Ragan Microeconomics, 16th Canadian Edition PDF by Christopher T.S. Ragan

By

Ragan Microeconomics, Sixteenth Canadian Edition

By Christopher T.S. Ragan

Ragan Microeconomics 16th Canadian Edition

Contents

List of Boxes ix

To the Instructor x

To the Student xiv

Acknowledgements xv

About the Author xvi

Chapter 1 Economic Issues and Concepts 1

1.1 What Is Economics? 3

Resources 4

Scarcity and Choice 4

Four Key Economic Problems 8

Microeconomics and Macroeconomics 9

Economics and Government Policy 9

1.2 The Complexity of Modern Economies 10

The Nature of Market Economies 11

The Decision Makers and Their Choices 13

Production and Trade 15

1.3 Is There an Alternative to the Market Economy? 17

Types of Economic Systems 17

The Great Debate 19

Government in the Modern Mixed Economy 20

Summary 21

Key Concepts 22

Study Exercises 22

Chapter 2 Economic Theories, Data, and Graphs 26

2.1 Positive and Normative Statements 27

Disagreements Among Economists 28

2.2 Building and Testing Economic Theories 30

What Are Theories? 30

Testing Theories 31

2.3 Economic Data 34

Index Numbers 34

Graphing Economic Data 37

2.4 Graphing Economic Theories 38

Functions 38

Graphing Functions 39

A Final Word 44

Summary 44

Key Concepts 45

Study Exercises 45

Chapter 3 Demand, Supply, and Price 49

3.1 Demand 50

Quantity Demanded 50

Quantity Demanded and Price 51

Demand Schedules and Demand Curves 52

3.2 Supply 57

Quantity Supplied 57

Quantity Supplied and Price 58

Supply Schedules and Supply Curves 58

3.3 The Determination of Price 62

The Concept of a Market 62

Market Equilibrium 63

Changes in Market Equilibrium 65

A Numerical Example 67

Relative Prices 68

Summary 69

Key Concepts 70

Study Exercises 70

Chapter 4 Elasticity 74

4.1 Price Elasticity of Demand 75

The Measurement of Price Elasticity 76

What Determines Elasticity of Demand? 79

Elasticity and Total Expenditure 82

4.2 Price Elasticity of Supply 83

Determinants of Supply Elasticity 84

4.3 Elasticity Matters for Excise Taxes 86

4.4 Other Demand Elasticities 88

Income Elasticity of Demand 88

Cross Elasticity of Demand 90

Summary 92

Key Concepts 93

Study Exercises 93

Chapter 5 Price Controls and Market Efficiency 97

5.1 Government-Controlled Prices 98

Disequilibrium Prices 98

Price Floors 98

Price Ceilings 99

5.2 Rent Controls: A Case Study of Price Ceilings 102

The Predicted Effects of Rent Controls 103

Who Gains and Who Loses? 105

Policy Alternatives 105

5.3 An Introduction to Market Efficiency 106

Demand as “Value” and Supply as “Cost” 106

Economic Surplus and Market Efficiency 108

Market Efficiency and Price Controls 109

One Final Application: Output Quotas 110

A Cautionary Word 111

Summary 112

Key Concepts 113

Study Exercises 113

Chapter 6 Consumer Behaviour 117

6.1 Marginal Utility and Consumer Choice 118

Diminishing Marginal Utility 118

Utility Schedules and Graphs 119

Maximizing Utility 119

The Consumer’s Demand Curve 123

Market Demand Curves 123

6.2 Income and Substitution Effects of Price Changes 124

The Substitution Effect 124

The Income Effect 125

The Slope of the Demand Curve 126

6.3 Consumer Surplus 128

The Concept 128

The Paradox of Value 130

Summary 132

Key Concepts 132

Study Exercises 133

Appendix to Chapter 6 Indifference Curves 138

Chapter 7 Producers in the Short Run 148

7.1 What Are Firms? 149

Organization of Firms 149

Financing of Firms 150

Goals of Firms 150

7.2 Production, Costs, and Profits 151

Production 151

Costs and Profits 153

Profit-Maximizing Output 155

Time Horizons for Decision Making 155

7.3 Production in the Short Run 157

Total, Average, and Marginal Products 157

Diminishing Marginal Product 159

The Average–Marginal Relationship 160

7.4 Costs in the Short Run 161

Defining Short Run Costs 161

Short-Run Cost Curves 162

Capacity 165

Shifts in Short-Run Cost Curves 165

Summary 167

Key Concepts 168

Study Exercises 168

Chapter 8 Producers in the Long Run 173

8.1 The Long Run: No Fixed Factors 174

Profit Maximization and Cost Minimization 174

Long-Run Cost Curves 177

8.2 The Very Long Run: Changes in Technology 181

Technological Change 182

Firms’ Choices in the Very Long Run 185

Summary 186

Key Concepts 186

Study Exercises 187

Appendix to Chapter 8 Isoquant Analysis 190

Chapter 9 Competitive Markets 195

9.1 Market Structure and Firm Behaviour 196

Competitive Markets 196

Competitive Behaviour 196

9.2 The Theory of Perfect Competition 197

The Assumptions of Perfect Competition 197

The Demand Curve for a Perfectly Competitive Firm 198

Total, Average, and Marginal Revenue 199

9.3 Short-Run Decisions 200

Should the Firm Produce at All? 201

How Much Should the Firm Produce? 202

Short-Run Supply Curves 204

Short-Run Equilibrium in a Competitive Market 205

9.4 Long-Run Decisions 208

Entry and Exit 208

Long-Run Equilibrium 212

Changes in Technology 213

Declining Industries 215

Summary 216

Key Concepts 217

Study Exercises 217

Chapter 10 Monopoly, Cartels, and Price Discrimination 221

10.1 A Single-Price Monopolist 222

Revenue Concepts for a Monopolist 222

Short-Run Profit Maximization 225

Why Are Monopolies Rare? 227

Entry Barriers 227

The Very Long Run and Creative Destruction 229

10.2 Cartels and Monopoly Power 230

The Effects of Cartelization 232

Problems That Cartels Face 232

10.3 Price Discrimination 235

When Is Price Discrimination Possible? 236

Different Forms of Price Discrimination 237

The Consequences of Price Discrimination 241

Summary 243

Key Concepts 243

Study Exercises 244

Chapter 11 Imperfect Competition and Strategic Behaviour 248

11.1 Imperfect Competition 249

Between the Two Extremes 249

Defining Imperfect Competition 251

11.2 Monopolistic Competition 253

The Assumptions of Monopolistic Competition 254

Predictions of the Theory 254

11.3 Oligopoly and Game Theory 256

Profit Maximization Is Complicated 256

The Basic Dilemma of Oligopoly 257

Some Simple Game Theory 258

Extensions in Game Theory 260

11.4 Oligopoly in Practice 261

Cooperative Behaviour 261

Competitive Behaviour 262

The Importance of Entry Barriers 263

Oligopoly and the Economy 265

Summary 267

Key Concepts 268

Study Exercises 268

Chapter 12 Economic Efficiency and Public Policy 272

12.1 Productive and Allocative Efficiency 273

Productive Efficiency 274

Allocative Efficiency 276

Which Market Structures Are Efficient? 277

Allocative Efficiency and Total Surplus 279

Allocative Efficiency and Market Failure 282

12.2 Economic Regulation to Promote Efficiency 283

Regulation of Natural Monopolies 284

Regulation of Oligopolies 287

12.3 Canadian Competition Policy 289

The Canadian Competition Act of 1986 289

The Reforms of 2009 292

Future Challenges 293

Summary 294

Key Concepts 294

Study Exercises 295

Chapter 13 How Factor Markets Work 299

13.1 The Demand for Factors 300

Marginal Revenue Product 300

The Firm’s Demand Curve for a Factor 301

The Market Demand Curve for a Factor 303

13.2 The Supply of Factors 305

The Supply of Factors to the Economy 305

The Supply of Factors to a Particular Industry 307

The Supply of Factors to a Particular Firm 309

13.3 Factor Markets in Action 310

Differentials in Factor Prices 311

Economic Rent 314

A Final Word 318

Summary 319

Key Concepts 320

Study Exercises 320

Chapter 14 Labour Markets and Income Inequality 324

14.1 Wage Differentials 326

Wage Differentials in Competitive Labour Markets 326

Wage Differentials in Non-competitive Labour Markets 330

Legislated Minimum Wages 333

14.2 Labour Unions 335

Collective Bargaining 336

14.3 Income Inequality 339

Measuring Income Inequality 339

Causes of Rising Income Inequality 343

Policy Implications 347

Summary 349

Key Concepts 349

Study Exercises 349

Chapter 15 Interest Rates and the Capital Market 354

15.1 A Brief Overview of the Capital Market 355

15.2 Present Value 356

The Present Value of a Single Future Sum 357

The Present Value of a Stream of Future Sums 359

Summary 359

15.3 The Demand for Capital 361

The Firm’s Demand for Capital 361

The Economy’s Demand for Investment 365

15.4 The Supply of Capital 365

Households’ Supply of Saving 365

The Economy’s Supply of Saving 367

15.5 Equilibrium in the Capital Market 367

The Equilibrium Interest Rate 367

Changes in the Market Equilibrium 368

Long-Run Trends in the Capital Market 371

Summary 373

Key Concepts 374

Study Exercises 374

Chapter 16 Market Failures and Government Intervention 377

16.1 Basic Functions of Government 378

16.2 The Case for Free Markets 379

Automatic Coordination 380

Innovation and Growth 381

Decentralization of Power 382

16.3 Market Failures 382

Market Power 383

Externalities 383

Non-Rivalrous and Non-Excludable Goods 386

Asymmetric Information 390

Summary 391

16.4 Broader Social Goals 393

Income Distribution 393

Preferences for Public Provision 394

Protecting Individuals from Others 395

Paternalism 395

Social Responsibility 396

A General Principle 396

16.5 Government Intervention 396

The Tools of Government Intervention 397

The Costs of Government Intervention 398

Government Failure 399

How Much Should Government Intervene? 401

Summary 402

Key Concepts 403

Study Exercises 403

Chapter 17 The Economics of Environmental Protection 407

17.1 The Economic Rationale for Reducing Pollution 408

Pollution as an Externality 408

The Optimal Amount of Pollution Abatement 409

17.2 Pollution-Reduction Policies 411

Direct Regulatory Controls 411

Emissions Taxes 413

Tradable Pollution Permits: “Cap and Trade” 415

Pricing Pollution 417

17.3 The Challenge of Global Climate Change 418

Greenhouse-Gas Emissions 418

The Case for Global Collective Action 420

Energy Use, GDP, and Greenhouse-Gas Emissions 422

Significant Policy Challenges 425

Summary 427

Summary 428

Key Concepts 429

Study Exercises 429

Chapter 18 Taxation and Public Expenditure 434

18.1 Taxation in Canada 435

Progressive Taxes 435

The Canadian Tax System 436

18.2 Evaluating the Tax System 440

Taxation and Equity 440

Taxation and Efficiency 442

18.3 Public Expenditure in Canada 445

Government Purchases and Transfers 446

Canadian “Fiscal Federalism” 446

Canadian Social Programs 449

18.4 Evaluating the Role of Government 454

Public Versus Private Sector 455

Scope of Government Activity 455

Evolution of Policy 456

Summary 456

Key Concepts 457

Study Exercises 457

Chapter 32 The Gains from International Trade 803

32.1 The Gains from Trade 804

Interpersonal, Interregional, and International Trade 805

Illustrating the Gains from Trade 806

The Gains from Trade with Variable Costs 811

Sources of Comparative Advantage 814

32.2 The Determination of Trade Patterns 816

The Law of One Price 817

The Pattern of Foreign Trade 818

Is Comparative Advantage Obsolete? 819

The Terms of Trade 821

Summary 824

Key Concepts 824

Study Exercises 825

Chapter 33 Trade Policy 828

33.1 Free Trade or Protection? 829

The Case for Free Trade 829

The Case for Protection 830

Invalid Arguments for Protection 833

33.2 Methods of Protection 836

Tariffs 837

Import Quotas 839

Tariffs Versus Quotas: An Application 839

Trade-Remedy Laws and Non-Tariff Barriers 840

33.3 Current Trade Policy 842

The GATT and the WTO 842

Regional Trade Agreements 842

Trade Creation and Trade Diversion 843

The North American Free Trade Agreement 844

Summary 848

Key Concepts 849

Study Exercises 849

Mathematical Notes M-1

Timeline of Great Economists T-1

List of Boxes

Applying Economic Concepts

1-1 The Opportunity Cost of Your University Degree 6

2-1 Where Economists Work 29

3-1 Why Apples but Not iPhones? 63

5-1 Minimum Wages and Unemployment 100

6-1 Rationality, Nudges, and Behavioural Economics 122

7-1 Is It Socially Responsible to Maximize Profits? 152

7-2 Three Examples of Diminishing Returns 160

7-3 The Digital World: When Diminishing Returns Disappear

Altogether 166

8-1 The Significance of Productivity Growth 183

9-1 Why Small Firms Are Price Takers 199

9-2 The Parable of the Seaside Inn 209

10-1 Network Effects as Entry Barriers 228

12-1 Are Google and Facebook the Standard Oil of the Twenty-First

Century? 290

14-1 The Rise of the “Gig” Economy 345

15-1 Inflation and Interest Rates 369

16-1 The World’s Endangered Fish 388

16-2 Used Cars and the Market for “Lemons” 392

18-1 Poverty Traps and the Negative Income Tax 453

Lessons from History

4-1 Economic Development and Income Elasticities 90

8-1 Jacob Viner and the Clever Draftsman 181

10-1 Disruptive Technologies and Creative Destruction 231

13-1 David Ricardo and “Economic Rent” 316

Extensions in Theory

3-1 The Distinction Between Stocks and Flows 51

11-1 The Prisoners’ Dilemma 260

16-1 Arthur Okun’s “Leaky Bucket” 394

18-1 Who Really Pays the Corporate Income Tax? 438

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