TY - BOOK AU - Pindyck, Robert S. AU - Rubinfeld, Daniel L. TI - Microeconomics SN - 9780137133352 U1 - 338.5 PIN PY - 2009/// CY - Upper Saddle River, N.J. PB - Pearson Prentice Hall, KW - Microeconomics N1 - Includes index; Preface xxv Part One Introduction: Markets and Prices 1 (64) Preliminaries 3 (18) The Themes of Microeconomics 4 (3) Trade-Offs 4 (1) Prices and Markets 5 (1) Theories and Models 5 (1) Positive versus Normative Analysis 6 (1) What is a Market? 7 (5) Competitive versus Noncompetitive Markets 8 (1) Market Price 8 (1) Market Definition---The Extent of a Market 9 (3) Real versus Nominal Prices 12 (3) Why Study Microeconomics? 15 (3) Corporate Decision Making: Ford's Sport Utility Vehicles 15 (2) Public Policy Design: Automobile Emission Standards for the Twenty-First Century 17 (1) Summary 18 (1) Questions for Review 18 (1) Exercises 18 (3) The Basics of Supply and Demand 21 (44) Supply and Demand 22 (3) The Supply Curve 22 (1) The Demand Curve 23 (2) The Market Mechanism 25 (1) Changes in Market Equilibrium 26 (8) Elasticities of Supply and Demand 34 (6) Point versus Arc Elasticities 37 (3) Short-Run versus Long-Run Elasticities 40 (9) Demand 40 (5) Supply 45 (4) Understanding and Predicting the Effects of Changing Market Conditions 49 (9) Effects of Government Intervention-Price Controls 58 (3) Summary 61 (1) Questions for Review 61 (1) Exercises 62 (3) Part Two Producers, Consumers, and Competitive Markets 65 (282) Consumer Behavior 67 (44) Consumer Behavior 67 (2) Consumer Preferences 69 (14) Market Baskets 69 (1) Some Basic Assumptions about Preferences 70 (1) Indifference Curves 70 (2) Indifference Maps 72 (2) The Shape of Indifference Curves 74 (1) The Marginal Rate of Substitution 75 (1) Perfect Substitutes and Perfect Complements 76 (7) Budget Constraints 83 (3) The Budget Line 83 (1) The Effects of Changes in Income and Prices 84 (2) Consumer choice 86 (6) Corner Solutions 90 (2) Revealed Preferences 92 (3) Marginal Utility and Consumer Choice 95 (5) Cost-of-Living Indexes 100 (6) Ideal Cost-of-Living Index 101 (1) Laspeyres Index 102 (1) Paasche Index 103 (1) Price Indexes in the United Statics: Chain Weighting 104 (2) Summary 106 (1) Questions for Review 106 (1) Exercises 107 (4) Individual and Market Demand 111 (48) Individual Demand 112 (8) Price Changes 112 (1) The Individual Demand Curve 113 (1) Income Changes 114 (1) Normal versus Inferior Goods 115 (1) Engel Curves 116 (3) Substitutes and Complements 119 (1) Income and Substitution Effects 120 (5) Substitution Effect 121 (1) Income Effect 121 (1) A Special Case: The Giffen Good 122 (3) Market Demand 125 (7) From Individual to Market Demand 125 (2) Elasticity of Demand 127 (5) Consumer Surplus 132 (4) Consumer Surplus and Demand 132 (4) Network Externalities 136 (4) The Bandwagon Effect 136 (1) The Snob Effect 137 (3) Empirical Estimation of Demand 140 (4) The Statistical Approach to Demand Estimation 140 (2) The Form of the Demand Relationship 142 (2) Interview and Experimental Approaches to Demand Determination 144 (1) Summary 144 (1) Questions for Review 145 (1) Exercises 146 (3) Demand Theory---A Mathematical Treatment 149 (8) Utility Maximization 149 (1) The Method of Lagrange Multipliers 150 (1) The Equal Marginal Principle 151 (1) Marginal Rate of Substitution 151 (1) Marginal Utility of Income 152 (1) An Example 152 (2) Duality in Consumer Theory 154 (1) Income and Substitution Effect 155 (2) Exercises 157 (2) Uncertainty and Consumer Behavior 159 (36) Describing Risk 160 (5) Probability 160 (1) Expected Value 161 (1) Variability 161 (2) Decision Making 163 (2) Preferences Toward Risk 165 (5) Different Preferences Toward Risk 167 (3) Reducing Risk 170 (6) Diversification 170 (2) Insurance 172 (2) The Value of Information 174 (2) The Demand for Risky Assets 176 (9) Assets 177 (1) Risky and Riskless Assets 177 (1) Asset Returns 178 (1) The Trade-Off Between Risk and Return 179 (1) The Investor's Choice Problem 180 (5) Behavioral Economics 185 (6) More Complex Preferences 186 (2) Rules of Thumb and Biases in Decision Making 188 (1) Probabilities and Uncertainty 189 (1) Summing Up 189 (2) Summary 191 (1) Questions for Review 191 (1) Exercises 191 (4) Production 195 (26) The Production Decisions of a Firm 195 (1) The Technology of Production 196 (2) The Production Function 197 (1) The Short Run versus the Long Run 197 (1) Production with One Variable Input (Labor) 198 (9) Average and Marginal Products 199 (1) The Slopes of the Product Curve 200 (1) The Average Product of Labor Curve 201 (1) The Marginal Product of Labor Curve 202 (1) The Law of Diminishing Marginal Returns 202 (3) labor Productivity 205 (2) Production with Two Variable Inputs 207 (8) Isoquants 207 (2) Input Flexibility 209 (1) Diminishing Marginal Returns 209 (1) Substitution Among Inputs 209 (2) Production Functions---Two Special Cases 211 (4) Returns to Scale 215 (3) Describing Returns to Scale 215 (3) Summary 218 (1) Questions for Review 218 (1) Exercises 219 (2) The Cost of Production 221 (50) Measuring Cost: Which Costs Matter? 221 (7) Economic cost versus Accounting Cost 222 (1) Opportunity Cost 222 (1) Sunk Costs 222 (2) Fixed Cost and Variable Costs 224 (1) Fixed versus Sunk Costs 225 (2) Marginal and Average Cost 227 (1) Cost in the Short Run 228 (6) The Determinants of Short-Run Cost 228 (2) The Shapes of the Cost curves 230 (4) Cost in the Long Run 234 (9) The User Cost of Capital 234 (1) The Cost-Minimizing Input Choice 235 (1) The Isocost Line 236 (1) Choosing Inputs 237 (4) Cost Minimization with Varying Output Levels 241 (1) The Expansion Path and Long-Run Costs 241 (2) Long-Run verus Short-Run Cost Curves 243 (5) The Inflexibility of Short-Run Production 243 (1) Long-Run Average Cost 243 (2) Economies and Diseconomies of Scale 245 (2) The Relationship between Short-Run and Long-Run Cost 247 (1) Production with Two Outputs---Economies of Scope 248 (3) Product Transformation Curves 249 (1) Economies and Diseconomies of Scope 250 (1) The Degree of Economies of Scope 250 (1) Dynamic Changes in Costs---The Learning Curve 251 (5) Graphing the Learning Curve 252 (1) Learning versus Economies of Scale 253 (3) Estimating and Predicting Cost 256 (4) Cost Functions and the Measurement of Scale Economies 258 (2) Summary 260 (1) Questions for Review 261 (1) Exercises 261 (3) Production and Cost theory---A Mathematical Treatment 264 (5) Cost Minimization 264 (1) Marginal Rate of Technical Substitution 265 (1) Duality in Production and Cost Theory 266 (1) The Cobb-Douglas Cost and Production Functions 267 (2) Exercises 269 (2) Profit Maximization and Competitive Supply 271 (38) Perfectly Competitive Markets 271 (3) When Is a Market Highly Competitive? 273 (1) Profit Maximization 274 (2) Do Firms Maximize Profit? 274 (1) Alternative Forms of Organization 275 (1) Marginal Revenue, Marginal Cost, and Profit Maximization 276 (3) Demand and Marginal Revenue for a competitive Firm 277 (2) Profit Maximization by a Competitive Firm 279 (1) Choosing Output in the Short Run 279 (5) Short-Run Profit Maximization by a Competitive Firm 279 (1) The Short-Run Profit of a Competitive Firm 280 (4) The Competitive Firm's Short-Run Supply Curve 284 (3) the Firm's Response to an Input Price Change 284 (3) The Short-Run Market Supply Curve 287 (5) Elasticity of Market Supply 288 (3) Producer Surplus in the Short Run 291 (1) Choosing Output in the Long Run 292 (7) Long-Run Profit Maximization 293 (1) Long-Run Competitive Equilibrium 294 (3) Economic Rent 297 (1) Producer Surplus in the Long Run 297 (2) The Industry's Long-Run Supply curve 299 (6) Constant-Cost Industry 299 (1) Increasing-Cost Industry 300 (2) Decreasing-Cost Industry 302 (1) The Effects of a Tax 302 (1) Long-Run Elasticity of Supply 303 (2) Summary 305 (1) Questions for Review 306 (1) Exercises 306 (3) The Analysis of Competitive Markets 309 (38) Evaluating the Gains and Losses from Government Policies--Consumer and Producer Surplus 309 (6) Review of Consumer and Producer Surplus 310 (1) Application of Consumer and Producer Surplus 311 (4) The Efficiency of a Competitive Market 315 (4) Minimum Prices 319 (5) Price Supports and Production Quotas 324 (7) Price Supports 324 (1) Production Quotas 325 (6) Import Quotas and Tariffs 331 (4) The Impact of a Tax or Subsidy 335 (7) The Effects of a Subsidy 339 (3) Summary 342 (1) Questions for Review 342 (1) Exercises 343 (4) Part Three Market Structure and Competitive Strategy 347 (236) Market Power: Monopoly and Monopsony 349 (42) Monopoly 350 (11) Average Revenue and Marginal Revenue 350 (2) The Monopolist's Output Decision 352 (1) An Example 353 (1) A Rule of Thumb for Pricing 354 (3) Shifts in Demand 357 (1) The Effect of a Tax 357 (2) The Multiplant Firm 359 (2) Monopoly Power 361 (5) Measuring Monopoly Power 362 (1) The Rule of Thumb for Pricing 363 (3) Sources of Monopoly Power 366 (2) The Elasticity of Market Demand 367 (1) The Number of Firms 367 (1) The Interaction Among Firms 368 (1) The Social Costs of Monopoly Power 368 (5) Rent Seeking 370 (1) Price Regulation 370 (2) Natural Monopoly 372 (1) Regulation in Practice 373 (1) Monopsony 373 (3) Monopsony and Monopoly Compared 376 (1) Monopsony Power 376 (5) Sources of Monopsony Power 377 (2) The Social Costs of Monopsony Power 379 (1) Bilateral Monopoly 380 (1) Limiting Market Power: The Antitrust Laws 381 (6) Enforcement of the Antitrust Laws 383 (1) Antitrust in Europe 384 (3) Summary 387 (1) Questions for Review 387 (1) Exercises 388 (3) Pricing with Market Power 391 (52) Capturing Consumer Surplus 392 (1) Price Discrimination 393 (10) First-Degree Price Discrimination 393 (3) Second-Degree Price Discrimination 396 (1) Third-Degree Price Discrimination 397 (6) Intertemporal Price Discrimination and Peak-Load Pricing 403 (3) Intertemporal Price Discrimination 403 (1) Peak-Load Pricing 404 (2) The Two-Part Tariff 406 (7) Bundling 413 (11) Relative Valuations 414 (4) Mixed Bundling 418 (3) Bundling in Practice 421 (2) Tying 423 (1) Advertising 424 (4) A Rule of Thumb for Advertising 426 (2) Summary 428 (1) Questions for Review 429 (1) Exercises 429 (4) Transfer Pricing in the Integrated Firm 433 (8) Transfer Pricing When There Is No Outside Market 433 (3) Transfer Pricing with a Competitive Outside Market 436 (2) Transfer Pricing with a Noncompetitive Outside Market 438 (1) A Numerical Example 439 (2) Exercises 441 (2) Monopolistic Competition and Oligopoly 443 (36) Monopolistic Competition 444 (5) The Makings of Monopolistic Competition 444 (1) Equilibrium in the Short Run and the Long Run 445 (1) Monopolistic Competition and Economic Efficiency 446 (3) Oligopoly 449 (7) Equilibrium in an Oligopolistic Market 449 (1) The Cournot Model 450 (3) The Linear Demand Curve---An Example 453 (2) First Mover Advantage---The Stackelberg Model 455 (1) Price Competition 456 (5) Price Competition with Homogeneous Products--The Bertrand Model 456 (2) Price Competition with Differential Products 458 (3) Competition versus Collusion: The Prisoners' Dilemma 461 (3) Implications of the Prisoners' Dilemma for Oligopolistic Pricing 464 (5) Price Rigidity 465 (1) Price Signaling and Price Leadership 465 (3) The Dominant Firm Model 468 (1) Cartels 469 (6) Analysis of Cartel Pricing 470 (5) Summary 475 (1) Questions for Review 475 (1) Exercises 476 (3) Game Theory and Competitive Strategy 479 (42) Gaming and Strategic Decisions 479 (3) Noncooperative versus Cooperative Games 480 (2) Dominant Strategies 482 (2) The Nash Equilibrium Revisited 484 (6) Maximin Strategies 486 (2) Mixed Strategies 488 (2) Repeated Games 490 (4) Sequential Games 494 (3) The Extensive Form of a Game 495 (1) The Advantage of Moving First 496 (1) Threats, Commitments, and Credibility 497 (6) Empty Threats 498 (1) Commitment and Credibility 498 (2) Bargaining Strategy 500 (3) Entry Deterrence 503 (6) Strategic Trade Policy and International Competition 505 (4) Auctions 509 (8) Auction Formats 510 (1) Valuation and Information 510 (1) Private-Value Auctions 511 (1) Common-Value Auctions 512 (1) Maximizing Auction Revenue 513 (1) Bidding and Colusion 514 (3) Summary 517 (1) Questions for Review 517 (1) Exercises 518 (3) Markets for Factor Inputs 521 (30) Competitive Factor Markets 521 (13) Demand for a Factor Input When Only One Input Is Variable 522 (2) Demand for a Factor Input When Several Inputs Are Variable 524 (2) The Market Demand Curve 526 (3) The Supply of Inputs to a Firm 529 (2) The Market Supply of Inputs 531 (3) Equilibrium in a Competitive Factor Market 534 (5) Economic Rent 535 (4) Factor Markets with Monopsony Power 539 (4) Monopsony Power: Marginal and Average Expenditure 539 (1) Purchasing Decisions with Monopsony Power 540 (1) Bargaining Power 541 (2) Factor Markets with Monopoly Power 543 (6) Monopoly Power over the Wage Rate 544 (1) Unionized and Nonunionized Workers 545 (4) Summary 549 (1) Questions for Review 549 (1) Exercises 550 (1) Investment, Time, and Capital Markets 551 (32) Stocks versus Flows 552 (1) Present Discounted Value 553 (3) Valuing Payment Streams 553 (3) The Value of a Bond 556 (4) Perpetuities 556 (1) The Effective Yield on a Bond 557 (3) The Net Present Value Criterion for Capital Investment Decisions 560 (4) The Electric Motor Factory 561 (1) Real versus Nominal Discount Rates 562 (1) Negative Future Cash Flows 563 (1) Adjustments for Risk 564 (4) Diversifiable versus Nondiversifiable Risk 564 (1) The Capital Asset Pricing Model 565 (3) Investment Decisions by Consumers 568 (2) Investments in Human Capital 570 (3) Intertemporal Production Decisions---Depletable Resources 573 (4) The Production Decision of an Individual Resource Producer 574 (1) The Behavior of Market Price 574 (1) User Cost 575 (1) Resource Production by a Monopolist 576 (1) How Are Interest Rates Determined? 577 (3) A Variety of Interest Rates 579 (1) Summary 580 (1) Questions for Review 580 (1) Exercises 581 (2) Part Four Information, Market Failure, and the Role of Government 583 (112) General Equilibrium and Economic Efficiency 585 (32) General Equilibrium analysis 585 (5) Two Interdependent Markets---Moving to General Equilibrium 586 (1) Reaching General Equilibrium 587 (3) Efficiency in Exchange 590 (7) The Advantages of Trade 590 (1) The Edgeworth Box Diagram 591 (1) Efficient Allocations 592 (1) The Contract Curve 593 (1) Consumer Equilibrium in a Competitive Market 594 (2) The Economic Efficiency of Competitive Markets 596 (1) Equity and Efficiency 597 (3) The Utility Possibilities Frontier 597 (2) Equity and Perfect Competition 599 (1) Efficiency in Production 600 (6) The Production Possibilities Frontier 601 (2) Output Efficiency 603 (1) Efficiency in Output Markets 604 (1) The Gains from Free Trade 605 (1) Comparative Advantage 606 (4) An Expanded Production Possibilities Frontier 607 (3) An Overview---The Efficiency of Competitive Markets 610 (2) Why Market Fail 612 (2) Market Power 612 (1) Incomplete Information 613 (1) Externalities 613 (1) Public Goods 613 (1) Summary 614 (1) Questions for Review 614 (1) Exercises 615 (2) Markets with Asymmetric Information 617 (28) Quality Uncertainty and the Market for Lemons 617 (6) The Market for Used Cars 618 (2) Implications of Asymmetric Information 620 (1) The Importance of Reputation and Standardization 621 (2) Market Signaling 623 (5) A Simple Model of Job Market Signaling 624 (3) Guarantees and Warranties 627 (1) Moral Hazard 628 (2) The Principal---Agent Problem 630 (6) The Principal---Agent Problem in Private Enterprises 631 (2) The Principal--Agent Problem in Public Enterprises 633 (2) Incentives in the Principal---Agent Framework 635 (1) Managerial Incentives in an Integrated Firm 636 (3) Asymmetric Information and Incentive Design in the Integrated Firm 637 (2) Applications 639 (1) Asymmetric Information in Labor Markets: Efficiency Wage Theory 639 (3) Summary 642 (1) Questions for Review 642 (1) Exercises 643 (2) Externalities and Public Goods 645 (50) Externalities 645 (6) Negative Externalities and Inefficiency 646 (2) Positive Externalities and Inefficiency 648 (3) Ways of Correcting Market Failure 651 (12) An Emissions Standard 652 (1) An Emissions Fee 653 (1) Standards versus Fees 654 (2) Tradeable Emissions Permits 656 (4) Recycling 660 (3) Stock Externalities 663 (6) Stock Buildup and its Impact 664 (5) Externalities and Property Rights 669 (4) Property Rights 669 (1) Bargaining and Economic Efficiency 670 (1) Costly Bargaining--The Role of Strategic Behavior 671 (1) A Legal Solution---Suing for Damages 671 (2) Common Property Resources 673 (3) Public Goods 676 (4) Efficiency and Public Goods 677 (1) Public Goods and Market Failure 678 (2) Private Preferences for Public Goods 680 (2) Summary 682 (1) Questions for Review 683 (1) Exercises 683 (4) Appendix: The Basics of Regression 687 (8) An Example 687 (1) Estimation 688 (1) Statistical Tests 689 (2) Goodness of Fit 691 (1) Economic Forecasting 691 (3) Summary 694 (1) Glossary 695 (16) Answers to Selected Exercises 711 (12) Photo Credits 723 (2) Index 725 ER -