Table Of ContentAPPLICATIONS INCLUDED IN THIS TEXT
Chapter 2 Chapter 5 Chapter 9 Chapter 13 BUSINESS APPLICATIONS Chapter 20
Valuing Land in Equilibrium
EVERYDAY APPLICATIONS EVERYDAY APPLICATIONS EVERYDAY APPLICATIONS BUSINESS APPLICATIONS EVERYDAY APPLICATIONS
Hiring an Assistant
Watching a Bad Movie Personality and Tastes for Current and Backward-Bending Labor Supply Switching Technologies Quality of Life Indexes
Renting Car vs. Taking Taxis Future Consumption Switching Technologies: Short-run vs. Long Run POLICY APPLICATIONS Trade, Migration, and the Price of a Haircut
Dieting and Nutrition Thinking about Old Age BUSINESS APPLICATIONS Fixed Amount of Land for Oil Drilling Compensating Wage Differentials and
Distortionary Taxes and Redistribution
Setting up a College Trust Fund Tastes for Paperclips Price Discounts, Substitutes, and Complements Minimum Wage Labor Subsidy Increased Worker Safety
Distortionary Taxes in General Equilibrium
Inferring Tastes for “Mozartkugeln” Good Apples vs. Bad Apples Business Taxes Adaptive Expectations and Oil Price Instability
The Laffer Curve in General Equilibrium
BUSINESS APPLICATIONS Syllabi-Induced Tastes over Exam Grades
Pricing and Quantity Discounts POLICY APPLICATIONS POLICY APPLICATIONS BUSINESS APPLICATIONS
Chapter 17
“Supersizing” Chapter 6 Tax and Retirement Policy Fixed Amount of Land for Oil Drilling Compensating Wage Differentials and
Frequent Flyer Perks Minimum Wage Labor Subsidy EVERYDAY APPLICATIONS Increased Worker Safety
EVERYDAY APPLICATIONS
Choice in Calling Plans Chapter 10 Business Taxes Gambling on Sporting Events Adaptive Expectations and Oil Price Instability
Price Fluctuations in the Housing Market
Teenage Sex and Birth Control The Risks of Short-Selling
POLICY APPLICATIONS Different Interest rates for Borrowing and EVERYDAY APPLICATIONS Chapter 14 Gambling with Different Beliefs Pricing Call and Put Options
Food Stamp Programs and Other Types Lending Teacher Pay and Professional Basketball Venice and Regret General Equilibrium Effects of a Property Tax
of Subsidies Salaries EVERYDAY APPLICATIONS Local Differences in Property Taxes
Public Housing and Housing Subsidies BUSINESS APPLICATIONS Ordering Appetizers Fast Food Restaurants and Grease BUSINESS APPLICATIONS
Taxing Goods vs. Lump Sum Taxes Quantity Discounts and Optimal Choices To Trade or Not To Trade Pizza Coupons Choosing a Mafia for Insurance POLICY APPLICATIONS
Public Schools and Private School Vouchers Retail Industry Lobbying for Daylight Savings To Join or Not To Join the Local Pool BUSINESS APPLICATIONS Diversifying Risk along the Business Cycle General Equilibrium Effects of a Property Tax
Tax Deductions and Tax Credits Time To Take or Not to Take the Bus Fast Food Restaurants and Grease Diversifying Risk along the Business Cycle in Local Differences in Property Taxes
Brand Names and Franchise Fees General Equilibrium U.S. Immigration Policy
Chapter 3 POLICY APPLICATIONS BUSINESS APPLICATIONS “Economic Rent” and Profiting from Local vs. National Insurance Trade Barriers against “Unfair” Competition
Food Stamp vs. Food subsidies Pricing at Disneyland Entrepreneurial Skill
EVERYDAY APPLICATIONS Gasoline Taxes Tax Rebates Negotiating an Endorsement Deal and a Bribe Capital Gains Taxes POLICY APPLICATIONS Chapter 21
Robots as Labor-Saving Products AFDC and Work Disincentives Using License Fees to Make Positive Profit
Investing for Retirement Cost of Living Adjustments of POLICY APPLICATIONS Business Taxes More Police or More Jails? EVERYDAY APPLICATIONS
More Police or More Teachers?
Different Interest Rates for Borrowing and Social Security Benefits Distortionary Taxes Minimum Wage Labor Subsidy Enforcement vs. Education Children’s Toys and Gucci Products
Lending Price Subsidies
BUSINESS APPLICATIONS ECVEhRaYpDAtYe Ar P7PLICATIONS TInatxeirnnga Itniotenrael sTtr aodne S aanvdin Cghsild Labor PCaOpLIiCtaYl AGPaPinLsIC TAaTxIOesNS Chapter 18 BFiUshSiInNgE SinS tAhPeP CLoICmAmTIOoNnsS
Present Value of Winning Lottery Tickets Efficient Land Taxes Using License Fees to Make Positive Profit EVERYDAY APPLICATIONS The Externality when Fishing in the Commons
Housing Price Fluctuations
Picking Savings Accounts Business Taxes Scalping College Basketball Tickets Network Externalities and the Battle between
Turkey and Thanksgiving
Compound Interest over the Long Run Chapter 11 Minimum Wage Labor Subsidy Microsoft and Apple
Pricing Government Bonds School Vouchers and the Private School Market BUSINESS APPLICATIONS Pollution that Increases Firm Costs—
Buying Houses with Annuities BUSINESS APPLICATIONS EVERYDAY APPLICATIONS Public School Teacher Salaries, Class Size, Minimum Wage Laws The Market Outcome
A Trick for Calculating the Value of Annuities Sam’s Club and the Marginal Consumer Workers as Producers of Consumption and Private School Markets Usury Laws
Are Gucci Products Giffen Goods Studying for an Exam Pollution Taxes on Output Subsidizing Corn Through Price Floors POLICY APPLICATIONS
POLICY APPLICATIONS The Externality when Fishing in the Commons
Wage Taxes and Budget Constraints POLICY APPLICATIONS BUSINESS APPLICATIONS Chapter 15 POLICY APPLICATIONS Pollution that Increases Firm Costs—
PSroocpiaolr tSioencaulr ivtsy. (Porro Pgaryersoslilv) eT aWxeasge Taxes TSauxb sDteitduuticotnib Eilfitfye catnsd a Tnadx S Corceidailt Ss ecurity OTepcthimnoallo Rgeicsaplo Cnhsaen tgoe L ianb Porro Rdeugcutiloantions EVERYDAY APPLICATIONS MUsiunrimy Luamw Ws age Laws PolBluatrinoeny t’sh aSto Ilnuctiroena ses Firm Costs—
AFDC vs. a Negative Income Tax Cost of Living Adjustments Labor-Saving Technologies Subsidizing Corn Through Price Floors Policy Solutions
TThhere Eea Prrnoepdo Isnaclosm toe DTaexa lC wreitdhit t he Fuealn Edf fiGcaise nPcryic, eGsa soline Consumption PPoOlLitICicYia AnPsP aLsIC PArToIdOuNcSers of Good Feelings BUSINESS APPLICATIONS RNeYnCt TCaoxni tCroalb Medallions Social Norms and Private Actions
Social Security Shortfall Public Housing and Housing Subsidies Determining Optimal Class Size Disneyland Pricing Revisited Kidney Markets Chapter 22
License Fees and Surplus without Income
Chapter 4 Chapter 8 Chapter 12 Effects Oil Shocks and Gasoline Prices EVERYDAY APPLICATIONS
Non-Random “Selection” is Everywhere
EVERYDAY APPLICATIONS BUSINESS APPLICATIONS EVERYDAY APPLICATIONS POLICY APPLICATIONS Chapter 19
Rating Movies on a Numerical Scale Merchandise Exchange Policies To Study or to Sleep? License Fees and Surplus without Income BUSINESS APPLICATIONS BUSINESS APPLICATIONS
Did 9/11 Change Tastes? Fast Food Restaurants and Grease Effects City Wage Taxes Competitive Provision of Health Insurance
Tastes of a Cocaine Addict POLICY APPLICATIONS Redistribution of Income without Income Land Use Policies
Savings Behavior and Tax Policy BUSINESS APPLICATIONS Effects Price Floors for Corn: Is It a Tax or a Subsidy? POLICY APPLICATIONS
BUSINESS APPLICATIONS The Negative Income Tax Fast Food Restaurants and Grease Deadweight Loss from Subsidy of Mortgage Expanding Health Insurance Coverage
Tastes for Cars and Product Characteristics The Earned Income Tax Credit Investing in Smokestack Filters under Interest POLICY APPLICATIONS Moral Hazard versus Adverse Selection
Investor Tastes over Risk and Return Advising Congress on Savings Subsidies and Cap and Trade Markets, Social Planners, and Pollution City Wage Taxes in Health Care Reform
Substitution Effects Anti-Price Gauging Laws Land Use Policies Statistical Profiling in Random Car Searches
POLICY APPLICATIONS International Trade and Child Labor POLICY APPLICATIONS Price Floors for Corn: Is It a Tax or a Subsidy?
Ideology and Preferences of Politicians Subsidizing Savings and Taxing Borrowing Investing in Smokestack Filters under Chapter 16 Rent Control: Is It a Tax or a Subsidy?
Subsistence Levels of Consumption Tax Revenues and the Laffer Curve Cap and Trade EVERYDAY APPLICATIONS Incidence of U.S. Social Security Taxes
Taxes on Firms Mortgage Interest Deductibility, Land Values,
Children, Parents, Baby Booms, and Baby Busts
and the Equilibrium Rate of Return
Parents, Children, and the Degree of
The Split-Rate Property Tax
Substitutability across Time
continued
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continued
APPLICATIONS INCLUDED IN THIS TEXT
Chapter 23 Chapter 25 POLICY APPLICATIONS
Competitive Local Public and Club Good
EVERYDAY APPLICATIONS BUSINESS APPLICATIONS
Production
Diamonds Are a Girl’s Best Friend Entrepreneurial Skill and Market Conditions
Demand for Charities and Tax Deductibility
Quitting Time: When to Exit a Declining
Do Antipoverty Efforts Provide a Public Good?
BUSINESS APPLICATIONS Industry
Distortionary Taxes and National Security
Diamonds Are a Girl’s Best Friend Financing a Strategic Investment under Social Norms and Private Actions
Monopoly Pricing in Health Insurance Markets Quantity Competition The Pork Barrel Commons
Second Degree Price Discrimination in Health Financing a Strategic Investment under Local and National Public Goods as
Insurance Markets Price Competition Pork Barrel Projects
Labor Unions Exercising Market Power Deal or No Deal—Acquisitions of Up-Start
Monopsony: A Single Buyer in the Labor Market Firms by Incumbents Chapter 28
Taxing Monopoly Output Production Quotas under Cartel Agreements
Two Natural Monopolies: Microsoft vs. EVERYDAY APPLICATIONS
Utility Companies POLICY APPLICATIONS Why Vote?
Production Quotas under Cartel Agreements “Winner-Take-All” Elections and the
POLICY APPLICATIONS Mergers, Cartels, and Antitrust Enforcement U.S. Electoral College
Monopoly Pricing in Health Insurance Markets Subsidizing an Oligopoly To Enter or Not to Enter the Race
Second Degree Price Discrimination in Health Government Grants and Cities as Cartels Citizen Candidates
Insurance Markets
Labor Unions Exercising Market Power Chapter 26 BUSINESS APPLICATIONS
Monopsony: A Single Buyer in the Labor Market Voting with Points
EVERYDAY APPLICATIONS
Taxing Monopoly Output
Two Natural Monopolies: Microsoft versus Cities and Land Values POLICY APPLICATIONS
Utility Companies Voting with Points
BUSINESS APPLICATIONS
Some Possible “Remedies” to the Monopoly Interest Groups, Transactions Costs,
Problem Mergers and Antitrust Policy in Related and Vote Buying
Pollution and Monopolies Product Markets Political Coalitions and Public School
Regulating Market Power in the Commons Advertising as Quality Signal Finance Policy
Price Leadership in Differentiated Product
Government Competition, Leviathan, and
Chapter 24 Markets Benevolence
The Evolution of the Fashion Industry
The Pork Barrel Commons and the
EVERYDAY APPLICATIONS Deterring Entry of Another Car Company
“Law of 1/N”
Splitting the Pot The Software Industry
Another Way to Split the Pot
Chapter 29
Real-World Mixed Strategies POLICY APPLICATIONS
Burning Money, Iterated Dominance, Mergers and Antitrust Policy in Related EVERYDAY APPLICATIONS
and the Battle of the Sexes Product Markets Reference Points, Happiness, and Envy
Bargaining Over a Fixed Amount Lobbying for Car Import Taxes Extreme Altruism and Normative Economics
Auctions The Software Industry Framing the Options: Praying while Smoking,
Education as a Signal To Tax or Not to Tax Advertising and Fighting Pandemics
To Fight or Not to Fight Teaser Rates on Credit Cards and Mortgages
Reporting a Crime Chapter 27 Impatient versus Present-Biased Students
Endowment Effects and Housing Markets
BUSINESS APPLICATIONS EVERYDAY APPLICATIONS
Bargaining Over a Fixed Amount Sandwiches, Chess Clubs, Movie Theaters, BUSINESS APPLICATIONS
Auctions and Fireworks Teaser Rates on Credit Cards and Mortgages
Monopoly and Price Discrimination Competitive Local Public and Club Good Endowment Effects and Housing Markets
Carrots and Sticks: Efficiency Wages Production The Equity Premium Puzzle
and the Threat of Firing Workers Raising Money for a Streetlight through a Increased Liquidity, Procrastination,
Education as a Signal “Subscription Campaign” and National Savings
To Fight or Not to Fight
BUSINESS APPLICATIONS POLICY APPLICATIONS
POLICY APPLICATIONS Competitive Local Public and Club Good Impatient versus Present-Biased Students
Negotiating with Pirates, Terrorists Production Increased Liquidity, Procrastination,
(and Children) Raising Money for a Streetlight through a and National Savings
Education as a signal “Subscription Campaign” First- and Second-Best Rawlsian Income
To Fight or Not to Fight The Marketing Challenge for Social Redistribution
Reporting a Crime Entrepreneurs Confirmation Bias, Politics, Research,
Some Prisoner’s Dilemmas and Last-Minute Studying
Smoothing the Business Cycle versus
Fostering Economic Growth: Psychology
Meets Normative Macroeconomics
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MICROECONOMICS
An IntuItIve ApproAch
WITH CALCULUS
2nd edItIon
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MICROECONOMICS
An IntuItIve ApproAch
WITH CALCULUS
2nd edItIon
Thomas J. Nechyba
Duke University
Australia • Brazil • Mexico • Singapore • United Kingdom • United States
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with Calculus, 2e WCN: 02-200-202
Thomas J. Nechyba
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BRIEF CONTENTS
Chapter 0: Foundational Preliminaries (web-based chapter)
Chapter 1: Introduction 1
PART 1: Utility-Maximizing Choice: Consumers, Workers, and Savers 21
Chapter 2: A Consumer’s Economic Circumstances 25
Chapter 3: Economic Circumstances in Labor and Financial Markets 49
Chapter 4: Tastes and Indifference Curves 75
Chapter 5: Different Types of Tastes 113
Chapter 6: Doing the “Best” We Can 143
Chapter 7: Income and Substitution Effects in Consumer Goods Markets 180
Chapter 8: Wealth and Substitution Effects in Labor and Capital Markets 215
Chapter 9: Demand for Goods and Supply of Labor and Capital 245
Chapter 10: Consumer Surplus and Deadweight Loss 277
PART 2: Profit-Maximizing Choice: Producers (or “Firms”) 321
Chapter 11: One Input and One Output: A Short-Run Producer Model 324
Chapter 12: Production with Multiple Inputs 367
Chapter 13: Production Decisions in the Short and Long Run 413
PART 3: Competitive Markets and the “ Invisible Hand” 463
Chapter 14: Competitive Market Equilibrium 466
Chapter 15: The “Invisible Hand” and the First Welfare Theorem 505
Chapter 16: General Equilibrium 535
Chapter 17: Choice and Markets in the Presence of Risk 578
PART 4: Distortions of the “Invisible Hand” in Competitive Markets 629
Chapter 18: Elasticities, Price-Distorting Policies, and Non-Price Rationing 633
Chapter 19: Distortionary Taxes and Subsidies 673
Chapter 20: Prices and Distortions across Markets 712
Chapter 21: Externalities in Competitive Markets 744
Chapter 22: Asymmetric Information in Competitive Markets 791
PART 5: Distortions of the “Invisible Hand” from Strategic Decisions 837
Chapter 23: Monopoly 841
Chapter 24: Strategic Thinking and Game Theory 885
Chapter 25: Oligopoly 950
Chapter 26: Product Differentiation and Innovation in Markets 989
Chapter 27: Public Goods 1040
Chapter 28: Governments and Politics 1094
PART 6: Considering How to Make the World a Better Place 1129
Chapter 29: What Is Good? Challenges from Psychology and Philosophy 1131
Chapter 30: Balancing Government, Civil Society, and Markets 1180
v
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