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MeGrawHill
McGraw-HillRyersonConnect. Learn. Succeed"
PREFACE
PART OWE:
CHAPTER 1: THINKING LIKE AN ECONOMIST
1.1 The Cost-Benefit Approach to Decisions
EXAMPLE 1-1: Should I Re-program My Stereo?
1.2 A Note on the Role of Economic Theory1.3 Common Pitfalls in Decision Making
EXAMPLE 1-2: Should I Go Skiing Today or Work as a Research Assistant?EXAMPLE 1-3: Should I Go Skiing Today or Scrape Plates?EXAMPLE 1-4: Should I Work First or Go to University or College First?EXAMPLE 1-5: Is It Fair to Charge Interest When Loaning a Friend or Relative Some Money?EXAMPLE 1-6: Why Do Banks Pay Interest in the First Place?EXAMPLE 1-7: Should I Drive to Halifax or Take the Bus?EXAMPLE 1-8: The Pizza ExperimentEXAMPLE 1-9A: Should You Drive to Bigbox Mall to Save $10 on a $20 Clock Radio?EXAMPLE 1-9B: Should You Drive to BigBox Mall to Save $10 on a $1000 Television Set?EXAMPLE 1-10: Should Tom Launch Another Boat?
EXAMPLE 1-11: How Many Boats Should Tom Launch?
1.4 Using Marginal Benefit and Marginal Cost Graphically
EXAMPLE 1-12: How Much Should Susan Talk to Hal Each Month?
1.5 The Invisible Hand and Its Limits: Externalities
EXAMPLE 1-13: Should I Burn My Leaves or Haul Them into the Woods?
1.6 Rationality and Self-interest
EXAMPLE 1-14: Should I Vote in the Next Federal Election?
XVI
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CONTENTS
1.7 Would Parents Want Their Daughter or Son to Marry Homo Economicus?1.8 The Economic Naturalist
ECONOMIC NATURALIST 1 -1 :ECONOMIC NATURALIST 1-2:ECONOMIC NATURALIST 1-3:
Why Is Airline Food So Bad?Why Do Spammers Spam?Why Paper Towels versus Hot-Air Hand Dryers inPublic Restrooms?
1.9 Positive Questions and Normative Questions1.10 Microeconomics and Macroeconomics
SummaryQuestions for Review '- _ _.ProblemsAnswers to In-Chapter Exercises
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25252628
CHAPTER 2: SUPPLY AND DEMAND
Chapter Preview2.1 Supply and Demand Analysis2.2 Equilibrium Quantity and Price2.3 Adjustment to Equilibrium2.4 Some Welfare Properties of Equilibrium2.5 Competitive Markets and Equity
EXAMPLE 2-1: Compensation for Being "Bumped" (Air Travel)EXAMPLE 2-2: Rent Controls
2.6 Price Supports2.7 The Rationing and Allocative Functions of Prices2.8 Determinants of Supply and Demand2.9 Predicting and Explaining Changes in Price and Quantity
ECONOMIC NATURALIST 2-1: Why Do the Prices of Some Goods, Like Apples,Go Down During the Months of HeaviestConsumption While Those of Others, Like BeachfrontCottages, Go Up?
EXAMPLE 2-3: If Grain Is One of the Components of Cattle Feed, How Does a PriceSupport Program in the Grain Market Affect the Equilibrium Priceand Quantity of Beep
2.10 The Algebra of Supply and Demand
SummaryQuestions for ReviewProblemsAnswers to In-Chapter Exercises
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PART TWO: THE THEORY OF CONSUMER BEHAVIOUR
CHAPTER 3: RATIONAL CONSUMER CHOICE
Chapter Preview3.1 The Budget Constraint and the Affordable Set
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CONTENTS
EXAMPLE 3-1: Using Budget Shares to Calculate Prices 61EXAMPLE 3-2: Quantity Discount Gives Rise to a Kinked Budget Constraint:
Graphing the Budget Constraint for a Consumer's Electric Power 62EXAMPLE 3-3: Budget Constraints Following Theft of Gasoline or Loss of Cash:
Should Red Green Go Fishing? 63
3.2 Consumer Preferences 64
3.3 The Best Feasible or Affordable Bundle 71
EXAMPLE 3-4: Equilibrium with Perfect Substitutes: Jolt Cola vs. Coca-Cola 74
3.4 An Application of the Rational Choice Model 75
EXAMPLE 3-5: Is It Better to Provide Subsidized Housing or Cash to Low-Income Families? 75
ECONOMIC NATURALIST 3-1: Why Do People Often Give Gifts in Kind Instead of Cash? 77
3.5 Changes in Tastes, Preferences, and Goods 78
Summary 81Questions for Review 81Problems 81Answers to In-Chapter Exercises 84
CHAPTER 4: INDIVIDUAL AND MARKET DEMAND 87
Chapter Preview , 874.1 The Effects of Changes in Price '> 884.2 The Effects of Changes in Income 904.3 The Income and Substitution Effects of a Price Change 93
EXAMPLE 4-1: Income and Substitution Effects for Perfect Complements: Skis and Bindings 96
EXAMPLE 4-2: Income and Substitution Effects for Perfect Substitutes: Tea and Coffee 97
4.4 Consumer Responsiveness to Changes in Price 98
EXAMPLE 4-3: Deriving Individual Demand Curve for Perfect Complements: Car Washes and Gasoline 1004.5 Market Demand: Aggregating Individual Demand Curves 101
EXAMPLE 4-4: The Market Demand Curve: Beech Saplings in a New Brunswick Town 102EXAMPLE 4-5: The Market Demand Curve: Ten Consumers 103
4.6 Price-Elasticity of Demand 104
EXAMPLE 4-6: Price-Elasticity of Demand: Should Bus Fares Be Raised or Lowered? 110
4.7 Determinants of Price-Elasticity of Demand 111
4.8 The Dependence of Market Demand on Income 113
EXAMPLE 4-7: How Does Income Affect the Market Demand Curve for Food? 113
APPLICATION: FORECASTING ECONOMIC TRENDS 116
4.9 Cross-Price Elasticities of Demand 117
ECONOMIC NATURALIST 4-1: Why Would a Sharp Decrease in Rental Housing RatesCause a Decrease in Demand for Hamburger Helper? 118
Summary 118Questions for Review 120Problems 120Answers to In-Chapter Exercises 123
vi CONTENTS
CHAPTER 5: APPLICATIONS OF RATIONAL CHOICE AND DEMAND THEORIES 126
Chapter Preview5.1 Using the Rational Choice Model to Answer Policy Questions
APPLICATION: A GASOLINE TAX AND REBATE POLICY
APPLICATION: SCHOOL VOUCHERS
5.2 Consumer Surplus
EXAMPLE 5-1: What Is the Loss in Consumer Surplus from an Oil Price Increase?
APPLICATION: TWO-PART PRICING
ECONOMIC NATURALIST 5-1: "Why Do Some Tennis Clubs Have an AnnualMembership Charge in Addition to Their HourlyCourt Fees ?
ECONOMIC NATURALIST 5-2: Why Do Some Amusement Parks Charge Only a FixedAdmission Fee?
5.3 Overal l Welfare Compar i sons
EXAMPLE 5-2: Price Changes: Was Jones Better Off this Year or Last Year?
APPLICATION: THE WELFARE EFFECTS OF CHANGES IN HOUSING PRICES
APPLICATION: A BIAS IN THE CONSUMER PRICE INDEX
5.4 Using Price-Elasticity of Demand
APPLICATION: TTC FARE INCREASES
APPLICATION: THE PRICE-ELASTICITY OF DEMAND FOR ALCOHOL
5.5 The Intertemporal Choice Model
EXAMPLE 5-3: Will an Increase in the Interest Rate Cause You to Save More?EXAMPLE 5-4: How Does a Higher Rate of Interest Affect Consumption and Saving or
Borrowing Behaviour?
APPLICATION: THE PERMANENT INCOME AND LIFE-CYCLE HYPOTHESES
SummaryQuestions for ReviewProblemsAnswers to In-Chapter Exercises
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158159159162
CHAPTER 6: THE ECONOMICS OF INFORMATION AND CHOICE UNDER UNCERTAINTY 164
Chapter Preview 164
6.A THE ECONOMICS OF INFORMATION 165
6.1 Communication between Potential Adversaries 1656.2 The Costly-to-Fake Principle 1666.3 The Full-Disclosure Principle 168
ECONOMIC NATURALIST 6-1: Why Do "Almost-New" Used Cars Sell for So Much Lessthan Brand-New Cars? ~ 171
ECONOMIC NATURALIST 6-2: Why Is Coyness Often an Attractive Attribute? 172
6.4 Conspicuous Consumption as Ability Signalling 173
CONTENTS Vii
ECONOMIC NATURALIST 6-3: Why Do Residents of Smaller Centres Spend Less on Their
Professional Wardrobes than Their Counterparts in Big Cities? 174
6.B CHOICE UNDER UNCERTAINTY 175
6.5 Probability and Expected Value 1756.6 The von Neumann-Morgenstern Expected Utility Model 176EXAMPLE 6-1: Maximizing Expected Utility: Lee and Gambling 177EXAMPLE 6-2: Will You Always Accept a Favourable Bet? 179EXAMPLE 6-3: The Lemons Principle: In a Certain Market, What Fraction of Personal
Computers is Defective? 181EXAMPLE 6-4: Should Sarah become a Teacher or an Actress?
What is the Most She Would Pay for Smith'sEvaluation? 181
EXAMPLE 6-5: Which of Two Universities Should You Attend? 183EXAMPLE 6-6: Should Smith Sue the Manufacturer? 184
6.7 Insuring against Bad Outcomes 1856.8 Adverse Selection 1886.9 Moral Hazard 1896.10 Statistical Discrimination 191
APPLICATION: ALWAYS SELF-INSURE AGAINST SMALL LOSSES 192
Summary 193Questions for Review 194Problems 195Answers to In-Chapter Exercises 198
CHAPTER 7: EXPLAINING TASTES: THE IMPORTANCE OF ALTRUISM AND OTHERNONEGOISTIC BEHAVIOUR 199
Chapter Preview 2007.1 An Application of the Present-Aim Standard: Altruistic Preferences 200
EXAMPLE 7-1: A Utility-Maximizing Altruist: Should Smith Give Some of HisWealth to Jones? 202
7.2 The Strategic Role of Preferences 2037.3 The Commitment Problem 2077.4 Illustration: The Cheating Problem 2087.5 A Simple Thought Experiment 2147.6 Altruism, Survival, and the Production of Preferences 216
ECONOMIC NATURALIST 7-1: Why Do People Vote in Federal Elections, and WhatDetermines Voter Turnout? 217
APPLICATION: CONCERNS ABOUT FAIRNESS 218
EXAMPLE 7-2: Will Capulet and Montagu Work Together? 220
7.7 The Importance of Tastes 220
Summary •. 221Questions for Review 222Problems 222Answers to In-Chapter Exercises 223
Viii CONTENTS
CHAPTER 8: COGNITIVE LIMITATIONS AND CONSUMER BEHAVIOUR 225
Chapter Preview 2268.1 Bounded Rationality 2268.2 The Asymmetric Value Function 2278.3 Sunk Costs 2308.4 Out-of-Pocket Costs versus Opportunity Costs 2308.5 Affective Forecasting Errors 2318.6 Choice under Uncertainty 2348.7 Judgmental Heuristics and Biases 2368.8 The Psychophysics of Perception 2408.9 The Difficulty of Actually-Deciding 241
ECONOMIC NATURALIST 8-1: Why Do Real Estate Agents Show Two Houses ThatAre Nearly Identical, Even Though One Is Cheaper andin Better Condition? 243
SummaryQuestions for ReviewProblemsAnswers to In-Chapter Exercises
243244244246
PART THREE:
CHAPTER 9:
THE THEORY OF THE FBRfVi AND MARKET STRUCTURE 261
PRODUCTION 248
Chapter Preview 2489.1 The Input-Output Relationship, or Production Function 2499.2 Production in the Short Run ' 252
ECONOMIC NATURALIST 9-1: Why Can't All of the World's People Be Fedfrom the Amount of Grain Grown in aSingle Flowerpot? 254
9.3 The Relationships among Total, Marginal, and Average Product Curves 2589.4 The Practical Significance of the Average-Marginal Distinction 259
EXAMPLE 9-1: Maximizing Total Output (I): Should the Allocation of Fishing FleetBoats Be Altered? 260
EXAMPLE 9-2: Maximizing Total Output (II): How Should the Allocation of the Fishing FleetBoats Be Altered?' 261
EXAMPLE 9-3: What Is the Optimal Amount of Time to Spend on EachExam Question? 261
9.5 Production in the Long Run 2629.6 Returns to Scale 265
ECONOMIC NATURALIST 9-2: Why Do Builders Use Prefabricated Frames forRoofs but Not for Walls? 267
Summary 269Questions for Review 270Problems 270Answers to In-Chapter Exercises 273
CONTENTS
CHAPTER 10: COSTS 274
Chapter Preview 27410.1 Costs in the Short Run 275
EXAMPLE 10-1: Graphing the Total, Variable, and Fixed Cost Curves 278EXAMPLE 10-2: Graphing the Average Fixed, Average Variable, Average Total, and Marginal Costs 282EXAMPLE 10-3: Graphing the Average Total Cost, Average Variable Cost, Average Fixed Cost,
and Marginal Cost Curves 284
10.2 Allocating Production Between Two Processes 285
EXAMPLE 10-4: What is the Least Costly Way to Produce a Total of'32 Units of Output? 286
10.3 The Relationship AmongMP, AP, MC, and AVC 28710.4 Costs in the Long Run 289
ECONOMIC NATURALIST 10-1: Why Is Grain Farming So Labour-intensive for EastAfrican Peasants and So Capital-intensive in Saskatchewan? 292
ECONOMIC NATURALIST 10-2: Why Would Unions Support Minimum-Wage Laws? 293ECONOMIC NATURALIST 10-3: Why Would a Manufacturer Bake the Image of a Housefly
into the Centre of Its Ceramic Urinals? 294
10.5 Long-Run Costs and the Structure of Industry 29710.6 The Relationship Between Long-Run and Short-Run Cost Curves 299
Summary 300Questions for Review 301Problems 301Answers to In-Chapter Exercises 303
CHAPTER 11: PERFECT COMPETITION 305
Chapter Preview 30511.1 The Goal of Profit Maximization 306
EXAMPLE 11-1: Should the Owner of a Canmore, Alberta, Golf Course Move the Operationto Toronto? 307
11.2 The Four Conditions for Perfect Competition 30911.3 The Short-Run Condition for Profit Maximization 31111.4 Short-Run Competitive Industry Supply 316
EXAMPLE 11-2: What Is the Industry Supply Curve for an Industry with 200 Firms? 317
11.5 Short-Run Competitive Equilibrium 31711.6 The Efficiency of Short-Run Competitive Equilibrium 32011.7 Producer Surplus 321
EXAMPLE 11-3: Should the Government Ban Fireworks? 323
11.8 Adjustments in the Long Run 32411.9 The Invisible Hand: Some Wrinkles 32711.10 The Cost of Extraordinary Inputs 329
ECONOMIC NATURALIST 11-1: Why Would Farmers Be Opposed to GovernmentEnvironmental Legislation Aimed at PreservingLand for Agricultural Purposes? 331
11.11 The Long-Run Competitive Industry Supply Curve 332
X CONTENTS
ECONOMIC NATURALIST 11-2: Why Did Film-Based Colour Photographs Once Cost
Less than Black-and-White Photographs?
11.12 The Elasticity of Supply
EXAMPLE 11-4: Finding the Price-Elasticity of Supply
11.13 Applying the Competitive Model
ECONOMIC NATURALIST 11-3: Why Did 18-Wheelers Suddenly Begin Using Airfoilsin the Mid-1970s?
SummaryQuestions for Review -ProblemsAnswers to In-Chapter Exercises
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CHAPTER 12: MONOPOLY
Chapter Preview12.1 Defining Monopoly12.2 Five Sources of Monopoly12.3 The Profit-Maximizing Monopolist
EXAMPLE 12-1: Finding a Marginal Revenue Curve for a Given Demand CurveEXAMPLE 12-2: What Is a Monopolist's Profit-Maximizing Price, and How Much
Economic Profit Is Earned?
12 A A Monopolist Has No Supply Curve12.5 Adjustments in the Long Run12.6 Price Discrimination
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EXAMPLE 12-3: Finding and Graphing the Monopolist's Quantity and Price in the Home Market 370
ECONOMIC NATURALIST 12-1: Why Do Some Doctors and Lawyers Offer Discounts toPeople with Low Incomes? 371
ECONOMIC NATURALIST 12-2: Why Do Theatre Owners Offer Student Discounts onAdmission Tickets but Not on Popcorn? 372
12.7 The Efficiency Loss from Monopo ly 37712.8 Public Policy Toward Na tu ra l Monopo ly 37812.9 Does Monopoly Suppress Innovat ion? 388
EXAMPLE 12-4: Will the Monopolist Introduce a New Light Bulb That Lasts 10,000 Hours? 388
Summary 390Questions for Review 390Problems 391Answers to In-Chapter Exercises 394
CHAPTER 13: OLIGOPOLY AND MONOPOLISTIC COMPETITION
Chapter Preview
13.A OLIGOPOLY
13.1 The Cournot Model
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CONTENTS
EXAMPLE 13-1: Deriving the Reaction Functions for Cournot Duopolists 401
13.2 The Bertrand Model 401
EXAMPLE 13-2: Finding the Equilibrium Price and Quantity for Bertrand'Duopolists 402
13.3 The Stackelberg Model 402
EXAMPLE 13-3: Finding the Equilibrium Price and Quantity for a Stackelberg Leader and Follower 403
13.4 Comparison of Outcomes 40513.5 Game Theory: A Primer 40613.6 The "Duopolist's Dilemma" 411
ECONOMIC NATURALIST 13-1: Why Could a Ban on Advertising Increase TobaccoCompany Profits? 414
13.7 The Nash Equilibrium Concept 41513.8 Strategies for Repeated Play in Prisoner's Dilemmas 41613.9 Sequential Games 420
ECONOMIC NATURALIST 13-2: Why Might a Company Make an InvestmentIt Knows It Will Never Use? 421
ECONOMIC NATURALIST 13-3: Why Would a Firm Build a Factory with More Capacity
Than It Would Ever Need? 423
13.10 Games Oligopolists Play 425
13.B MONOPOLISTIC COMPETITION 427
13.11 A Chamberlinian Model of Monopolistic Competition 42713.12 A Spatial Model of Monopolistic Competition ' 431ECONOMIC NATURALIST 13-4: Why Are There Fewer Grocery Stores in Cities
than There Were in 1930? And Why DoResidential Neighbourhoods in Montreal Tendto Have More Grocery Stores than ResidentialNeighbourhoods in Vancouver? 436
13.13 Product Characteristics and the "Distance" between Products 437
13.14 Historical Note: Hotelling's Hot Dog Vendors 438
APPLICATION: A SPATIAL PERSPECTIVE ON POLITICAL COMPETITION 439
13.15 Consumer Preferences and Advertising 440
Summary 442Questions for Review 442Problems 443Answers to In-Chapter Exercises 445
PART FOUR:
CHAPTER 14:
FACTOR MARKETS
LABOUR
Chapter Preview14.1 The Perfectly Competitive Firm's Short-Run Demand for Labour14.2 The Perfectly Competitive Firm's Long-Run Demand for Labour14.3 The Market Demand Curve for Labour14.4 An Imperfect Competitor's Demand for Labour
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14.5 The Supply of Labour 453
EXAMPLE 14-1: The Labour Supply Curve for Someone with a Target Level of Income 455
ECONOMIC NATURALIST 14-1: Why Is It So Hard to Find a Taxi on Rainy Days? 456
EXAMPLE 14-2: The Optimal Leisure Demand for Someone Who Views Income and Leisureas Perfect Complements 4:57
14.6 Is Leisure a Giffen Good? 45814.7 The Noneconomist's Reaction to the Labour Supply Model 45914.8 The Market Supply Curve 459
EXAMPLE 14-3: How Do Rising MBA Enrolments Affect the Salaries and Employment ofEconomists in MBA'and Liberal Arts Programs? 460
14.9 Monopsony 46114.10 Minimum-Wage Laws 46514.11 Labour Unions 46714.12 Discrimination in the Labour Market 46914.13 Statistical Discrimination 47214.14 Winner-Take-All Markets 475
Summary 476Questions for Review ~ 477Problems 477Answers to In-Chapter Exercises 481
CHAPTER 15: CAPITAL 485
Chapter Preview 48515.1 Financial Capital and Real Capital 48615.2 The Demand for Real Capital 48615.3 The Relationship between the Rental Rate and the Interest Rate 48715.4 The Criterion for Buying a Capital Good 48815.5 Interest Rate Determination 48915.6 Real, vs. Nominal Interest Rates 49015.7 The Market for Stocks and Bonds 491
ECONOMIC NATURALIST 15-1: Why Is Owning Stock in a Monopoly NoBetter Than Owning Stock in a PerfectlyCompetitive Firm? 494
15.8 Tax Policy and the Capital Market 49615.9 Economic Rent 49815.10 Peak-Load Pricing 499
ECONOMIC NATURALIST 15-2: Why Do Some Cellphone Plans Offer 1000 "Free"Monthly Minutes at Night and on Weekends at the SameTime That They Provide Only 50 Free Minutes Per Monthfor Weekday Calls? 501
Summary 502Questions for Review 503Problems 503Answers to In-Chapter Exercises 504
CONTENTS xiii
PART FIVE: GENERAL EQUBLlBRBUfVI AND WELFARE 505
CHAPTER 16: GENERAL EQUILIBRIUM AND MARKET EFFICIENCY 506
Chapter Preview 50616.1 A Simple Exchange Economy 50716.2 Efficiency in Production 51516.3 Efficiency in Product Mix 51716.4 Gains from International Trade 521
EXAMPLE 16-1: General Equilibrium and Market Efficiency 522
16.5 Taxes in General Equilibrium 52316.6 Other Sources of Inefficiency 525
ECONOMIC NATURALIST 16-1: Why Is Eliminating Peer-to-Peer (P2P) File Sharing of CopyrightMusic, Movies, and Software an Almost Impossible Task? 527
Summary 527Questions for Review 528Problems 528Answers to In-Chapter Exercises 530
CHAPTER 17: EXTERNALITIES, PROPERTY RIGHTS, AND THE COASE THEOREM 532
Chapter Preview ' 53217.1 The Reciprocal Nature of Externalities 533
EXAMPLE 17-1: The Confectioner and the Doctor (I): Making the Confectioner Liable forNoise Damage 533
EXAMPLE 17-2: The Confectioner and the Doctor (II): Changing Costs and Benefits 534EXAMPLE 17-3: The Confectioner and the Doctor (III): Installing a Soundproofing Device 535EXAMPLE 17-4: The Confectioner and the Doctor (IV): Should the Doctor Rearrange His Office? 536EXAMPLE 17-5: The Confectioner and the Doctor (V): Costly Negotiation When the
Confectioner Can Make the Least-Cost Adjustment 537EXAMPLE 17-6: The Confectioner and the Doctor (VI): Costly Negotiation When the Doctor
Can Make the Least-Cost Adjustment 538
17.2 Proper ty Rights 540
ECONOMIC NATURALIST 17-1: Why Does the Law of Trespass Often Not Apply onLakefront Properties? And Why Are Property RightsOften Suspended During Storms? 541
17.3 The Tragedy of the C o m m o n s 541
EXAMPLE 17-7: If Village Residents Make Their Investment Decisions Independently,How Many of Their Steers Will Graze on the Commons? 542
17.4 Smoking Rules, Public and Private 546
EXAMPLE 17-8: Should Smoker Smith Live with Nonsmoker Jones, or Find aSeparate Apartment? 546
17.5 Positive Externalities 54717.6 Positional Externalities 54717.7 Taxing Externalities ~ ~ 548
EXAMPLE 17-9: The Confectioner and the Doctor (VII): Taxing the Confectioner for Noise 548EXAMPLE 17-10: What Is the Best Way for the Government to Reduce Air Pollution? 550
CONTENTS
Summary 552Questions for Review 552Problems 553Answers to In-Chapter Exercises 559
CHAPTER 18: GOVERNMENT 560
Chapter Preview 56118.1 Public Goods 561
EXAMPLE 18-1: Should the Network Broadcast Celebrity Mud Wrestling orThe Emerging Global Economy: A Crash Course? 567
18.2 Public Choice 57018.3 Cost-Benefit Analysis 572
EXAMPLE 18-2: If Two People, One Rich and One Poor, Have Opposite Views ona Proposed Public Project, on What Basis Would Each Like to Seethe Decision Made: Cost-Benefit Analysis or Majority Rule? 574
18.4 Rent Seeking 575
EXAMPLE 18-3: If the Applicants for a Food-Services Contract Cannot Collude, How MuchWill Each Spend on Lobbying City Council Members? 576
18.5 Income Distribution 576
Summary \ 579Questions for Review 580Problems 580Answers to In-Chapter Exercises 582
APPENDICES
Appendix 3A: The Utility Function Approach to the Consumer BudgetingProblem 583
Appendix 4A: Additional Topics in Demand Theory 600Appendix 5A: Additional Applications of Rational Choice and Demand Theories 618Appendix 6A: Search Theory and the Winner's Curse 626Appendix 9A: Mathematical Extensions of Production Theory 639Appendix 10A: Mathematical Extensions of the Theory of Costs 650Appendix 13A: Additional Models of Oligopoly and Monopolistic Competition 661Appendix 15A: A More Detailed Look at Renewable and Exhaustible Resource
Allocation 669
GLOSSARY 681
INDEX 685
WEB SUPPLEMENTS (www.mcgrawhill.ca/olc/frank)
Supplement 2S: TaxesSupplement 5S: Additional Applications of Rational Choice and Demand TheoriesSupplement 8S: Hedonic FramingSupplement 13S: Additional Models of Oligopoly and Monopolistic CompetitionSupplement 14S: Labour
CONTENTS XV