Intermediate Microeconomics: A Modern Approach

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