Microeconomics 2nd – Krugman, Wells

656 Pages·2008·10.8 MB·English

by  Paul Krugman

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Applications in Microeconomics
CHAPTER CHAPTER-OPENING STORIES GLOBAL COMPARISONS
1: First Principles 1:Common Ground, 5
2: Economic Models: Trade-offs and 2: Tunnel Vision, 23 2: Pajama Republics, 34
Trade
3: Supply and Demand 3: Wake Up and Don’t Smell the Coffee, 3: Pay More, Pump Less, 64
61
4: Consumer and Producer Surplus
4:
Making Gains by the Book, 93
5: The Market Strikes Back
5: Big City, Not-So-Bright Ideas, 117 5: Check Out Our Low, Low Wages!, 131
6: Elasticity
6: More Precious Than a Flu Shot, 143 6: Food’s Bite in World Budgets, 157
7: Taxes
7: A Tax Riot, 167 7: You Think You Pay High Taxes?, 189
8: International Trade
8: A Seafood Fight, 195 8: Productivity and Wages Around the
9: Making Decisions World, 202
10: The Rational Consumer 9: A Tale of Two Invasions, 225 9: Portion Sizes, 236
11: Consumer Preferences and 10: A Clam Too Far, 249
Consumer Choice
11:
12: Behind the Supply Curve: Inputs A Tale of Two Cities, 271
and Costs
12: The Farmer’s Margin, 303 12: Wheat Yields Around the World, 306
13: Perfect Competition and the
Supply Curve 13:
Doing What Comes Naturally, 329
14: Monopoly 14: Everybody Must Get Stones, 355 14: The Price We Pay, 361
15: Oligopoly
15: Caught in the Act, 387 15: Europe Levels the Playing Field for Coke
and Pepsi, 393
16: Monopolistic Competition and
Product Differentiation
16:
Fast-Food Differentiation, 415
17: Externalities
17: Who’ll Stop the Rain?, 433 17: Economic Growth and Greenhouse Gases
18: Public Goods and Common in Five Countries, 441
Resources
18: The Great Stink, 459 18: Voting as a Public Good: The Global
19: The Economics of the Welfare Perspective, 467
State
19:
Insuring Children’s Health, 479
19:
Poor People In Rich Countries, 483
20: Factor Markets and the
20:
Distribution of Income The Value of a Degree, 509
20:
The Overworked American?, 532
21: Uncertainty, Risk, and Private 21: The Year of the Hurricane, 543
Information
Indicates global example
ECONOMICS IN ACTION FOR INQUIRING MINDS
1: 1:
A Woman’s Work, 10 ■ Restoring Equilibrium on the Freeways, 16 ■ Adventures Got a Penny?, 8 ■ Pay for Grades?, 10
in Babysitting, 18 Choosing Sides, 13
2: Rich Nation, Poor Nation, 36 ■ Economists in Government, 40 2: Models for Money, 24 ■ When Economists
Agree, 39
3:
Beating the Traffic, 70 ■ Only Creatures Small and Pampered, 77 ■ The Price
of Admission, 82 The Great Tortilla Crisis, 87 3: Tribulations on the Runway, 86
4:
When Money Isn’t Enough, 100 ■ When the Corn Is High, 104 4:
A Matter of Life and Death, 99
■ eBay and eFficiency, 110 A Great Leap—Backward, 112
5:
5: Winners, Losers, and Rent Control, 122
Hard Shopping in Caracas, 126 “Black Labor” in Southern Europe, 132
Rent Control, Mumbai Style, 124 ■ Price
■ The Clams of New Jersey, 137
Floors and School Lunches, 129
6:
Estimating Elasticities, 147 ■ Responding to Your Tuition Bill, 154 Spending 6:
Where Have All the Farmers Gone?, 157
It, 158 European Farm Surpluses, 161
7:
7: The Laffer Curve, 177 Killing the Lawyers,
Who Pays the FICA?, 173 ■ Taxing the Marlboro Man, 182 ■ Federal Tax
184 Taxing Income versus Taxing
Philosophy, 185 ■ The Top Marginal Income Tax Rate, 190
Consumption, 189
8:
Skill and Comparative Advantage, 204 Trade, Wages, and Land Prices in the
8:
Nineteenth Century, 211 Trade Protection in the United States, 214 Increasing Returns to Scale and
The Doha Deadlock, 219 International Trade, 204 Chinese Pants
Explosion, 217
9:
Farming in the Shadow of Suburbia, 229 The Cost of a Life, 237 ■ A Billion
9:
Here, a Billion There . . . , 238 ■ How Big Is That Jackpot, Anyway?, 243 Famous College Dropouts, 227
10: 10:
Oysters versus Chicken, 252 ■ The Consumption Possibilities of American Is Marginal Utility Really Diminishing?, 252
Workers, 1895–2000, 257 ■ Buying Your Way Out of Temptation, 262 ■ Food for Thought on Budget Constraints,
■ Mortgage Rates and Consumer Demand, 265 256 ■ But Are Consumers Really Rational?,
262 Giffen Goods, 265
11:
Rats and Rational Choice, 285 ■ Publicity or Piracy?, 290 ■ How Much
11:
Housing?, 297 Are Utils Useful?, 275
12: The Mythical Man-Month, 310 ■ Don’t Put Out the Welcome Mat, 318 ■ There’s 12: Was Malthus Right?, 308
No Business Like Snow Business, 324
13:
What’s a Standardized Product?, 332
13:
The Pain of Competition, 332 ■ Prices Are Up . . . but So Are Costs, 344
■ A Crushing Reversal, 350 14: Monopoly Behavior and the Price Elasticity of
14: Demand, 368
Low Supply and Soaring Demand: A Diamond Producer’s Best Friend, 362
■ California Power Play, 369 ■ Cable Dilemmas, 375 ■ Sales, Factory Outlets, 15:
Prisoners of the Arms Race, 400 The Art
and Ghost Cities, 381
of Conspiracy, 407
15:
Is It an Oligopoly or Not?, 389 The Great Vitamin Conspiracy, 395 The Rise 16:
Can’t Buy Love, 418 ■ Hits and Flops, 423
and Fall and Rise of OPEC, 402 ■ The Price Wars of Christmas, 408
17:
16: Talking and Driving, 437
Any Color, So Long as It’s Black, 419 ■ The Last Stand of the 6 Percenters?,
424 Absolut Irrationality, 429 18:
Voting as a Public Good, 467 ■ A Water Fight
17: Thank You for Not Smoking, 439 Cap and Trade, 445 ■ The Impeccable in Maine, 471
Economic Logic of Early Childhood Intervention, 450 ■ The Microsoft Case, 453
19:
Justice and the Welfare State 481 ■ Defining
18: A Policeman’s Lot, 463■ Old Man River, 468 A Tale of Two Fisheries, 472 Poverty, 482 ■ A California Death Spiral, 495
■ Blacked-Out Games, 474
20:
The Factor Distribution of Income and Social
19: Long-Term Trends in Income Inequality in the United States, 487 Britain’s War on Change in the Industrial Revolution, 511
Poverty, 492 ■ The Trouble with Medical Progress, 501 French Family Values, 504 ■ Why You Can’t Find a Cab When It’s
Raining, 531
20:
The Factor Distribution of Income in the United States, 512 ■ Help Wanted!, 522
21:
The Economics of Apartheid, 527 ■ The Decline of the Summer Job, 532 The Paradox of Gambling, 550 ■ Those Pesky
Emotions, 557
21:
Warranties, 551 When Lloyd’s Almost Llost It, 558■ Franchise Owners Try
Harder, 562
To beginning students everywhere, which we all were at one time.
Cover Photo Credits
Image of seated group on front: Comstock/Jupiter Images; First
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Bike rider: Flat Earth Images;Second Row: Little girl: Photodisc;
Tires:Photodisc;Grocers:Photodisc;Trees: Photodisc;Couple
buying car: Photodisc;Red Factory shot: Digitalvision;Ships:
Photodisc;Vancover Skyline: Photodisc;Third Row: Cars in traffic:
PhotoDisc;Farmer on tractor: Photodisc;Pipes in oil field:
Photodisc;Tugboat: Flat Earth Images;Squash: Photodisc;Mom and
Baby: Photodisc;Machine Worker: Digitalvision;Cargo:Photodisc;
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Flowers in a field: Stockbyte;Engineers:PhotoDisc;Oil Refinery at
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Director of Market Research and Development: Steven Rigolosi Currency: Photodisc;Hong Kong Intersection: Photodisc
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Text Credits
Art Director, Cover Designer, Interior Designer: Babs Reingold
Layout Designer: Lee Ann Mahler Chapter 5, Source information for Table 5-1 on page 147:
Eggs, beef:Kuo S. Huang and Biing-Hwan Lin, Estimation of Food
Illustrations:TSI Graphics and Lyndall Culbertson
Demand and Nutrient Elasticities from Household Survey Data,
Photo Editor: Cecilia Varas United States Department of Agriculture Economic Research
Photo Researchers: Elyse Rieder and Julie Tesser Service Technical Bulletin, No. 1887 (Washington, DC: U.S.
Department of Agriculture, 2000); Stationery, gasoline, airline
Production Manager: Barbara Anne Seixas
travel, foreign travel:H. S. Houthakker and Lester D. Taylor,
Composition:TSI Graphics Consumer Demand in the United States, 1929–1970: Analyses and
Printing and Binding: RR Donnelley Projections(Cambridge, MA: Harvard University Press, 1966);
Housing, restaurant meals:H. S. Houthakker and Lester D.
Taylor, Consumer Demand in the United States: Analyses and
ISBN-13: 978-0-7167-7159-3 Projections,2nd ed. (Cambridge, MA: Harvard University Press,
ISBN-10: 0-7167-7159-4 1970). Chapter 12, Source information for “Economics in
Action” on page 310: www.ercb.com, Dr. Dobb’s Electronic
Library of Congress Control Number: 2008933695 Review of Computer Books. Chapter 17, Source article for
“Economics in Action” on page 439: M. Gross, J.L. Sindelar, J.
Mullahy, and R. Anderson, Policy Watch: Alcohol and Cigarette
© 2009 by Worth Publishers Taxes, Journal of Economic Perspectives, 7,211–222, 1993.Chapter
All rights reserved. 20, Source article of “For Inquiring Minds” box on page
501: C. Camerer et al., Labor Supply of New York City Cab
Printed in the United States of America Drivers: One Day at a Time. Quarterly Journal of Economics, 112,
407–471, 1997. Chapter 20, Source article of “For Inquiring
First printing 2008 Minds” box on page 511: Nancy Stokey, A Quantitative Model
of the British Industrial Revolution, 1780–1850. Carnegie-
Rochester Conference Series on Public Policy, 55,55–109, 2001.
Worth Publishers Chapter 21, Source article of “For Inquiring Minds” box on
page 557: Joe Nocera, “Can We Turn Off Our Emotions When
41 Madison Avenue
Investing?” New York Times, September 29, 2007. Retrieved from:
New York, NY 10010
http://www.nytimes.com/2007/09/29/business/29nocera.html?
www.worthpublishers.com _r=1&scp=1&sq=nocera%20Zweig&st=cse&oref=slogin
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SECOND EDITION
Paul Krugman Robin Wells
Princeton University Princeton University
WORTH PUBLISHERS
About the Authors
Paul Krugman
is Professor of Economics at Princeton University, where
he regularly teaches the principles course. He received his BA from Yale and his
PhD from MIT. Prior to his current position, he taught at Yale, Stanford, and
MIT. He also spent a year on the staff of the Council of Economic Advisers in
1982–1983. His research is mainly in the area of international trade, where he is
one of the founders of the “new trade theory,” which focuses on increasing
returns and imperfect competition. He also works in international finance, with
a concentration in currency crises. In 1991, Krugman received the American Eco-
nomic Association’s John Bates Clark medal. In addition to his teaching and aca-
demic research, Krugman writes extensively for nontechnical audiences.
Krugman is a regular op-ed columnist for the New York Times. His latest trade
book, The Conscience of a Liberal, is a best-selling study of the political economy
of economic inequality and its relationship with political polarization from the
Gilded Age to the present His earlier books, Peddling Prosperity and The Age of
Diminished Expectations, have become modern classics.
Robin Wells
was a Lecturer and Researcher in Economics at Princeton Uni-
versity. She received her BA from the University of Chicago and her PhD from the
University of California at Berkeley; she then did postdoctoral work at MIT. She
has taught at the University of Michigan, the University of Southampton (Unit-
ed Kingdom), Stanford, and MIT. The subject of her teaching and research is the
theory of organizations and incentives.
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