: Publication

Principles of Microeconomics is a fascinating course, whether you’re taking it in college, in high school, or doing some learning on your own. One prominent feature of the standard Principles of Microeconomics curriculum is the use of mathematical and graphical models—all those crazy graphs!

Each section shows you the exact steps necessary to work with these models and also shows you why each of these steps works. These economic models are in your course because they represent economic concepts. With this book, you’ll learn how to work with these models, why you’re working with these models, and what they mean.

Features

O   A guide for working with the models and concepts you’ll likely see in your course.

O   Precise steps for working with the questions you’ll be asked.

O   Each section shows you how to do something—for example “How to Calculate Comparative Advantage,” “How to Graph Market Equilibrium,” “How to Model Taxes.” This book doesn’t mess around!

O   Plenty of practice questions that will give you practice following the steps as well as test your knowledge about the concepts.

          Preface                                                                              ix

                      How Students Can Use the Book                          ix

                      How Educators Can Use the Book

          Acknowledgements                                                         xiii

          About the Author                                                              xv

Chapter 1 Comparative Advantage                      1

             1.a   Glossary and Concepts                                                        1

             1.b   How to Calculate Comparative Advantage                           2

             1.c   How to Draw Production Possibilities Frontiers                    4

                      1.c.i      How to Draw a Production Possibilities Frontier for One Person      4

                      1.c.ii  How to Draw a Production Possibilities Frontier for Two People      7

                    1.c.iii                                                                                   
How to Draw a Production Possibilities Frontier for a
Whole Economy      10

             1.d   How to Find Consumption With and Without Trade           12

             1.e How to Shift a Production Possibilities Frontier                  15

                     Practice Problems                                                               18

Chapter 2 Supply and Demand                         23

             2.a   Glossary and Concepts                                                      23

             2.b   How to Make a Supply Schedule                                        24

             2.c   How to Draw a Supply Curve                                             27

             2.d   How to Make a Demand Schedule                                     29

             2.e How to Draw a Demand Curve                                           32

             2.f
How to Aggregate Individual Supply and Demand Curves to
Get Market Supply and Demand                                                              35

             2.g   How to Predict Shifts in Supply and Demand                     37

                      2.g.i                                                                                       
How to Predict Shifts in Supply and Demand: Complements
and Substitutes       40

             2.h  
How to Find Excess Supply (Surplus) and Excess Demand
(Shortage)     42

             2.i   How to Calculate Market Equilibrium                                  44

             2.j   How to Graph Market Equilibrium                                       46

             2.k  
How to Find the New Equilibrium when Supply and
Demand Curves Shift                                                                                47

                    3.k.i            How to Find the New Equilibrium When One Curve Shifts      47

                      3.k.ii                                                                                    
How to Find the New Equilibrium When Both Curves Shift
at Once   49

                      Practice Problems                                                               52

Chapter 3 Elasticity                                57

             3.a    Glossary and Concepts                                                      57

             3.b    How to Calculate Percentage Change                               58

                      3.b.i How to Calculate Percentage Change Using the Standard Method   59

                      3.b.ii     How to Calculate Percentage Change Using the Midpoint Method   60

             3.c    How to Calculate Elasticity                                                 61

                      3.c.i
How to Calculate Price Elasticity Using a New Point and
an Old Point    61

                      3.c.ii
How to Calculate Price Elasticity Using a Supply Curve or
a Demand Curve     63

                      3.c.iii                                                                                        
How to Calculate Income or Cross-Price Elasticity Using a
New Point and an Old Point                                                                          66

             3.d    How to Draw Price Elasticity                                              68

             3.e    How to Use Elasticity When the Supply or Demand Shift  71

             3.f    
How to Determine if Something is Elastic, Inelastic, or
Unit Elastic    73

                      Practice Problems                                                               75

Chapter 4 Marginal Value and Marginal Cost          79

             4.a    Glossary and Concepts                                                      79

             4.b    Marginal Cost                                                                      80

                      4.b.i How to Calculate Marginal Cost                                      80

                      4.b.ii                       How to Derive a Supply Curve from Marginal Cost        82

                      4.b.iii                               How to Find Marginal Cost on a Supply Curve      83

                      4.b.iv                                How to Calculate and Graph Producer Surplus   85

             4.c    Marginal Value                                                                    88

                      4.c.i How to Calculate Marginal Value                                    88

                      4.c.ii How to Derive a Demand Curve from Marginal Value       90

                      4.c.iii                           How to Find Marginal Value on a Demand Curve      91

                      4.c.iv                              How to Calculate and Graph Consumer Surplus   93

             4.d   
How to Graph Producer Surplus and Consumer Surplus
Change When Price Changes                                                                  97

             4.e    How to Determine the Optimal or Efficient Level of an Activity  99

             4.f     Deadweight Loss                                                              101

                      4.f.i   How to Calculate Deadweight Loss                               101

                      4.f.ii How to Graph Deadweight Loss                                    104

                      Practice Problems                                                             106

Chapter 5 Government Policy in Competitive Markets 111

             5.a    Glossary and Concepts                                                    111

             5.b    How to Model Price Maximums (Price Ceilings)              112

             5.c    How to Model Price Minimums (Price Floors)                  115

             5.d    How to Model Taxes                                                         118

             5.e    How to Calculate Tax Incidence                                       122

             5.f     How to Model Quotas                                                       127

             5.g    How to Model International Trade                                     130

                      Practice Problems                                                             134

Chapter 6 The Production Process in Competitive Markets     139

             6.a    Glossary and Concepts                                                    139

             6.b    How to Distinguish Fixed and Variable Costs                  141

             6.c    How to Fill Out a Cost, Revenue, and Profit Table           143

             6.d    Average Costs                                                                  147

                      6.d.i How to Calculate Average Costs                                   147

                      6.d.ii                                                       How to Graph Average Costs    148

             6.e    How to Determine the Profit-Maximizing Quantity            149

             6.f     How to Graph a Firm in a Competitive Market                  151

             6.g    How to Calculate Profit                                                     152

             6.h    Long-Run Market Behavior                                               153

                      6.h.i How to Predict Entry and Exit                                       153

                      6.h.ii                                How to Model the Market and the Firm Together 155

                      6.h.iii                       How to Find Long-Run Equilibrium Price and Quantity 158

                      6.h.iv                              How to Graph Long Run Average Total Cost      158

                      Practice Questions                                                            162

Chapter 7 Monopoly                                 167

             7.a    Glossary and Concepts                                                    167

             7.b    How to Distinguish between Market Structures                168

             7.c    The Model of Monopoly                                                    170

                      7.c.i How to Find Marginal Revenue Using a Demand Curve  170

                      7.c.ii How to Determine the Profit-Maximizing Quantity and Price     172

                      7.c.iii                                                How to Calculate Monopoly Profit     173

                      7.c.iv                                      How to Find Deadweight Loss in a Monopoly 174

                      7.c.v                                                                 How to Graph a Monopoly 176

                      7.c.vi                                                     How to Graph a Natural Monopoly 177

             7.d    Monopolistic Competition                                                  178

                      7.d.i
How to Find Short-Run Equilibrium in Monopolistic
Competition 178

                      7.d.ii                                                                                        
How to Graph Long-Run Equilibrium in Monopolistic
Competition 179

             7.e    Price Discrimination                                                          180

                      7.e.i How to Graph Perfect (First-Degree) Price Discrimination 180

                      7.e.ii                                                                                        
How to Graph Less-than-Perfect (Third-Degree) Price
Discrimination 181

                      7.e.iii                  How to Calculate Hurdle (Second-Degree) Price Discrimination 182

                      Practice Problems                                                             185

Chapter 8 Game Theory and Oligopoly                189

             8.a    Glossary and Concepts                                                    189

             8.b   
How to Draw a Game Table (Normal Form) for
Simultaneous Games                                                                             190

             8.c    How to Find Nash Equilibria in a Game Table                  193

             8.d   
How to Draw a Game Tree (Extensive Form) for
Sequential Games                                                                                  196

             8.e    How to Solve a Game Tree                                              199

             8.f     How to Predict the Effect of Repeated Interaction on Games  203

                      Practice Problems                                                             206

Chapter 9 Externalities and Public Goods          211

             9.a    Glossary and Concepts                                                    211

             9.b    How to Graph Externalities                                               213

             9.c    How to Find the Efficient Outcome under an Externality  214

             9.d    Pigouvian Tax or Subsidy                                                 216

                      9.d.i How to Calculate the Optimal Pigouvian Tax or Subsidy 216

                      9.d.ii How to Graph the Optimal Pigouvian Tax or Subsidy     218

             9.e    How to Use the Coase Theorem to Solve an Externality 219

             9.f     How to Distinguish Types of Goods                                 221

             9.g   
How to Find Efficient and Market Outcomes for Different
Types of Goods                                                                                       224

                      9.g.i Public Goods                                                               224

                      9.g.ii                                                                            Common Goods   227

                      9.g.iii                                             Artificially Scarce Goods/Club Goods   228

                      Practice Problems                                                             231

          Answers to Odd-Numbered Questions        235

          Index                                    275

 

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Dr. Nick Huntington-Klein is an Assistant Professor of Economics at California State University Fullerton. He holds a PhD in Economics from the University of Washington Seattle, and an undergraduate degree from Reed College. He is the author of numerous journal articles and reports, mostly on the topics of labor and education economics. He was inspired to write this book through his experience teaching Principles of Microeconomics at Fullerton and at Seattle University, as well as through his work tutoring in person and online.