse 274
Asymmetric Information in Product Markets 275
Hidden Characteristics: Adverse Selection 275
Hidden Actions: The Principal-Agent Problem 276
Asymmetric Information in Insurance Markets 277
Coping with Asymmetric Information 277
Asymmetric Information in Labor Markets 278
Adverse Selection in Labor Markets 278
Signaling and Screening 278
Case Study: The Reputation of a Big Mac 279
Market Failure and Public Policy
Economic Regulation and Antitrust Policy 282
Business Behavior, Public Policy, and Government Regulation 283
Regulating Natural Monopolies 284
Unregulated Profit Maximization 284
Setting Price Equal to Marginal Cost 284
Subsidizing the Natural Monopolist 285
Setting Price Equal to Average Cost 286
The Regulatory Dilemma 286
Alternative Theories of Economic Regulation 286
Producers' Special Interest in Economic Regulation 287
Case Study: Airline Regulation and Deregulation 287
Antitrust Law and Enforcement 289
Origins of Antitrust Policy 289
Antitrust Law Enforcement 291
Per Se Illegality and the Rule of Reason 291
Mergers and Public Policy 291
Merger Waves 292
Competitive Trends in the U.S. Economy 294
Market Competition over Time 294
Case Study: Microsoft on Trial 296
Recent Competitive Trends 297
Problems with Antitrust Policy 298
Public Goods and Public Choice 301
Public Goods 302
Private Goods, Public Goods, and In Between 302
Optimal Provision of Public Goods 303
Paying for Public Goods 305
Public Choice in a Representative Democracy 305
Median Voter Model 305
Special Interest and Rational Ignorance 306
Distribution of Benefits and Costs 307
Case Study: Farm Subsidies 309
Rent Seeking 311
Case Study: Campaign Finance Reform 312
The Underground Economy 313
Bureaucracy and Representative Democracy 314
Ownership and Funding of Bureaus 314
Ownership and Organizational Behavior 314
Bureaucratic Objectives 315
Private Versus Public Production 316
Externalities and the Environment 318
Externalities and the Common-Pool Problem 319
Renewable Resources 319
Resolving the Common-Pool Problem 320
Optimal Level of Pollution 321
External Costs with Fixed Technology 321
External Costs with Variable Technology 322
Case Study: Destruction of the Tropical RainForests 325
The Coase Theorem 326
Markets for Pollution Rights 327
Pollution Rights and Public Choice 328
Environmental Protection 329
Air Pollution 329
Case Study: City in the Clouds 330
Water Pollution 332
Hazardous Waste and the Superfund 332
Solid Waste: "Paper or Plastic?" 333
Positive Externalities 334
Income Distribution and Poverty 339
The Distribution of Household Income 340
Income Distribution by Quintiles 340
The Lorenz Curve 340
A College Education Pays More 341
Problems with Distribution Benchmarks 343
Why Incomes Differ 343
Poverty and the Poor 344
Official Poverty Level 344
Programs to Help the Poor 345
Who Are the Poor? 348
Poverty and Age 348
Poverty and Public Choice 348
The Feminization of Poverty 349
Poverty and Discrimination 351
Affirmative Action 352
Unintended Consequences of Income Assistance 353
Disincentives 353
Does Welfare Cause Dependency? 354
Welfare Reform 354
Case Study: Is Welfare-to-Work Working? 355
Recent Reforms 355
Case Study: Oregon's Program of "Tough Love" 357
International Microeconomics
International Trade 360
The Gains from Trade 361
A Profile of Exports and Imports 361
Production Possibilities Without Trade 363
Consumption Possibilities Based on Comparative Advantage 364
Reasons for International Specialization 366
Trade Restrictions and Welfare Loss 367
Tariffs 368
Import Quotas 369
Quotas in Practice 371
Tariffs and Quotas Compared 371
Other Trade Restrictions 371
Freer Trade by Multilateral Agreement 372
The World Trade Organization 372
Case Study: The WTO and the "Battle in Seattle" 373
Common Markets 374
Arguments for Trade Restrictions 375
National Defense Argument 375
Infant Industry Argument 375
Antidumping Argument 375
Jobs and Income Argument 376
Declining Industries Argument 377
Problems with Protection 377
Case Study: Bush's Steel Tariffs 378
Import Substitution Versus Export Promotion 379
Glossary 381
Index 389
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