McGraw-Hill RyersonHill McGraw-Hill Ryerson Connect. Learn. Succeed" PREFACE PART OWE: CHAPTER 1: THINKING LIKE AN ECONOMIST 1.1 The Cost-Benefit Approach to Decisions EXAMPLE 1-1:

D

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

1

2

3

4

45

9101112121314

15

15

16

17

18

19

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

2021

2222

23

2424

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

29

303034353637

3740

41414245

45

46

48

49495052

PART TWO: THE THEORY OF CONSUMER BEHAVIOUR

CHAPTER 3: RATIONAL CONSUMER CHOICE

Chapter Preview3.1 The Budget Constraint and the Affordable Set

53

54

5555

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


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


127127

127129

133

134

135

135

136

136

136

137139

142

142144

145

151

152

153

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


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


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


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


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

335

336

337

338

343

344

345

345

348

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

350

350351352356

363

364

367

368

369

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


CHAPTER 13: OLIGOPOLY AND MONOPOLISTIC COMPETITION

Chapter Preview

13.A OLIGOPOLY

13.1 The Cournot Model

396

397

398

398

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


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

447

448

448449450451452

CONTENTS

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


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


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


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

Documents

McGraw-Hill RyersonHill McGraw-Hill Ryerson Connect. Learn. Succeed" PREFACE PART OWE: CHAPTER 1: THINKING LIKE AN ECONOMIST 1.1 The Cost-Benefit Approach to Decisions EXAMPLE 1-1: