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BRI EF CON TENT S
Preface xx
PART 1 Introduction
1 The Nature of Economics 1
2 Scarcity and the World of Trade-Offs 27
3 Demand and Supply 49
4 Extensions of Demand and Supply Analysis 75
5 Public Spending and Public Choice 100
6 Funding the Public Sector 124
PART 2 Introduction to Macroeconomics and Economic Growth

7 The Macroeconomy: Unemployment, Inflation, and Deflation 142
8 Measuring the Economy’s Performance 164
9 Global Economic Growth and Development 189
PART 3 Real GDP Determination and Fiscal Policy
10 Real GDP and the Price Level in the Long Run 212
11 Classical and Keynesian Macro Analyses 232
12 Consumption, Real GDP, and the Multiplier 253
13 Fiscal Policy 281
14 Deficit Spending and the Public Debt 303
PART 4 Money, Stabilization, and Growth

15 Money, Banking, and Central Banking 322
16 Domestic and International Dimensions of Monetary Policy 349
17 Stabilization in an Integrated World Economy 374
18 Policies and Prospects for Global Economic Growth 397
PART 5 Dimensions of Microeconomics

19 Demand and Supply Elasticity 416
20 Consumer Choice 437
21 Rents, Profits, and the Financial Environment of Business 465
PART 6 Market Structure, Resource Allocation, and Regulation
22 The Firm: Cost and Output Determination 486
23 Perfect Competition 510
24 Monopoly 535
25 Monopolistic Competition 559
26 Oligopoly and Strategic Behavior 578
27 Regulation and Antitrust Policy in a Globalized Economy 600
PART 7 Labor Resources and the Environment

28 The Labor Market: Demand, Supply, and Outsourcing 624
29 Unions and Labor Market Monopoly Power 648
30 Income, Poverty, and Health Care 668
31 Environmental Economics 692
PART 8 Global Economics

32 Comparative Advantage and the Open Economy 710
33 Exchange Rates and the Balance of Payments 732
vii

C O NTENTS
Preface xx
PART 1 Introduction
EXAMPLE
Microeconomic and Macroeconomic
1 The Nature of Economics 1
Implications of the Gig Economy 3 The Power of Economic Analysis 2 • The Three Basic Economic Questions and Two
Getting Directions 8
Opposing Sets of Answers 4
INTERNATIONAL POLICY WHAT IF… the government increases pharmaceutical companies’ costs but prevents them
EXAMPLE from raising their prices? 5
Greece Discovers That Higher Tax Rates The Economic Approach: Systematic Decisions 6 • Economics as a Science 7
Encourage More Tax Evasion 6 • Positive versus Normative Economics 10
BEHAVIORAL EXAMPLE YOU ARE THERE The Incentive to Understand Chickens’ “Speech” 11
Why Doesn’t Higher Pay Persuade Some ISSUES & APPLICATIONS Why More Highly Educated Women Are Having More
Women to Avoid Traditional Gender Children 12
Roles? 7
Summary: What You Should Know/Where to Go to Practice 13 • Problems 14
• References 17
APPENDIX A Reading and Working with Graphs 18
Direct and Inverse Relationships 18 • Constructing a Graph 19 • Graphing Numbers
in a Table 20 • The Slope of a Line (A Linear Curve) 22 • Summary: What You
Should Know/Where to Go to Practice 25 • Problems 26
EXAMPLE 2 Scarcity and the World of Trade-Offs 27

The Airline Industry Confronts the Law Scarcity 28 • Opportunity Cost, Trade-Offs, and Choices 30 • The Economic
of Increasing Additional Cost 36 Choices a Nation’s People Face 33 • Economic Growth, Production Possibilities, and
POLICY EXAMPLE the Trade-Off between Present and Future 37
Why the “Free File” Tax Service Is Not WHAT IF… the U.S. government continues to ratchet up required production of health care
Really “Free” 30 services? 39
INTERNATIONAL EXAMPLE Specialization, Comparative Advantage, and Trade 39
The Substantial Trade-Off of Satisfying YOU ARE THERE Reducing the Opportunity Cost of Waiting in Gridlocked Traffic, at a
U.N. Development Goals 34 Price 42
BEHAVIORAL EXAMPLE ISSUES & APPLICATIONS The U.S. Navy Expands Production Possibilities via a New
An Economic Explanation for Technology 42
Monogamy 32
• References 48
EXAMPLE 3 Demand and Supply 49

The Law of Demand in the Market for Demand 50 • Shifts in Demand 55 • Supply 59 • Shifts in Supply 62 • Putting
Cable TV Subscriptions 51 Demand and Supply Together 65
Altered Tastes and Preferences
Generate Lower Demand for Chewing
WHAT IF… the government requires buyers to pay a price that is above the equilibrium
Gum 57 price? 68
Long Lines at Restaurants Special- YOU ARE THERE The Breakfast Cereal Industry Confronts Changing Tastes and Prefer-
izing in Barbecued Brisket Signal a ences 69
Shortage 67
ISSUES & APPLICATIONS The U.S. Oil Gusher Produces Shortages of Oil Storage
POLICY EXAMPLE
Space 70
Policies Generate Higher Water Input
Costs and Cut Agricultural Commodity
Supplies 64
Should Shortages in the Ticket Market
Be Solved by Scalpers? 68
viii

CONTENTS ix
INTERNATIONAL EXAMPLE Summary: What You Should Know/Where to Go to Practice 71 • Problems 72
A Global Substitution from Coal to • References 74
Natural Gas as an Energy Source 57
An Increase in the Supply of Automo-
biles in China 64
BEHAVIORAL EXAMPLE
Tips and Quality-Adjusted Prices 52
EXAMPLE 4 Extensions of Demand and Supply Analysis 75

Dramatic Responses to Cities’ The Price System and Markets 76 • Changes in Demand and Supply 77 • The
Minimum Wage Hikes: “Zeroing Out” Rationing Function of Prices 80 • Price Ceilings 82
Employment 88
WHAT IF… the government requires apartment owners to set rents based on tenants’ in-
POLICY EXAMPLE comes? 85
Rationing Water 81
Price Floors and Quantity Restrictions 85
Regulating the Raisin Reserve 93
YOU ARE THERE Price Rationing via Changes in the Number of Items Sold in a Package 90
INTERNATIONAL EXAMPLE
Why Are Global Ship Rental Prices ISSUES & APPLICATIONS Online Middlemen: Customer Sales Reps Move to the Web 90
Dropping? 80 Summary: What You Should Know/Where to Go to Practice 91 • Problems 92
INTERNATIONAL POLICY • References 95
EXAMPLE APPENDIX B Consumer Surplus, Producer Surplus, and Gains from Trade within a Price
Looking for Hard-to-Find Items in Ven- System 96
ezuela? Ask for the Bachaqueros 83 Consumer Surplus 96 • Producer Surplus 97 • Gains from Trade within a Price
The European Union Decides That the System 98 • Price Controls and Gains from Trade 99
Costs of Milk Quotas Outweigh the
Benefits 89
BEHAVIORAL EXAMPLE
Online Dating Sites and Virtual
Roses 77
EXAMPLE 5 Public Spending and Public Choice 100

Medicare’s “1 Percent” 112 Market Failures and Externalities 101
POLICY EXAMPLE WHAT IF… the government engages in policies that force down the price of an item subject to
That Noisy Drone Hovering by Your external benefits while leaving its supply curve’s position unchanged? 105
House? Your Property Rights Are The Other Economic Functions of Government 105 • The Political Functions
Unclear 102
of Government 108 • Public Spending and Transfer Programs 109 • Collective
Mixed Public Choice Incentives and Decision Making: The Theory of Public Choice 114
Policies for School Lunches 115
YOU ARE THERE Addressing Rail-Freight Transportation Externalities 116
INTERNATIONAL POLICY
EXAMPLE ISSUES & APPLICATIONS The U.S. Measles Threat––Once Nearly Eliminated but Less So
Is Regulation the Solution for Today 117
an Expanding Cloud of Orbital Summary: What You Should Know/Where to Go to Practice 118 • Problems 119
Pollution? 104 • References 122
BEHAVIORAL EXAMPLE
Funding Public Goods: Differences in
Valuations versus Competencies 108
EXAMPLE 6 Funding the Public Sector 124

The Progressive U.S. Income Tax Paying for the Public Sector: Systems of Taxation 125
System 126
WHAT IF… borrowing to fund public expenditures was illegal? 125
POLICY EXAMPLE The Most Important Federal Taxes 127 • Tax Rates and Tax Revenues 131
Inducing Disability Insurance • Taxation from the Point of View of Producers and Consumers 134
Recipients Not to Work Causes
Payouts to Exceed Taxes 130 YOU ARE THERE Mergers Move U.S. Firms Abroad and Reduce the U.S. Income Tax Base 136
Are Vehicle User Fees an Inevitable ISSUES & APPLICATIONS Will Taxing “Remote Sales” Be a Salvation for Sinking State
Replacement for Gasoline Excise Budgets? 137
Taxes? 131
North Carolina Cuts Tax Rates and
Expands a Tax Base, and Its Revenue
Increase 133

x CONTENTS
BEHAVIORAL EXAMPLE Summary: What You Should Know/Where to Go to Practice 138 • Problems 139
Trying to Boost Government Tax • References 141
Receipts by Making Tax Delinquents
Feel Bad 134
PART 2 Introduction to Macroeconomics and Economic Growth
EXAMPLE 7 The Macroeconomy: Unemployment, Inflation, and

An Increase in the Duration Deflation 142
of Unemployment 146 Unemployment 143 • The Major Types of Unemployment 147
Why a Drop in “Routine Jobs” WHAT IF… the government requires businesses to provide their employees with a wider range of
Is Elevating the Natural Rate of benefits, such as broader health insurance and longer parental leaves? 147
Unemployment 148
Inflation and Deflation 149 • Anticipated Versus Unanticipated Inflation 153
POLICY EXAMPLE • Changing Inflation and Unemployment: Business Fluctuations 155
How High One’s Price-Level-Adjusted
YOU ARE THERE Is the Level of Prices Rising in Russia? Take a Look at the “Borscht
Income Is Depends on Where One
Lives 151
Index” 157
INTERNATIONAL EXAMPLE ISSUES & APPLICATIONS Interpreting Employment Data as the Gig Economy Grows 158
How Variations in Prices of Imported
Items Can Push Apart the PPI and
• References 163
CPI 152
BEHAVIORAL EXAMPLE
Animal Spirits and Business Fluctuations:
Can Fear Cause Recessions? 157
EXAMPLE 8 Measuring the Economy’s Performance 164

Correcting GDP for Price Index The Simple Circular Flow 165 • National Income Accounting 167 • Two Main
Changes, 2007–2017 178 Methods of Measuring GDP 171
POLICY EXAMPLE WHAT IF… a nation’s measure of aggregate economic activity were based on production using
Accuracy versus Precision in Measur- inputs that its residents own and operate in other countries? 173
ing Business Fixed Investment 172
• Other Components of National Income Accounting 176 • Distinguishing Between
INTERNATIONAL EXAMPLE Nominal and Real Values 178
Complications in Assessing the GDP YOU ARE THERE Redesigning GDP to Take into Account the Treatment of Natural
Effects of the “Free Web” 169
Resources? 181
Purchasing Power Parity Comparisons
of World Incomes 181 ISSUES & APPLICATIONS How Big Is the Underground Economy? 182
BEHAVIORAL EXAMPLE • References 188
Should an Economic “Dashboard”
Supplement or Replace GDP? 170
POLICY EXAMPLE 9 Global Economic Growth and Development 189

An Annual Quota on Importing Human How Do We Define Economic Growth? 190
Capital Fills Up in a Hurry 198
WHAT IF… from the perspective of the rule of 70, China and India were able to maintain their high
INTERNATIONAL EXAMPLE rates of per capita real GDP growth over the next couple of decades? 194
Growth Rates around the World 191 Productivity Growth, Saving, and New Technologies: Fundamental Determinants of
A Youth Shrinkage and Aging Capital Economic Growth 194 • Immigration, Property Rights, and Growth 199
Contribute to Secular Stagnation in • Economic Development 199 • Are Developed Nations Stuck with Stagnant Growth
Japan 205
Prospects? 203
BEHAVIORAL EXAMPLE YOU ARE THERE Does More Income Inequality Necessarily Harm Economic Growth? 206
Interpersonal Trust and Economic
Growth 197 ISSUES & APPLICATIONS Both Quality and Quantity of Regulations Matter for Economic
Growth 207
• References 211

CONTENTS xi
PART 3 Real GDP Determination and Fiscal Policy

INTERNATIONAL EXAMPLE 10 Real GDP and the Price Level in the Long Run 212
China’s Long String of Rightward Output Growth and the Long-Run Aggregate Supply Curve 213 • Total Expenditures
Shifts in the LRAS Curve 215 and Aggregate Demand 215 • Long-Run Equilibrium and the Price Level 220
Inferring That South African Aggregate WHAT IF… there are steady and susteined decreases in the prices of key inputs in the production
Demand Growth Dropped after
of energy? 222
2008 224
Causes of Inflation 222
BEHAVIORAL EXAMPLE
Does The “Sentiment” of Consum-
YOU ARE THERE Watching a Crumbling U.S. River System Impede Growth of Aggregate
ers Generate Aggregate Demand Supply 225
Shifts? 219 ISSUES & APPLICATIONS The Implications of U.S. Secular Stagnation for Real GDP and the
Price Level 225
• References 231
EXAMPLE 11 Classical and Keynesian Macro Analyses 232

Why U.S. Nominal Wages Have Been The Classical Model 233 • Keynesian Economics and the Keynesian Short-
Slow to Adjust 239 Run Aggregate Supply Curve 238 • Shifts in the Aggregate Supply Curve 241
BEHAVIORAL EXAMPLE • Consequences of Changes in Aggregate Demand 243 • Explaining Short-Run
Variations in Credit-Market Sentiment Variations in Inflation 245
and Aggregate Demand Stocks 243 WHAT IF… a nation’s economy were to experience demand-pull and cost-push inflation simultane-
ously? 246
YOU ARE THERE A Japanese Economist Tells His Government, “I Told You So!” 247
ISSUES & APPLICATIONS A Minimum Wage Boost Causes a Puerto Rican Aggregate Supply
Shock 248
• References 252
EXAMPLE 12 Consumption, Real GDP, and the Multiplier 253

Why the U.S. Economy’s Saving Rate Determinants of Planned Consumption and Planned Saving 254 • Determinants of
Rises During Recessions 260 Investment 260 • Determining Equilibrium Real GDP 262 • Keynesian Equilibrium
INTERNATIONAL EXAMPLE with Government and the Foreign Sector Added 266
Diminished Rightward Shifts in WHAT IF… real incomes earned by residents of other nations were to increase? 268
Germany’s Investment Function 264
The Multiplier, Total Expenditures, and Aggregate Demand 268
BEHAVIORAL EXAMPLE YOU ARE THERE Inferring Low Real GDP Growth from “Restrained” Consumption
Habit Formation in Consumption Spending 273
Spending and the Multiplier
Effect 270 ISSUES & APPLICATIONS An Investment Spending Slowdown Holds Down U.S. Real
GDP 274
• References 279
APPENDIX C The Keynesian Model and the Multiplier 280
INTERNATIONAL POLICY 13 Fiscal Policy 281

EXAMPLE Discretionary Fiscal Policy 282 • Possible Offsets to Fiscal Policy 284
Higher Government Research and
Development Generates Offsetting
WHAT IF… a nation’s government were to find itself to the right of the top of the Laffer
Spending Cuts 288 curve? 289
Discretionary Fiscal Policy in Practice: Coping with Time Lags 289 • Automatic
BEHAVIORAL EXAMPLE
Stabilizers 291
Bounded Rationality and Variations
in the Effects of Fiscal Policy on Real YOU ARE THERE Why Are Several States Cutting the Duration of Unemployment
GDP 291 Compensation? 292
ISSUES & APPLICATIONS Which Governments Conduct Fiscal Stabilization Most
Effectively? 293
• References 299

xii CONTENTS
APPENDIX D Fiscal Policy: A Keynesian Perspective 300

Changes in Government Spending 300 • Changes in Taxes 301 • The Balanced-
Budget Multiplier 301 • The Fixed Price Level Assumption 302 • Problems 302
POLICY EXAMPLE 14 Deficit Spending and the Public Debt 303

Increasing Costs of Student Loan For- Public Deficits and Debts 304 • Evaluating the Rising Public Debt 307
giveness Are Raising Federal Budget Growing U.S. Government Deficits: Implications for U.S. Economic
Deficits 306 Performance 311 • How Could the Government Reduce All of Its Red Ink? 313
INTERNATIONAL EXAMPLE WHAT IF… the rich were to respond to higher average and marginal income tax rates by engaging
What Nations’ Residents Have the in fewer activities subject to taxation? 314
Largest Holdings of the U.S. Public
Debt? 311 YOU ARE THERE Want a Balanced Budget? Sell Some Government Assets 316
BEHAVIORAL EXAMPLE ISSUES & APPLICATIONS Is Fiscal Policy Drowning in Accumulated Budgetary Red Ink? 316
Will Taxpayers Eventually Force Summary: What You Should Know/Where to Go to Practice 318 • Problems 319
Government Spending Cuts? 307 • References 321
PART 4 Money, Stabilization, and Growth

EXAMPLE 15 Money, Banking, and Central Banking 322
Customers Pay Fees to Hold Hundreds Functions and Measures of Money 323
of Billions in Deposits at Banks 330
WHAT IF… a type of asset that previously had been regularly exchanged in active trading suddenly
INTERNATIONAL EXAMPLE experiences a long period of hardly any transactions? 325
Why Bother with a Debit Card • Financial Intermediation and Banks 328 • The Federal Reserve System: The U.S.
When Payments Can Accompany Central Bank 332 • Fractional Reserve Banking, the Federal Reserve, and the Money
“Tweets”? 332 Supply 335 • Federal Deposit Insurance 339
INTERNATIONAL POLICY YOU ARE THERE In Europe, Some Borrowers Receive Bank Interest Payments on Their
EXAMPLE Loans 342
What Does Zimbabwe Now Use as
ISSUES & APPLICATIONS Why U.S. Taxpayers are Last-Resort Funders of Much of the
Money, and Why? 326
Financial Industry 343
Is Money Really Just for “Record • References 348
Keeping”? 324
EXAMPLE 16 Domestic and International Dimensions of Monetary

Interest Rate Movements and U.S.
Companies’ Cash Holdings 352
Policy 349
The Demand for Money 350 • How the Fed Influences Interest Rates 352 • Effects
BEHAVIORAL EXAMPLE of an Increase in the Money Supply 354
Can Behavioral Economics Explain the
WHAT IF… Federal Reserve policies generate a higher level of interest rates intended in part to
Federal Reserve’s Bad Forecasts? 359
influence bank lending? 356
Monetary Policy and Inflation 357 • Monetary Policy Transmission and Credit Policy
at Today’s Fed 359
YOU ARE THERE A Member of Congress Seeks a Fed Policy Rule, Irrespective of the Rule’s
Name 365
ISSUES & APPLICATIONS Do Federal Open Market Committee “Dot Plots” Chart
Confusion? 365
• References 370
APPENDIX E Monetary Policy: A Keynesian Perspective 371
Increasing the Money Supply 372 • Decreasing the Money Supply 372 • Arguments
against Monetary Policy 372 • Problems 372

CONTENTS xiii
POLICY EXAMPLE 17 Stabilization in an Integrated World Economy 374
Policy Uncertainty and Reduced Total Active Versus Passive Policymaking and the Natural Rate of Unemployment 375
Planned Expenditures 378 The Phillips Curve: A Rationale for Active Policymaking? 379 • Rational
What Policy-Relevant Inflation Rate Expectations, the Policy Irrelevance Proposition, and Real Business Cycles 382
Should the Public Try to Predict? 388
WHAT IF… the Federal Reserve were to engage in a policy action that the public is unable to antici-
BEHAVIORAL EXAMPLE pate and therefore surprises all firms and households? 383
Do Distorted Beliefs Influence Modern Approaches to Justifying Active Policymaking 384 • Behavioral Economics
Real GDP and the Unemployment
and Macroeconomic Policymaking 388
Rate? 389
YOU ARE THERE Are National Inflation Rates Mysteriously “Too Low”? 390
ISSUES & APPLICATIONS Does the Usual Phillips Curve Consider the Wrong Unemployment
Rate? 391
• References 396
INTERNATIONAL POLICY 18 Policies and Prospects for Global Economic Growth 397
EXAMPLE Labor Resources and Economic Growth 398 • Capital Goods and Economic
Indian Farmers Confront “Dead Land” Growth 400 • A Recent Shift in Global Growth Trends 401 • Private International
Problems 401 Financial Flows as a Source of Global Growth 404 • International Institutions and
INTERNATIONAL EXAMPLE Policies for Global Growth 406
Myanmar Ends Monopolies’ Control of WHAT IF… the World Bank and the IMF were to face competition from new international lending
Financial Information to Spur Foreign institutions? 408
Investment 405
YOU ARE THERE Will Renewable Energy “Leapfrog” African Nations to Higher Economic
BEHAVIORAL EXAMPLE Growth? 409
Nudging the World’s Poor to Make
Different Choices 399 ISSUES & APPLICATIONS China’s One-Child Policy Relaxed––To Promote Economic
Growth 409
Summary: What You Should Know/Where to Go to Practice 410 • Problems 412 •
References 415
PART 5 Dimensions of Microeconomics

EXAMPLE 19 Demand and Supply Elasticity 416
The Price Elasticity of Demand for Price Elasticity 417 • Elasticity and Total Revenues 421 • Determinants of the Price
Cable TV Subscriptions 418 Elasticity of Demand 423 • The Cross Price and Income Elasticities of Demand 426
The Price Elasticity of Demand for WHAT IF… stronger enforcement of a ban on an illegal drug pushes up its market clearing price,
Movie Tickets 419
but its cross price elasticity with another illicit drug is highly positive? 427
BEHAVIORAL EXAMPLE Price Elasticity of Supply 428
Short-Term Stress and the Price
Elasticity of Demand for Alcohol 426
YOU ARE THERE Using Price Elasticity of Supply to Assess Effects of Rewards for Academic
Performance 430
ISSUES & APPLICATIONS Cotton Subsidies and the Price Elasticity of Cotton Supply in
Egypt 431
• References 435
EXAMPLE 20 Consumer Choice 437

Monitoring the Provision of Legal Utility Theory 438
Services to Ensure Attainment of a
Consumer Optimum 444 WHAT IF… consuming an additional unit of an item generates negative marginal utility?
Optimizing Consumption Choices 441 • How a Price Change Affects Consumer
Optimum 444 • Behavioral Economics and Consumer Choice Theory 448
Why a Consumer Optimum Can
Include “Unlimited” Consumption in a YOU ARE THERE Confronting the Challenge of Comparing Levels of Disutility from Pain 449
Pay-by-the-Minute Cafe 442 ISSUES & APPLICATIONS Two Different Utility Issues Associated with a “Pacemaker for the
BEHAVIORAL EXAMPLE Stomach” 449
Do “Big Box” Discount Retailers Summary: What You Should Know/Where to Go to Practice 450 • Problems 452
Contribute to Higher Obesity Rates • References 454
among Consumers? 446

xiv CONTENTS
APPENDIX F More Advanced Consumer Choice Theory 455

On Being Indifferent 455 • The Budget Constraint and the Consumer Optimum 459
• Deriving the Demand Curve 461 • Summary: What You Should Know/Where to
Go to Practice 463 • Problems 463
EXAMPLE 21 Rents, Profits, and the Financial Environment of

Why the “Discount Rate” That Pension
Funds Use to Value Their Liabilities
Business 465
Matters 475
Economic Rent 466 • Firms and Profits 467 • Interest 473
Analyzing Tweets to Predict Stock- WHAT IF… the nominal interest rate is negative? 474
Market Swings 479 Corporate Financing Methods 477
POLICY EXAMPLE YOU ARE THERE China’s Government Learns That Stock Prices Can Drift Downward 480
Do Government Grants and Subsidies
ISSUES & APPLICATIONS Assessing Three Recent Changes in Stock Exchange Trading 480
Favor Corporations? 470
The Federal Reserve Allegedly––and
• References 485
Actually––Has Released Insider
Information 479
BEHAVIORAL EXAMPLE
Does Bounded Rationality Explain
Why Some People “Cash Out” of
Pensions? 477
PART 6 Market Structure, Resource Allocation, and Regulation

EXAMPLE 22 The Firm: Cost and Output Determination 486
Reducing Variable Costs by Initially Short Run Versus Long Run 487 • A Firm’s Production 488 • Short-Run Costs to
Keeping the Bubbles Out of Bubble the Firm 491
Wrap® 492
WHAT IF… adoption of a technological improvement caused a firm’s average product curve and
Tesla’s Initial Home-Battery Production
Scale Is Below the Minimum Efficient marginal product curve to shift upward? 499
Scale 503 Long-Run Cost Curves 500
INTERNATIONAL EXAMPLE YOU ARE THERE Wal-Mart Relearns How to Reduce “Shrink” Costs 504
Short-Run Average and Marginal Costs ISSUES & APPLICATIONS Cutting Per-Unit Costs of Making Drugs and Exploring Other Worlds
Increase at the World’s Ports 495 with 3D and Molecular Printers 504
INTERNATIONAL POLICY Summary: What You Should Know/Where to Go to Practice 506 • Problems 507
EXAMPLE • References 509
A Government Produces Solar Energy
on a Massive Scale––To Pump More
Oil 502
BEHAVIORAL EXAMPLE
Is a Firm’s Feasible Output Greater
with Individual- or Group-Structured
Tasks? 488
EXAMPLE 23 Perfect Competition 510

Characteristics of Perfect Competition Characteristics of a Perfectly Competitive Market Structure 511 • Profit-Maximizing
in the Propane-Distribution Choices of a Perfectly Competitive Firm 512 • Short-Run Supply Under Perfect
Market 512 Competition 517
INTERNATIONAL EXAMPLE WHAT IF… short-run shutdown prices differ across the firms that constitute a perfectly
Long-Run Supply Curves for “Rare competitive industry? 520
Earths” Turn Out Not to Slope Upward
After All 526
Price Determination Under Perfect Competition 523 • The Long-Run Industry
Situation: Exit and Entry 524
BEHAVIORAL EXAMPLE
YOU ARE THERE Lower Recycled-Plastics Prices Cause Short-Run Shutdowns––And Exits from
Do Competition and Bad Behavior
Necessarily Go Together? 515
That Industry 528
ISSUES & APPLICATIONS Just How Commonplace Are Entrances and Exits of U.S. Firms? 529
• References 534

CONTENTS xv
EXAMPLE 24 Monopoly 535
Want to Raise Prices of Heart Drugs? Defining and Explaining the Existence of Monopoly 536
Create a Monopoly Seller 545
WHAT IF… a single company acquired rights to lands containing all known deposits of all the key
POLICY EXAMPLE minerals required to produce batteries used to power digital devices? 538
A Tombstone Law Is a Grave Barrier to The Demand Curve a Monopolist Faces 539 • Costs and Monopoly Profit
Entry in New Jersey 538
Maximization 542 • On Making Higher Profits: Price Discrimination 547 • The
BEHAVIORAL EXAMPLE Social Cost of Monopolies 548
Can Firms Use “Big Data” and YOU ARE THERE A Legal Barrier to Entry Prevents Lemonade Sales by Two Young Sisters 550
Complicated Pricing to “Gouge”
Consumers? 548 ISSUES & APPLICATIONS Why a French Dealer of Illegal Drugs Provides Loyalty Discount
Cards 550
• References 555
APPENDIX G Consumer Surplus and the Deadweight Loss Resulting from Monopoly 556
Consumer Surplus in a Perfectly Competitive Market 556 • How Society Loses From
Monopoly 557
EXAMPLE 25 Monopolistic Competition 559

When a Drink’s Taste Is Not Monopolistic Competition 560 • Price and Output for the Monopolistic
Sufficiently Distinguishable, Try a Competitor 563
Flavored Edible Straw 561
WHAT IF… the government decided that monopolistically competitive prices exceeding marginal
POLICY EXAMPLE costs constitutes social “waste” and banned such “waste” from occurring? 565
Want to Start a Kids’ TV Network?
Brand Names and Advertising 566 • Information Products and Monopolistic
Bring Back Old Cartoon
Characters 562
Competition 568
BEHAVIORAL EXAMPLE YOU ARE THERE A Soft Drink Company Faces Another Entry into an Already Crowded
Industry 572
Do Business Schools’ Uses of Their
Rankings Inform or Persuade? 568 ISSUES & APPLICATIONS Professional Service Firms Confront Easier Entry by New
Competitors 572
• References 577
EXAMPLE 26 Oligopoly and Strategic Behavior 578

The Four-Firm Concentration Ratio in Oligopoly 579 • Measuring Industry Concentration 581 • Strategic Behavior and
the U.S. Broadband Industry 581 Game Theory 583 • The Cooperative Game: A Collusive Cartel 587
New Online-Dating Platform Firms
Specialize in Limiting the Number of
WHAT IF… a number of firms that have agreed to restrain the output within a collusive cartel give
Matches 592 in to the temptation to boost their profits by increasing their output? 590
Network Effects and Two-Sided Markets 590
The HHI for the Global Tablet-Device
YOU ARE THERE Free-Game Platform Firms Find Positive Market Feedback Harder to Find 594
Industry 583 ISSUES & APPLICATIONS The Ticket-Resale Industry––An Oligopoly with Many Firms 594
Why There Is a 50-50 Chance That
• References 599
Cheating on One’s Mate is a Dominant
Strategy 584
EXAMPLE 27 Regulation and Antitrust Policy in a Globalized

Mandated Energy Efficiencies Threaten
Power Companies––And Electricity
Economy 600
Buyers 605
Forms of Industry Regulation 601 • Regulating Natural Monopolies 603
• Regulating Nonmonopolistic Industries 606 • Incentives and Costs of
POLICY EXAMPLE Regulation 609 • Antitrust Policy 611
Lighting Up the Holidays Now
Requires Satisfying Eleven Pages of
WHAT IF… antitrust laws were altered to forbid all forms of product bundling? 617
Federal Rules 602 YOU ARE THERE A Feedback Effect of Truck Safety Regulations: Unsafe Truck Parking 617
INTERNATIONAL POLICY
EXAMPLE
European Antitrust Authorities Charge
Hollywood with Restraining Film
Trade 614

xvi CONTENTS
BEHAVIORAL EXAMPLE ISSUES & APPLICATIONS How Firms Engage in Conspiracies to Restrain Trade 618
Does Bounded Rationality Strengthen Summary: What You Should Know/Where to Go to Practice 619 • Problems 620
or Weaken the Argument for • References 623
Regulation? 611
A U.S. Firm Asks French Antitrust
Authorities to Halt a Pricing
Conspiracy 613
PART 7 Labor Resources and the Environment

EXAMPLE 28 The Labor Market: Demand, Supply, and
A Rise in the Demand for Restau- Outsourcing 624
rants’ Food Services Shifts the Labor Labor Demand for a Perfectly Competitive Firm 625 • Market Labor Demand for
Demand Curve 632
and the Elasticity of Demand for Inputs 629 • Wage Determination in a Perfectly
INTERNATIONAL EXAMPLE Competitive Labor Market 631 • Labor Outsourcing, Wages, and Employment 634
Oil Prices Drop, and the Derived • Labor Demand of a Monopolist and Overall Input Utilization 637
Demand for Oil Workers Declines 629
WHAT IF… the government decided to forbid U.S. firms from outsourcing labor abroad and to
BEHAVIORAL EXAMPLE prevent foreign firms from using outsourced labor located in the United States? 637
Can Behavioral Nudges Induce YOU ARE THERE Robot Tailors Threaten Human Sewing Workers 642
Workers to Keep Labor Supply
Promises? 634 ISSUES & APPLICATIONS Effects of Minimum Wage Laws with Substitution of Capital for
“Mental Productivity” and the Hiring of Labor 642
Younger versus Older Workers 641 Summary: What You Should Know/Where to Go to Practice 644 • Problems 645
• References 647
POLICY EXAMPLE 29 Unions and Labor Market Monopoly Power 648

A Key Structural Change in Collective Industrialization and Labor Unions 649 • Union Goals and Strategies 652
Bargaining: “Micro-Unit”
Representation 652 WHAT IF… the government were to outlaw all union strikes? 653
A Constitutional Interpretation Alters Economic Effects of Labor Unions 656 • Monopsony: A Buyer’s Monopoly 658
Demands for Nonunion and Union YOU ARE THERE Chinese Buyers Act as Monopsony to Push Down Tobacco Prices in
Labor 656 Zimbabwe 662
BEHAVIORAL EXAMPLE ISSUES & APPLICATIONS A Strategy Regarding Minimum Wages Helps to Achieve Union
Should Firms That Can Set Wages Goals 663
Raise Workers’ Pay All at Once or in Summary: What You Should Know/Where to Go to Practice 664 • Problems 665
Stages? 660
• References 667
EXAMPLE 30 Income, Poverty, and Health Care 668

Pitfalls in Contemplating the Distribu- The Distribution of Income 669 • Determinants of Income Differences 674
tion of Households across Income • Poverty and Attempts to Eliminate It 677 • Health Care 680
Ranges 672
WHAT IF… the government were to reduce out-of-pocket payments by people with subsidized
POLICY EXAMPLE health insurance plans? 685
A Few Medications Account for
a Large Share of Medicare Drug YOU ARE THERE Choosing Not to Purchase Health Insurance 686
Spending 684 ISSUES & APPLICATIONS Do Antipoverty Programs Contribute to Poverty by Penalizing
BEHAVIORAL EXAMPLE Marriage? 687
Trying to Close the Parental “Word Summary: What You Should Know/Where to Go to Practice 688 • Problems 689
Gap” between Rich and Poor with • References 691
“Nudges” 676
POLICY EXAMPLE 31 Environmental Economics 692

The Environmental Protection Agency Private Versus Social Costs 693 • Pollution 696 • Reducing Humanity’s Carbon
Creates a Negative Externality 696 Footprint: Restraining Pollution-Causing Activities 698
INTERNATIONAL EXAMPLE WHAT IF… government estimates of resource savings from non-carbon-generated energy sources
How Trophy Hunting Might Help fail to acount for these sources’ reliance on carbon-based energy? 700
to Protect Dwindling Big-Game
Common Property and Wild Species 700
Species 702

CONTENTS xvii
BEHAVIORAL EXAMPLE YOU ARE THERE Companies in China Seek to Export Pollution Abroad 703
How Behavioral Responses to Appeals ISSUES & APPLICATIONS Assessing the Economics of Global Plastic-Waste Pollution 703
to Conserve Energy Boost Carbon Summary: What You Should Know/Where to Go to Practice 705 • Problems 706
Emissions 694
• References 709
PART 8 Global Economics

POLICY EXAMPLE 32 Comparative Advantage and the Open Economy 710
Ending the U.S. Oil Export Ban 722 Why We Trade: Comparative Advantage and Mutual Gains from Exchange 711
INTERNATIONAL EXAMPLE • Arguments Against Free Trade 718 • Ways to Restrict Foreign Trade 721
How African Nations Are Developing • International Trade Organizations 724
Comparative Advantages in WHAT IF… joining a new regional trade bloc shifts existing trade to countries within that bloc and
Agriculture 716 away from countries in another regional trade bloc? 725
Why European Firms View
YOU ARE THERE Argentina Specializes in Oil Production to Protect Domestic Jobs 726
Chinese Tourists’ Parallel Imports
as a Threat 719 ISSUES & APPLICATIONS Drought Induces California Farmers to Double Down on a
Comparative Advantage 726
BEHAVIORAL EXAMPLE
Has Greater Financial Uncertainty
• References 731
Become an Impediment to Trade? 721
EXAMPLE 33 Exchange Rates and the Balance of Payments 732

Harley-Davidson’s Sales of The Balance of Payments and International Financial Flows 733 • Deriving the
Motorcycles Are Reduced by the Demand for and Supply of Foreign Exchange 738 • Determining Foreign Exchange
Strong Dollar 742 Rates 742 • Fixed Versus Floating Exchange Rates 745
BEHAVIORAL EXAMPLE WHAT IF… a central bank that fixes its nation’s exchange rate runs out of foreign exchange
Can Behavioral Economics Help reserves? 748
Nations Achieve Balanced Trade? 746
YOU ARE THERE Nigeria’s Central Bank Forces a Reduction in the Demand for Foreign
Exchange 749
ISSUES & APPLICATIONS A Year of an Appreciation, Lower Import Prices, and Higher Quantity
of Foreign Exchange Demanded 750
• References 754
Glossary G-1
Index I-1

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A01_LO5943_03_SE_FM.indd iv 04/12/15 4:22 PM

ON E- SEM ES T ER CO UR SE O UT L IN E
Macroeconomic Emphasis Microeconomic Emphasis Balanced Micro-Macro

The Macro View The Micro View 1. The Nature of Economics
1. The Nature of Economics 1. The Nature of Economics 2. Scarcity and the World of
2. Scarcity and the World of 2. Scarcity and the World of Trade-Offs
Trade-Offs Trade-Offs 3. Demand and Supply
3. Demand and Supply 3. Demand and Supply 4. Extensions of Demand and
4. Extensions of Demand and 4. Extensions of Demand and Supply Analysis
Supply Analysis Supply Analysis 5. Public Spending and Public
5. Public Spending and Public 5. Public Spending and Public Choice
Choice Choice 6. Funding the Public Sector
6. Funding the Public Sector 6. Funding the Public Sector 20. Consumer Choice
7. The Macroeconomy: 19. Demand and Supply Elasticity 21. Rents, Profits, and the Financial
Unemployment, Inflation, and 20. Consumer Choice Environment of Business
Deflation
21. Rents, Profits, and the Financial 22. The Firm: Cost and Output
8. Measuring the Economy’s Environment of Business Determination
Performance
22. The Firm: Cost and Output 23. Perfect Competition
9. Global Economic Growth and Determination
Development 24. Monopoly
23. Perfect Competition 28. The Labor Market: Demand,
10. Real GDP and the Price Level
in the Long Run 24. Monopoly Supply, and Outsourcing
11. Classical and Keynesian Macro 25. Monopolistic Competition 29. Unions and Labor Market
Analyses 26. Oligopoly and Strategic Monopoly Power
12. Consumption, Real GDP, Behavior 7. The Macroeconomy: Unem-
and the Multiplier 27. Regulation and Antitrust Policy ployment, Inflation, and
in a Globalized Economy Deflation
13. Fiscal Policy
28. The Labor Market: Demand, 10. Real GDP and the Price Level
14. Deficit Spending and the Public in the Long Run
Debt Supply, and Outsourcing
29. Unions and Labor Market 11. Classical and Keynesian Macro
15. Money, Banking, and Central Analyses
Banking Monopoly Power
30. Income, Poverty, and Health 12. Consumption, Real GDP,
16. Domestic and International and the Multiplier
Dimensions of Monetary Policy Care
31. Environmental Economics 13. Fiscal Policy
17. Stabilization in an Integrated
World Economy 32. Comparative Advantage and the 14. Deficit Spending and the
Open Economy Public Debt
18. Policies and Prospects for
Global Economic Growth 33. Exchange Rates and the Balance 15. Money, Banking, and Central
of Payments Banking
32. Comparative Advantage and the
Open Economy 16. Domestic and International
Dimensions of Monetary Policy
33. Exchange Rates and the Balance
of Payments 32. Comparative Advantage and the
Open Economy
33. Exchange Rates and the Balance
of Payments
xix

PREFACE
How do we motivate students in economics? I believe that we should present them

with economic explanations for what is happening around them and throughout the
world. Theory may be the backbone of our discipline, but its application is the only
way we can help our students understand the importance of economics in their daily
lives and for their futures.
New and Increased Emphasis on Behavioral

Economics
The theory of bounded rationality forms the basis of behavioral economics. This
theory is expanded upon in the introductory chapter, and in many other chapters.
More importantly, in keeping with the desire to show the applicability of theory,
every single chapter in the 19th edition has a behavioral economics example.
New Additional End-of-Chapter Problems

In this 19th edition, you will find six to eight new problems at the end of each
chapter. Many are based on the interactive graphs within the chapter. They require
students to apply their critical thinking skills learned from the chapter.
New Questions in MyEconLab

With the 19th edition, we have added close to 500 new assignable questions
in MyEconLab, expanding the database of questions to an average of over 100
questions per chapter.
MyEconLab—Getting Better with Each Edition

• Figure Animations: Figure animations provide a step-by-step walk-through of
select figures. Seventy percent of all figures are animated. Figure animations have
been updated to reflect changes to the 19th edition.
• Concept Checks: Each section of each learning objective concludes with an on-
line Concept Check that contains one or two multiple-choice, true/false, or fill-in
questions. These checks act as “speed bumps” that encourage students to stop and
check their understanding of fundamental terms and concepts before moving on
to the next section. The goal of this digital resource is to help students assess their
progress on a section-by-section basis, so they can be better prepared for home-
work, quizzes, and exams.
• Graphs Updated with Real-Time Data from FRED®: Data graphs in the eText
are continually updated with the latest data from FRED®, which is a comprehen-
sive, up-to-date data set from the Federal Reserve Bank of St. Louis. Students can
display a pop-up graph that shows new data plotted in the graph. The goal of this
digital feature is to provide students with the most current macro data available
so that they can observe the changing impacts of these important variables on the
economy.
Assessments using current macro data help students understand changes in
economic variables and their impact on the economy. Real-time data analysis
exercises in MyEconLab also communicate directly with the Federal Reserve
Bank of St. Louis’s FRED® site and automatically update as new data are available.
xx

PREFACE xxi
These exercises allow students to practice with data to better understand the current economic
environment.
42 PART 1 | INTRODUCTION
• Self Checks: Self Checks appear at the end of every Learning Objective section. Self Check ques-
tions allow students to check their understanding ofsomewhere else in the country,
the key concepts they just U.S.reademployment
beforewould moving decline. That has never
happened and never will.
on. All questions and answers are available in MyEconLab. When nations specialize in an area of comparative advantage and then trade with the
• Dynamic Study Modules: Dynamic Study Modules, restavailable
of the world,within MyEconLab,
the average standard of living continuously
in the world rises. In effect, interna-
S E L F CH E C K tional trade allows the world to move from inside the global production possibilities
assess student performance on key topics in real time, and provide additional and personalized
curve toward the curve itself, thereby improving worldwide economic efficiency. Thus,
Visit MyEconLab
practice content. Dynamic Study Modules exist for every chapter andinare
to practice
all countries that engage tradeavailable on all
can benefit from mobileadvantage, just as regions
comparative
problems and to get instant
devices for on-the-go studying.
feedback in your Study Plan.
in the United States benefit from interregional trade. MyEconLab Concept Check
MyEconLab Study Plan
• Digital Interactives: Digital Interactives are dynamic and engaging assessment activities that pro-
mote critical thinking and application of key economic principles. Each Digital Interactive has 3–5
progressive levels and requires
Y O Uapproximately
A R E T H E R E20 minutes to explore, apply, compare, and analyze
each topic. Many Digital Interactives include real-time data from FRED®, allowing professors and
Reducing the Opportunity Cost of Waiting in Gridlocked Traffic, at a Price
students to display, in graph and table form, up-to-the-minute data on key macro variables. Digital
Interactives can be assignedFourand graded
decades within
ago, Howard Becker,MyEconLab, or used
founder of Becker Automotive, Inc., as a lecture
including tool
clients, to encourage
personal assistants, or secretarial support staff.
started a Los Angeles business installing sound systems in homes Thus, buyers of Becker’s converted vans and limos can, while paying
engagement, classroom conversation, and group
and vehicles. His company work.
is still based in that area, but now it spe- chauffeurs to traverse the thick traffic, avoid sacrificing time that they
• Learning Catalytics®: Learning
cializes in Catalytics ® generates
reducing the opportunity cost of theclassroom discussion,
hours that people could devoteguides lectures,
to activities and
they otherwise would pursue at home or in an
spend traversing congested highways and surface roads. Becker’s office setting.
promotes peer-to-peer learning with real-time analytics. Now students can use any device to inter-
customers are individuals who had previously been among U.S. com-
act in the classroom, engage with
muters whocontent, and 7even
devote a combined billion draw
hours perand share graphs.
year self-driving CRITICAL THINKING QUESTIONS
• Enhanced eText for MyEconLab: The Pearson eText for MyEconLab1. gives
their vehicles slowly through nearly gridlocked traffic instead of pur- How muststudents access
the dollar values to
of the opportunity costs of time compare
suing other activities. for a typical purchaser of a vehicle converted by Becker Automotive,
their textbook anytime, anywhere.At prices In
that addition
typically start to note-taking,
at $150,000, Becker’s firmhighlighting,
converts Inc.,and
versusbookmarking, the them? Explain briefly.
commuters who do not purchase
Pearson eText offers interactive and sharing
chauffeur-driven features.
vans and limos into mobile offices or custom-built 2. Why do you suppose that economists have estimated the dollar value
homes away from home. Becker’s converted vehicles provide amenities of the combined opportunity costs of time that U.S. commuters spend
that include built-in touchscreen devices with remote access to cloud- in gridlocked traffic to be in excess of $150 billion per year? Explain
based information networks and home-film library systems, bathrooms, your reasoning.
and even exercise bicycles. Many vehicles provide sufficient seating—
Continuing Emphasis on Public Policy and, if desired, accessories and equipment—for several passengers, Sources are listed at the end of this chapter.
Public policy issues concern your students just as they concern everyone else. Much of the theory
throughout this text relates to exactly how changing public policies affect all of us.
• In Chapter 2, read-
ers will find out
why “free” tax-filing
ISSUES &
Specialist 2nd Class Kristopher Kirsop/Released
services from the IRS

really aren’t free.
APPLICATIONS
U.S. Navy photo by Mass Communication
• When water becomes

scarcer because of
droughts, how politi- The U.S. Navy Expands
cians respond affects
everyone, as your
Production Possibilities
students will read in via a New Technology
Chapter 4.
• Poorly defined prop- CONCEPTS APPLIED The U.S. Navy faces an on-going task of producing ship-borne weapons that
deliver explosive forces to remote targets. At the same time, the Navy is
erty rights to airspace Production Possibilities
seeking to expand its fleet of ships afloat. Consequently, the Navy faces an
occupied by drones is Production Possibilities economic problem involving production possibilities.
an issue addressed in Curve
Chapter 5 Technology
M02_MILL8777_19_SE_C02.indd 42 24/10/16 4:36 PM

Another random document with
no related content on Scribd:
men are at present enthusiastic riders; for where the girls are there
shall the men be also.
HALLOWE’EN.
(October 31st.)
I.
At Hallowe’en, so calm and still,

All frisky spirits are astir:
The fairies haunt the vale and hill,
And witch-like elves meet to confer.
II.
But we can well keep free from those,

For by the fireside round about
Sweet rosy maids meet with their beaux
To spell their future fortune out.
III.
Chestnuts or walnuts, pair by pair,

Are put upon the living coals,
And if they lie contented there
They represent two happy souls.
IV.
Some eat an apple, while they stare

Within the telltale looking glass:
And as they eat and comb their hair
The fated face is sure to pass
V.
Before their eyes. Some pull the kale;

Some try the oats, or size the sack;
Some seek the rivulet in the vale,
Some hemp seed sow for answer back.
VI.
Ah, me! How many spells of old

To tell our fortunes I have seen;
No sweeter charm does memory hold,
Than those past hours of Hallowe’en.
A LIFE’S SPECULATIONS.
When a wee child I used to wonder why
The bright stars fell not from the bending sky,
For I no sky line saw to hold them by,
When told of angels up beyond the blue,
I used to wonder if the winged crew
Flew races, when they’d nothing else to do.
A little later, as around I played,

And saw that young girls were so frail and ’fraid,
I wondered why on earth a maid was made.
No mortal use the timid things could be
That a philosopher of six could see—
So great a mystery was the sex to me.
A few years more, when youth’s expansive flame

Put my philosophy of six to shame,
A greater mystery the sex became.
Next into college I for knowledge went
And wondered at the time so vainly spent—
Four years for learning things not worth a cent!
A year of lounging in that sacred place,

Then round the world to see the human race
I wandered, and my wonder grew apace.
More than seven marvels had the world for me,
And this the greatest: why the poor should be
Slaves of the rich men, when they might be free.
But having had sufficient time to cool

My fancy in this tough world’s roughest school
I give up life’s conundrums—as a rule.
Yet such is habit—howsoe’er we try—
The other day I fell to wondering why
In Yankee taverns they serve cheese with pie.
Henry W. Austin.
AN ACCIDENTAL ROMANCE.
By Matthew White, Jr.
His friends called Radnor Hunt a cynic. He laughed lightly when
accused of being cold and unresponsive, and declared that he must
have imbibed the trait unconsciously from the nature of his work, for
winter landscapes were his specialty. But now and then when he
was alone, in the little studio over the stable in Fifty Fifth Street,
where he worked by day and slept by night, he would look at himself
in the mirror over his dressing case and—laugh again, such a hard,
bitter laugh, that sometimes he shuddered on hearing it, and glanced
fearfully around him as if dreading to see the author of the sound.
“I, a cynic, a woman hater!” he would mutter, putting his hand
above his eyebrows and leaning forward to peer more closely at
himself in the glass. “Bah! how blind the world is! Who would believe
from this what rages here?”
And with a quick motion he would sweep his hand across his face
and place it for an instant over his heart. Then, as if in utter disgust
with himself, he would hastily turn out the light, fling himself on his
bed, just as he was, and sleep thus till morning.
And yet Radnor Hunt was reckoned a moderately fortunate young
man. He had come to New York knowing no one, and now, after a
two years’ residence, he had had a picture in the Water Color which
brought him orders for three others, while half a dozen periodicals
were always ready to pay well for his “pot boilers,” the pen and ink
work which Radnor despised.
He was an only child. His father had been a country doctor in a
Connecticut town, who, contrary to the usual rule, had been proud of
his son’s artistic tastes and had encouraged him in them. This,
instead of being grateful for it, Radnor frequently recalled with bitter
regret.
“If he had only laughed at my first attempt, taken my paints away
from me and put me to some business,” he would sigh. “Then
perhaps——”
But here he usually broke off his reflections, while a strange light
would come into his eyes. It was in this mood that he frequently
sprang up from his work to jam his hat fiercely over his brows and go
out to take a long walk that was utterly aimless.
Mr. and Mrs. Hunt had both died within a few months of one
another the winter before Radnor left home. He was twenty three
then, and that summer he had passed with his cousin, Mrs. Stilton
Barnes, in the Adirondacks. Mrs. Stilton Barnes was a Philadelphian
who lived south of Market Street and who had at once conceived a
great fondness for the handsome young relative whom she met for
the first time in thirteen years at his mother’s funeral.
Radnor well remembered having worshiped her at a respectful
distance when he was a small boy. She was then a happy hearted
girl just leaving her teens behind her, and with her head too full of
lovers, one of whom might turn out to be a husband, to pay much
attention to the little fellow in knickerbockers whom she often caught
looking at her with unveiled admiration in his great blue eyes.
Now positions were reversed. Camilla Hunt had become Mrs.
Stilton Barnes, the wife of the well to do jeweler. The plumpness that
had been the beauty of her youth had transformed itself into a
buxomness that positively shocked Radnor when he first beheld it.
He wondered how he could ever have found this woman charming
and—here she was becoming really enthusiastic over him.
“My dear cousin,” she exclaimed, “why did you not let me know
what I was missing? Why, you would have been a treasure indeed at
my Friday evenings last winter,” and she would put up her lorgnettes
for another survey which sent the blood surging to poor Radnor’s
cheeks and made him look handsomer than ever.
Camilla Barnes was thoroughly candid and outspoken. Before she
left Cheltenham she told Radnor that if she had had the slightest
idea that he had developed into such a presentable specimen of
humanity she would have had him out of that sleepy old town long
before.
“It’s too late in the season to do anything now,” she added, “but I
must insist on your spending the month of August with us at Lorimac.
We shall then have plenty of opportunity to talk over the future.”
Nor would she go away until Radnor had given his consent. After
all, she was his cousin, and if she chose to extend to him the
hospitality of a hotel, why should he not accept it, as he would have
done at her own home?
Radnor’s pride was the most notable element in his make up. It
was indomitable, unyielding. Even as a boy it permeated his life, and
made him miserable whenever in his studies he fell short of the high
standard he had set for himself.
But for the reasons given he finally decided to accept his cousin
Camilla’s invitation. If he could have read the future and foreseen the
consequences of that Adirondack visit, he would have shunned the
place as a plague spot.
At least this was what he told himself almost always when he
recalled it. At other times he felt that he would not have had the
experience left out of his life for all the joys that the entire span of
three score and ten might have in store for him.
Even before this period he had gained some fame and a little
money as an illustrator of children’s books, and now that the last tie
that bound him to Cheltenham was severed by his mother’s death,
he decided that he would take the step which the nature of his work
rendered almost a necessity—settlement in some city close to his
markets.
However, this could now easily be deferred till fall, and meantime
he had the estate to close up, and then the month with Mrs. Barnes
would doubtless do much toward the shaping of his plans.
Radnor had traveled but little, still he possessed that quality of
adaptiveness that made him seem easy and at home wherever he
was. His mother had been a Bournie, of Huguenot descent, and of
the most delicate refinement. Radnor inherited this quality from her
in very large degree, tempered with the rugged persistency and vigor
of his father.
Her cousin’s arrival at the Lorimac House created all the sensation
Mrs. Stilton Barnes could have wished. With the tact of a true
diplomatist she had said but little about him beforehand.
Expectations too fully roused, she well knew, were almost invariably
doomed to disappointment. So she had merely told a few of her most
particular friends that she expected a cousin of hers from New
England.
“A young artist,” she added, “who has recently lost his mother, so I
shall not be expected to give him a gay time.”
Men, of course, were scarce at this distance from the cities. There
were any number of boys in their teens, and several dudes, who
spent almost as much time as the ladies in devising new
combinations of sash and hat bands, outing jackets and shirts. This
fact had been uppermost in Camilla Barnes’s mind when she asked
Radnor to come to Lorimac. She felt that he would tower head and
shoulders above all the other males at the hotel.
“And who knows but he may make a rich catch?” she even
whispered to herself.
It was a reversal of things, she knew, this exploiting of a man, but
then the very uniqueness of the process added zest to it for this
woman whose nature craved excitement of this sort above all other
things.
When Radnor’s train came in she walked across the road to the
station to meet him. She had seen to it that he took the express,
which would bring him to Lorimac just before the supper hour, when
everybody was on the piazzas, looking out for the new arrivals.
“You are very welcome, Radnor,” she said, when he came up to
her amid the crowd.
She gave him both her hands, forcing him to drop his valise while
he took them for a moment. Then they walked across to the hotel
together, and while he registered, Mrs. Barnes tapped her jeweled
fingers together and glanced half carelessly around the great office,
with its big fire place in one corner and the many groups scattered
about. And she saw in that apparently casual glance all she wanted,
and knew that the first impression Radnor had made was an
extremely favorable one.
That evening, however, she introduced him to no one. They sat
together in a remote corner of the piazza, talking over old times, the
future, the walks and drives around Lorimac.
Radnor said but very little. It was not necessary. His cousin was
fond of talking, and she certainly found Radnor a most attentive
listener. The only fault she had to find with him was that he did not
ask questions enough. There were dozens of pretty girls in the dining
room at supper time, in a few of whom it might be supposed he
would have some little interest. But he always allowed Camilla to
speak of them first, except in one instance, and then he asked about
a young lady whom she did not know and had not observed.
“She came up on the train with me,” Radnor explained then, and
Mrs. Barnes made a resolve to find out the entire facts about the
new comer before she went to sleep that night.
This was not difficult to do. Pleading fatigue from his journey,
Radnor went to his room before ten, leaving his cousin to join a
group of ladies who each evening occupied the same corner of the
drawing room, and gossiped—gossiped of all that went on before
their eyes, and of much else that never went on at all, with
indefatigable zeal.
“Oh, didn’t you see her?” exclaimed Mrs. General Barentham
when Mrs. Barnes mentioned the matter. “Ah, of course, you were
absorbed in that charming cousin of yours. I trust you are not going
to make a practice of keeping him entirely to yourself. But about Miss
Bellman; you must have heard of her coming. She is that New York
girl who is so immensely wealthy in her own right, and with it all is so
sublimely beautiful. Did you ever, Mrs. Penford, see more exquisite
coloring?”
“Never,” was Mrs. Penford’s emphatic acquiescence.
“And such repose of manner,” went on Mrs. Barentham.
“Are you sure about that heiress part of it?” inquired Mrs. Barnes
earnestly. “You know how often these rumors get out without one
particle of foundation.”
“Oh, that is perfectly trustworthy, my dear,” rejoined the general’s
wife. “The Bellman estate in New York is one of the best known of
the vested interests in the metropolis.”
“With whom is she here?” Mrs. Barnes now wanted to know.
“With her uncle’s family, the Grants; very distinguished people, too.
The McBrintons know them, so I suppose we shall all be presented
tomorrow.”
It was very seldom that Camilla Barnes’s conscience troubled her,
and on this particular night it was not that which kept her awake long
after she had sought rest. The single instance of Radnor’s
manifestation of interest in the girls of the Lorimac, the exalted
position financially occupied by Olive Bellman, the coincidence of
their having come up on the same train—these three facts combined
kept Camilla’s brain in busy ferment for many hours.
“But I must be cautious,” she kept reminding herself. “I must make
haste very slowly. I wonder how long they are going to stay—how
much time they will give me?”
She was introduced to the Grants the next morning by Miss
McBrinton, while the ladies were all gathered with their fancy work in
a shady corner of the piazza. Olive was included in the presentation,
but she seemed scarcely to heed the ceremony.
She had no work in her lap, but sat there with one hand on the
railing of the piazza, while her eyes were fixed most of the time on
the hills across the lake.
Radnor had gone by himself for a row. Mrs. Barnes never ventured
on the water except for a few minutes in the evening. She had told
him where to look for her when he came back. Everything had turned
out so far exactly as she had planned. She hoped he would not stay
out too long. With this one thought she returned to active
participation in the discussion of Mrs. Dorrington’s nursemaid, who
insisted on calling herself a governess, and hence declared that she
had a perfect right to sit at the first table with the others.
Olive rose presently and walked towards the front door, where she
remained standing for a while, evidently drinking in to the full the
exquisite view of the lake from this point.
“My dear,” called her aunt, “you are in the sun. Let me send for
your hat.”
“Don’t bother, Aunt Elizabeth. I was just going up stairs, and I’ll get
it myself.”
The girl disappeared, and at that moment Mrs. Barnes caught
sight of Radnor returning in his boat.
And the same thing happened during the next two days. It seemed
as if fate had decreed that the two were not to meet.
But Camilla had ascertained that the Grants were to remain
through the month, and she endeavored to possess her soul in
patience, feeling that after all this was the very best of beginnings.
“How like him she is,” she said to herself more than once, when
noticing traits in Olive that made her seem different from the other
girls. “They say that men always find their ideal in their opposites,
but then it is the exceptions that prove the rule.”
Of Olive herself she never once spoke to Radnor, but then so far
as the girl’s position and prospects went there was no need for her to
say a word. By nightfall of the day succeeding her arrival the facts
were known throughout the hotel. Radnor had played two or three
games of billiards with General Barentham, and the general was
almost as great a gossip as his wife.
It was not until the third evening that the meeting took place, and
then, oddly enough, it came about without the agency of Camilla at
all, and while she was working hard to compass it in an entirely
different way—seated in the writing room with Mr. McBrinton trying to
persuade him to join her in getting up a launch party.
Radnor meanwhile was in the parlor, entertaining a large company
of boys with stories of his bicycling experiences. It was while thus
engaged that Mrs. McBrinton touched him on the shoulder and
asked him if he would not make up a hand at whist.
When Mrs. Barnes came in a few moments later she caught her
breath quickly on beholding her cousin seated vis-a-vis to Olive
Bellman at the card table.
After that the acquaintance progressed as rapidly as she could
have desired. Nearly every morning found the two on the tennis
courts, where they were the most evenly matched pair of players that
the Lorimac had seen that season. Then in Olive Radnor found as
enthusiastic a lover of the water as himself, and the afternoons were
devoted to exploring tours around the shores of the lake.
Mrs. Grant or Mrs. McBrinton generally accompanied them on
these expeditions, and it was odd to hear them sing Radnor’s
praises among themselves.
He was naturally chivalric towards all, and the little attentions he
bestowed on the chaperones were so self evidently spontaneous
and disinterested that the hearts of the old ladies were completely
won.
Mrs. Barnes felt as though she were on wings. It was a real effort
for her to keep her exultation under. Indeed, even now she never
trusted herself to mention Olive’s name to her cousin.
Thus affairs went on till the last week in August, when the grand
Venetian Carnival was held on the lake. General Barentham took the
greatest possible interest in the celebration and was determined that
the Lorimac House should outdo all competitors in the grand
procession. He constructed a Lohengrin swan boat out of his
naphtha launch, and after begging and entreating for three days,
almost on his knees, succeeded in obtaining Olive Bellman’s
consent to be the Venus who should sail in it.
“But you don’t want a Venus, General Barentham,” she protested.
“Venus belongs to Tannhaeuser. You want a Lohengrin if you are
going to have a swan boat.”
“I want nothing of the kind,” the general responded. “I want you,
and I am going to have you,” and in the end he triumphed.
Radnor was selected to be Olive’s companion in the launch and
do the steering in the dress of the Swan Knight, while the engineer,
concealed as deftly as possible by the counterfeited wings, was
tucked away in the stern. General Barentham was here, there and
everywhere, managing the rest of his flotilla, and the guests of the
Lorimac not in the “show,” as Radnor insisted on terming it, were
accommodated on the steam launch Meteor.
The procession started at four o’clock to make the tour of the lake,
and the plaudits that greeted the swan barge everywhere were loud
and prolonged. But the engine of the launch worked badly, and once
the engineer was forced to run ashore to see what he could do at
easing matters.
This put them behind, and when they started on again it was
already beginning to grow dark.
The wind was rising too, and presently the boat was tossing in
quite a sea. Radnor took off his coat and insisted on wrapping it
around the “Venus,” and they both cowered behind the windward
wing of the Swan to escape as much as possible the pelting rain that
now began to descend.
Not a very romantic situation truly, but nevertheless Radnor found
in it his perilous turning point. Olive was so brave, so patient, so
confident in his ability to bring them safely into port, showed to him,
in short, a side of her character that had not yet been presented to
him, that—well, he went down before it as so many men before him
have done before their fates, and when he helped a wet, bedraggled
Venus out of the boat at the Lorimac pier he realized that the sooner
he got out of the Adirondack woods the better for his peace of mind.
It had all come on him like a lightning stroke, or, as he preferred to
compare it himself, with the swiftness of the flash in night time
photography. He had gone on so joyously, so confidently, with no
thought beyond the contentment of the present.
“But why should I not go on and be happy?” he asked himself that
night as he tried calmly to review the situation.
To be sure there were Miss Bellman’s millions, contrasted with his
own poverty. The world would be sure to talk, but then he would wait
and work, and perhaps some day he would feel that the gulf between
them was not too wide to be spanned by their clasped hands. And
with this ravishing possibility for his last waking thought he fell
asleep.
He woke early, and with the new hope strong within him, he felt he
could not endure the confinement of four walls until his customary
rising time. He dressed and went out to walk beside the lake, which
now reflected back the overshadowing hills from a mirror-like surface
that it seemed could not be the same on which the swan boat had
been so rudely tossed but yesterday. He had never seen the Lorimac
so peaceful; all was quiet in the early morning; even the birds
seemed to have hushed their music for the moment. There was not a
sound but the tiniest lap of the ripples against the stony shore at his
feet and—yes, here was a jarring discord overhead as his walk
brought him just beneath the summer house.
Two French nursemaids were sitting there, talking in their own
language, in which Radnor was well versed.
“See there!” one of them exclaimed. “Here he comes now.
Madame Barnes arranged it well, did she not, that they go off in the
swan boat? Such a fortune is not to be trapped every day, and as
she couldn’t marry it herself, she wanted to have it in the family
somewhere. It’s the talk of the house how she’s been playing off the
handsome cousin for the——”
But by this time Radnor was out of hearing, his cheeks flaming
with indignation, his teeth set fiercely together, his fingers tightly
pressed against his palms.
So he had been a puppet in the hands of the scheming Camilla. “A
very docile and obedient little puppet,” as he told himself, for he had
gone and done the very thing expected of him.
As he would have scorned and loathed another man who would
have deliberately lent himself to such a scheme, he now scorned
and loathed himself, all innocent as he was. And his cousin Camilla?
He felt that he could not bring himself even to see her again.
The common talk of the house, forsooth! Aye, this was easily
believable, for had he not heard it with his own ears from the very
nursemaids? The Bournie pride rose tumultuously in Radnor’s
breast. He wanted to get away from Lorimac, from men and women,
from himself, from everything that could remind him of his
humiliation.
His walk had now brought him to the fence which separated the
hotel grounds from the forest adjoining. Placing his hands on the
topmost rail Radnor vaulted lightly over and plunged into the
underbrush, taking a certain sort of satisfaction in trampling down the
low bushes that lay in his path.
For an hour he roamed on, by some instinct always holding the
lake in view. It seemed that he must keep in motion or be
overwhelmed by the wild, maddening thoughts that were surging
through his brain.
He could liken himself only to Tantalus, about to drink of the life
giving draught, to have it dashed from his very lips. But in his own
case another cup had been substituted—a cup so bitter and revolting
that, strong man as he was, he shuddered at the realization of its
existence.
When or why he turned around he knew not, but presently he
found himself approaching the hotel again. As soon as he caught
sight of its outlines he paused, half determined to strike off into the
deeper woods. And at that instant he heard his name called.
It was his cousin Camilla. She had been out looking for him, and
now came forward, keen anxiety on her face and in her voice, as she
exclaimed: “My dear Radnor, what has come over you? I have been
really concerned about you. Here it is almost ten and you have not
been to breakfast yet. A maid said you had come into the woods,
and you can imagine how eager I was to find you when I ventured
here myself.”
She held up her gown, to the trimming of which a many forked twig
had fastened itself, shaking it at him suggestively. But he neither
answered her smile with another, nor made any motion to disengage
the dress. His face took on a hard, stern look Camilla had never
seen on it before, and if Radnor had not been too fully preoccupied
to notice it he would have been interested in observing the fading out
of the smile on hers and the creeping into its place of a strange
expression of commingled fear and defiance.
There was a moment’s pause, the silence broken only by the
stirring of the leaves overhead in the gentle breeze that had just
sprung up, and by the shrill voice of one of the Carew boys calling
out—“Love, fifteen,” on the tennis grounds. Then Radnor spoke.
“Why did you do this, Camilla?” he said. “No,” he went on
hurriedly, as she opened her eyes in real or assumed mystification.
“You need not waste time in asking what. I shall tell you all. You
wanted me to marry rich, deliberately planned to have me do it, as
any silly match making mother with a daughter to get off her hands
would have done, and now the whole scheme is the talk of the
servants’ hall and the sculleries. I am sorry to have to disoblige a
lady, but under the circumstances I must make my adieux to you at
once.”
He lifted his hat and struck off towards the hotel.
“Radnor, you are mad,” Camilla called after him, but he never
turned his head; and it was the talk of the house for the rest of the
day that Radnor Hunt and his cousin had breakfasted separately.
But the gossips had a yet richer feast in store. Radnor left on the
noon train, and—how it got out no one exactly knew—but it was
rumored for a fact that he had insisted on paying his own bill. Mrs.
Stilton Barnes took her departure almost immediately afterwards,
and the following week the Grants left for Au Sable Chasm, Miss
Bellman of course accompanying them.
All this, as has been explained, happened two years previous to
the opening of the present account of Radnor Hunt. He had gone
straight from Lorimac to New York, and plunged into work with
desperate earnestness. And so well had he succeeded that, starting
in the metropolis without a friend, he had now not only a comfortable
income, but would have been warmly welcomed at a dozen homes
had he chosen to accept the invitations he received.
He was even chary of companionship with his own sex. It seemed
as if his faith in the entire human species had been shaken, and
while his fellow artists and the literary men with whom he came in
contact, all liked him, none ever succeeded in becoming more than
an acquaintance.
And thus, lonesome as a hermit, Radnor lived on, taking his
successes without enthusiasm, for there was no one else to reap the
benefit of them. He suffered as one without hope, for no matter now
what fame or riches he might attain, he felt that after what had
happened he could never make any attempt to secure the only thing
in the world that was precious to him.
Sometimes during his long solitary vigils in the studio he would try
and plan how things might have gone if he had not chanced to
understand French. Already before the Carnival he had received an
invitation to call if he made up his mind to settle in New York. He
might have been very intimate at the great house on Madison
Avenue by this time. He passed it now and then in his walks, and
once he met Olive just as she was crossing the sidewalk to step into
the carriage.
She smiled as she bowed, and turned partially as if she expected
he was going to stop, but he walked on rapidly, and always after that
avoided the avenue whenever possible.
The first summer after his settlement in New York he spent in
Europe, traveling and sketching; the second he went to Labrador
with a scientific expedition. From this he had now returned, as the
early October frosts were sending the reddened leaves skurrying to
earth, and the out of town sojourners were hurrying back to their city
homes.
Radnor experienced a strange feeling of gladness when he caught
sight of the uneven roof lines of the Knickerbocker town as he
steamed up the bay. And yet he expected no one to meet him, and
anticipated taking up the old life just where he had left off.
Nevertheless this sense of odd contentment abided with him all
through the turmoil and confusion of arriving, and sent him for the
night to one of the new palace hotels instead of to his lonely quarters
in the studio.
Had time cured the old wound, he asked himself? But no; he knew
that could not be, and he expected to wake up the next morning his
old self again.
But the morrow found him still with the same inexplicable
buoyancy of spirit, and the business friends whom he called on
during the forenoon congratulated him on the great good his trip had
done him. Among the orders he received was one for a sketch in
Central Park, and early in the afternoon he went up to the city’s great
pleasure ground to refreshen his memory of it.
It was Saturday, and children were everywhere. A crowd of them
of all sizes were eagerly gathering around the Lohengrin boats as
Radnor strolled along the path that skirts the pond.
The swan-like craft sent the young man’s mind backward with a
rush; and yet in his present mood he did not try to stem the current
of thought. On the other hand, he astonished himself by stepping
aboard one of the boats for a sail. A nurse with three young charges
occupied the seat with him, and had her hands and eyes fully
occupied in keeping them all out of the water. Radnor took pity on
her at length, and offered to take one of them, a little girl, on his
knee.
This arrangement delighted the child, to say nothing of relieving
the nurse, and presently the little thing began to prattle away to
Radnor as though he were an old acquaintance.
“I’ve seen you before,” she presently announced, turning her gaze
from the water in front of them to look up earnestly into his face.
“Oh, I guess not,” he answered, smiling down into the deep blue
eyes, the brows of which now began to knit in perplexed thought. “I
never saw you in my life before today, so how could you see me?”
“Yes, I did!” she persisted, “and it was in a boat with a swan to it
just like this.”
Radnor started. What could the child mean? She was certainly not
over six. It was not possible she could remember that Lake Lorimac
incident of two years before.
“Where was it?” he asked. “Here in Central Park?”
“Oh no, it was in a picture, and Cousin Olive wouldn’t tell me
where the boat was, but she was in it too, all dressed in white and—
why, then you must know Cousin Olive. I wonder if you like her as
well as I do. Only she was cross—almost, when Flo and I found that
picture. It was all wrapped up and—oh dear, she told me never to tell
anybody and it would be all right, and now I’ve told you. But you
won’t tell, will you?”
Radnor, however, was not compelled to make a promise. The boat
at this point reached the landing stage again, and the nurse carried
all her charges ashore with small ceremony, the “polite gentleman”
seeming scarcely to notice that they were gone.
He sat there perfectly still while the boat made another tour of the
lake. He was recalling incidents which he had thought never to
recollect again. One of them, that of the photograph Miss Carew took
of the swan boat just before they started. So Olive Bellman had kept
this secretly as a treasure, not as a forbidden object. Radnor had
met Mr. Grant more than once and had been asked why he did not
call. What if—well, what if there were two sides to the picture, and
money were to stand in the way of the happiness of the one who
possessed it because of pride in the other?
How should he, Radnor Hunt, deal with the problem?
This was the question that kept the young artist’s thoughts active
as he strode homewards that afternoon. The air was coming on chill
as the sun dipped towards the west, and the dead leaves blew up
about him spitefully as he walked rapidly along, but somehow it
seemed to Radnor, as one struck him in the face now and then, as if
they were not the withered remnants of a dead summer, but the
hopeful blossoms of a dawning spring.

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I could not have found a better

Cataloging-in-Publication Data is on file at the Library of Congress

ISBN 10: 0-13-447877-0

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PART 2 Introduction to Macroeconomics and Economic Growth

PART 4 Money, Stabilization, and Growth

PART 5 Dimensions of Microeconomics

PART 7 Labor Resources and the Environment

PART 8 Global Economics

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EXAMPLE 2 Scarcity and the World of Trade-Offs 27

EXAMPLE 3 Demand and Supply 49

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EXAMPLE 4 Extensions of Demand and Supply Analysis 75

EXAMPLE 5 Public Spending and Public Choice 100

EXAMPLE 6 Funding the Public Sector 124

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PART 2 Introduction to Macroeconomics and Economic Growth

EXAMPLE 7 The Macroeconomy: Unemployment, Inflation, and

EXAMPLE 8 Measuring the Economy’s Performance 164

POLICY EXAMPLE 9 Global Economic Growth and Development 189

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PART 3 Real GDP Determination and Fiscal Policy

EXAMPLE 11 Classical and Keynesian Macro Analyses 232

EXAMPLE 12 Consumption, Real GDP, and the Multiplier 253

INTERNATIONAL POLICY 13 Fiscal Policy 281

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APPENDIX D Fiscal Policy: A Keynesian Perspective 300

POLICY EXAMPLE 14 Deficit Spending and the Public Debt 303

PART 4 Money, Stabilization, and Growth

EXAMPLE 16 Domestic and International Dimensions of Monetary

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PART 5 Dimensions of Microeconomics

EXAMPLE 20 Consumer Choice 437

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APPENDIX F More Advanced Consumer Choice Theory 455

EXAMPLE 21 Rents, Profits, and the Financial Environment of

PART 6 Market Structure, Resource Allocation, and Regulation

EXAMPLE 23 Perfect Competition 510

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EXAMPLE 25 Monopolistic Competition 559

EXAMPLE 26 Oligopoly and Strategic Behavior 578

EXAMPLE 27 Regulation and Antitrust Policy in a Globalized

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PART 7 Labor Resources and the Environment

POLICY EXAMPLE 29 Unions and Labor Market Monopoly Power 648

EXAMPLE 30 Income, Poverty, and Health Care 668

POLICY EXAMPLE 31 Environmental Economics 692

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PART 8 Global Economics

EXAMPLE 33 Exchange Rates and the Balance of Payments 732