MankiwMI_IM_t_0324319088g 12/29/05g 11:19gPMg Pageg1
Instructor's Manual with Solutions Manual
g g g g
PrinciplesofMicroeconomics g g
FOURTH EDITION
g
N. Gregory Mankiw
g g
Harvard University
g
Prepared by g
Linda Ghent
g
Eastern Illinois University
g g
, Instructor’sgManual
PrinciplesgofgMicroeconomics,g4thgEdition
N.gGregorygMankiwgPrepar
edgbygLindagS.gGhent
VP/EditorialgDirector: Sr.gProductiongProjectgManager: AssistantgEditor:
JackgW.gCalhoun EmilygS.gGross EringBerger
Editor-in-Chief: ManagergofgTechnology,gEditorial:
Ancillaryg Coordinator:
AlexgvongRosenberg VickygTrue
EringM.gDonohoe
Publisher: TechnologygProjectg Editor:
StevegMomper DanagCowden ArtgDirector:
MichellegKunkler
Sr.gAcquisitionsgEditor:
MikegWorls WebgCoordinator: Productiong Artist:
KarengSchaffer PattigHudepohl
Developmentalg Editor:
JanegTufts InternalgandgCovergDesigner:
Sr.gManufacturingg Coordinator: StrattongDesign
Contributingg Editors: SandeegMilewski
SarahgK.gDorgergJennif CovergIllustration:
ergE.gBaker Productiong House: TategGallery,gLondon/ArtgResource,gNY
OffCentergConceptgHouse
Sr.gMarketinggManager: InternalgIllustrator:
BriangJoyner Printer:g Darb WilliamgLow/CobaltgIllustrationgServices
ygPrintinggAtla
Assoc.gMarketinggCommunications nta,gGA
gManager:
SarahgGreber
COPYRIGHTg©g2007 ALLgRIGHTSgRESERVED.gNogpartgof Forgpermissiongtogusegmaterialgfromgthis
ThomsongSouth- thisgworkgcoveredgbygthegcopyrightghe gtextgorgproduct,gsubmitgagrequestgonlin
Western,gagpartgofgThegThomsongCorp reongmaygbegreproducedgorgusedginga egatghttp://www.thomsonrights.com.
oration.gThomson,gthegStarglogo,gandgS nygformgorgbyganygmeans—
outh- graphic,gelectronic,gorgmechanical,ginc Forgmoreginformationgaboutgourgproduct
Westerngaregtrademarksgusedghereingu ludinggphotocopying,grecording,gtapin s,gcontactgusgat:
nderglicense. g,gWebgdistribution,ginformationgstora
gegandgretrievalgsystems,gorginganygot ThomsongLearninggAcademicgResourcegC
PrintedgingthegUnitedgStatesgofgAmerica hergmanner— enter
1g 2g 3g 4g 5g 09g 08g 07g 06 exceptgasgmaygbegpermittedgbygtheglic 1-800-423-0563
ensegtermsgherein.
ISBNg0-324-31908-8 ThomsongHighergEducation
5191gNatorpgBoulevard
Mason,gOHg45040gUS
A
,Preface
Theginstructor’sgmaterialgthatgaccompaniesgthegfivegversionsgofgMankiw’sgPrinciplesgofg Eco
nomics,gFourthgEditiongtextbooksgaddressgthegneedsgofgbothgnovicegandgexperiencedg instr
uctors.gTogmeetgthegneedsgofgthesegtwoggroups,gthisgInstructor’sgManualgwithg SolutionsgMa
nualgcomprisesg bothg chapterg outlinesg andgteachingg tipsg asg wellg asg solutionsgtog allg ofg theg
questionsg andg problemsg foundg ing theg textbook.
LindagGhentgofgEasterngIllinoisgUniversitygpreparedgthegmaingportiongofgeachgchaptergi
ncludinggagsynopsisgofgwhatgisgnewgingthisgeditiongcomparedgtogthegthirdgedition.gHergwo
rkgforgeachgchaptergalsogincludesgaglistgofglearninggobjectivesgandgkeygpoints.gThesegitem
sgaregfollowedgbygdetailedgchaptergoutlinesgthatgfocusgongthegcontentgfoundgingthegtextbo
ok.gHelpfulgtipsgandgiconsgoccasionallyginterruptgthesegoutlines.gThegbombgicong(Warnin
gs)gindicatesgareasgwheregstudentsgmayghavegparticulargdifficultygwithgthegmaterial.gThe
glightgbulbgicong(BrightgIdeas)goffersgideasgforgpresentinggthegmaterialgingagnewgorgmoregt
houghtfulgway.gAlsogincludedgingeachgchaptergofgthegInstructor’sgManualgaregclassroomg
activities,gdevelopedg ingpartgbygCharlesgStullgofgKalamazoogCollege.gEachgactivitygprovid
esgimportantgdetailsgtogassistgingplanninggasgwellgasgclearginstructionsgforgleadinggthegacti
vity.gRecommendedg“PointsgforgDiscussion”gconnectgthegactivitygtogthegrelevantgeconomi
cgconceptsgdiscussedgingthegchapter.
Usinggthesegresources,ganginstructorgcangquicklygreviewgthegchapterglearninggobjectivesg
andgchaptergsummariesgtogmakegsuregtheirglecturegnotesgcovergeverythinggingthegtextgch
apter.gIngaddition,gthegchaptergoutlinesgaregdesignedgasgagbasegforgcreatingglecturegnotesg
forgnoviceginstructors.gTheygmaygalsogbegusedgasgagcompletegsetgofgnotesgforgmoregexperi
encedginstructors.g Therefore,gthisgsupplementgisgalsogavailablegelectronicallygfromgthegpr
oductgsupportgWebgsiteg(http://mankiw.swlearning.com).
Forgqueriesgandggrading,gthegInstructor’sgManualgcontainsgsolutionsgtogexercisesgfromg
thegtextbook.gDeangCroushoreg(UniversitygofgRichmond)gpreparedgmanygofgthegsolutionsg
forgtheg“QuickgQuizzes,”g“gQuestionsgforgReview,”gandg“ProblemsgandgApplications”gfoun
dgingthegtextbook.
, Comparative Table of Contents
g g g
Brief
Core Micro Macro Essentials Macro
Partg1:gIntroduction Partg1 Partg1 Partg1 Partg1
1 Teng Principlesg ofg Economics 1 1 1 1
2 ThinkinggLikegangEconomist 2 2 2 2
3 Interdependenceg andg theg Gainsg fromg Trade 3 3 3 3
Partg2:gHowgMarketsgWork Partg2 Partg2 Partg2 Partg2
4 ThegMarketgForcesgofgSupplygandgDemand 4 4 4 4
5 Elasticityg andg Itsg Application 5 5 5
6g g Supply,g Demand,g andg Governmentg Policies 6 6 6
Partg3:gMarketsgandgWelfare Partg3 Partg3 Partg3
7 Consumers,gProducers,gandgthegEfficiencygofgMarkets 7 7 7
8 Application:gThegCostsgofgTaxation 8 8 8
9 Application:g Internationalg Trade 9 9 9
Partg4:gThegEconomicsgofgthegPublicgSector Partg4 Partg4
10g Externalities 10 10
11g Publicg Goodsg andg Commong Resources 11 11
12g ThegDesigngofgthegTaxgSystem 12
Partg5:gFirmgBehaviorgandgthegOrganizationgofgIndustry Partg5 Partg5
13g ThegCostsgofgProduction 13 12
14g FirmsgingCompetitivegMarkets 14 13
15g Monopoly 15 14
16g Oligopoly 16
17g MonopolisticgCompetition 17
Partg6:gThegEconomicsgofgLaborgMarket Partg6
18g ThegMarketsgforgthegFactorsgofgProduction 18
19g Earningsg andg Discrimination 19
20g IncomegInequalitygandgPoverty 20
Partg7:gTopicsgforgFurthergStudy Partg7
21g ThegTheorygofgConsumergChoice 21
22g FrontiersgofgMicroeconomics 22
Partg8:gThegDatagofgMacroeconomics Partg4 Partg6 Partg3
23g MeasuringgagNation’sgIncome 10 15 5
24g MeasuringgthegCostgofgLiving 11 16 6
Partg9:gThegRealgEconomygingthegLonggRun Partg5 Partg7 Partg4
25g ProductiongandgGrowth 12 17 7
26g Saving,gInvestment,gandgthegFinancialgSystem 13 18 8
27gThegBasicgToolsgofgFinance 14 19 9
28gUnemployment 15 20 10
Partg10:gMoneygandgPricesgingthegLonggRun Partg6 Partg8 Partg5
29g ThegMonetarygSystem 16 21 11
30g MoneygGrowthgandgInflation 17 22 12
Partg11:gThegMacroeconomicsgofgOpengEconomics Partg7 Partg6
31g Open-Economyg Macroeconomics:g Basicg Concepts 18 13
32g AgMacroeconomicgTheorygofgthegOpengEconomy 19 14
Partg12:gShort-RungEconomicgFluctuations Partg8 Partg9 Partg7
33g AggregategDemandgandgAggregategSupply 20 23 15
34gThegInfluencegofgMonetarygandgFiscalgPolicygongAggregategDemand 21 24 16
35g ThegShort-RungTrade-offgbetweengInflationgandgUnemployment 22 17
Partg13:gFinalgThoughts Partg9 Partg8
36g FivegDebatesgovergMacroeconomicgPolicy 23 18
Instructor's Manual with Solutions Manual
g g g g
PrinciplesofMicroeconomics g g
FOURTH EDITION
g
N. Gregory Mankiw
g g
Harvard University
g
Prepared by g
Linda Ghent
g
Eastern Illinois University
g g
, Instructor’sgManual
PrinciplesgofgMicroeconomics,g4thgEdition
N.gGregorygMankiwgPrepar
edgbygLindagS.gGhent
VP/EditorialgDirector: Sr.gProductiongProjectgManager: AssistantgEditor:
JackgW.gCalhoun EmilygS.gGross EringBerger
Editor-in-Chief: ManagergofgTechnology,gEditorial:
Ancillaryg Coordinator:
AlexgvongRosenberg VickygTrue
EringM.gDonohoe
Publisher: TechnologygProjectg Editor:
StevegMomper DanagCowden ArtgDirector:
MichellegKunkler
Sr.gAcquisitionsgEditor:
MikegWorls WebgCoordinator: Productiong Artist:
KarengSchaffer PattigHudepohl
Developmentalg Editor:
JanegTufts InternalgandgCovergDesigner:
Sr.gManufacturingg Coordinator: StrattongDesign
Contributingg Editors: SandeegMilewski
SarahgK.gDorgergJennif CovergIllustration:
ergE.gBaker Productiong House: TategGallery,gLondon/ArtgResource,gNY
OffCentergConceptgHouse
Sr.gMarketinggManager: InternalgIllustrator:
BriangJoyner Printer:g Darb WilliamgLow/CobaltgIllustrationgServices
ygPrintinggAtla
Assoc.gMarketinggCommunications nta,gGA
gManager:
SarahgGreber
COPYRIGHTg©g2007 ALLgRIGHTSgRESERVED.gNogpartgof Forgpermissiongtogusegmaterialgfromgthis
ThomsongSouth- thisgworkgcoveredgbygthegcopyrightghe gtextgorgproduct,gsubmitgagrequestgonlin
Western,gagpartgofgThegThomsongCorp reongmaygbegreproducedgorgusedginga egatghttp://www.thomsonrights.com.
oration.gThomson,gthegStarglogo,gandgS nygformgorgbyganygmeans—
outh- graphic,gelectronic,gorgmechanical,ginc Forgmoreginformationgaboutgourgproduct
Westerngaregtrademarksgusedghereingu ludinggphotocopying,grecording,gtapin s,gcontactgusgat:
nderglicense. g,gWebgdistribution,ginformationgstora
gegandgretrievalgsystems,gorginganygot ThomsongLearninggAcademicgResourcegC
PrintedgingthegUnitedgStatesgofgAmerica hergmanner— enter
1g 2g 3g 4g 5g 09g 08g 07g 06 exceptgasgmaygbegpermittedgbygtheglic 1-800-423-0563
ensegtermsgherein.
ISBNg0-324-31908-8 ThomsongHighergEducation
5191gNatorpgBoulevard
Mason,gOHg45040gUS
A
,Preface
Theginstructor’sgmaterialgthatgaccompaniesgthegfivegversionsgofgMankiw’sgPrinciplesgofg Eco
nomics,gFourthgEditiongtextbooksgaddressgthegneedsgofgbothgnovicegandgexperiencedg instr
uctors.gTogmeetgthegneedsgofgthesegtwoggroups,gthisgInstructor’sgManualgwithg SolutionsgMa
nualgcomprisesg bothg chapterg outlinesg andgteachingg tipsg asg wellg asg solutionsgtog allg ofg theg
questionsg andg problemsg foundg ing theg textbook.
LindagGhentgofgEasterngIllinoisgUniversitygpreparedgthegmaingportiongofgeachgchaptergi
ncludinggagsynopsisgofgwhatgisgnewgingthisgeditiongcomparedgtogthegthirdgedition.gHergwo
rkgforgeachgchaptergalsogincludesgaglistgofglearninggobjectivesgandgkeygpoints.gThesegitem
sgaregfollowedgbygdetailedgchaptergoutlinesgthatgfocusgongthegcontentgfoundgingthegtextbo
ok.gHelpfulgtipsgandgiconsgoccasionallyginterruptgthesegoutlines.gThegbombgicong(Warnin
gs)gindicatesgareasgwheregstudentsgmayghavegparticulargdifficultygwithgthegmaterial.gThe
glightgbulbgicong(BrightgIdeas)goffersgideasgforgpresentinggthegmaterialgingagnewgorgmoregt
houghtfulgway.gAlsogincludedgingeachgchaptergofgthegInstructor’sgManualgaregclassroomg
activities,gdevelopedg ingpartgbygCharlesgStullgofgKalamazoogCollege.gEachgactivitygprovid
esgimportantgdetailsgtogassistgingplanninggasgwellgasgclearginstructionsgforgleadinggthegacti
vity.gRecommendedg“PointsgforgDiscussion”gconnectgthegactivitygtogthegrelevantgeconomi
cgconceptsgdiscussedgingthegchapter.
Usinggthesegresources,ganginstructorgcangquicklygreviewgthegchapterglearninggobjectivesg
andgchaptergsummariesgtogmakegsuregtheirglecturegnotesgcovergeverythinggingthegtextgch
apter.gIngaddition,gthegchaptergoutlinesgaregdesignedgasgagbasegforgcreatingglecturegnotesg
forgnoviceginstructors.gTheygmaygalsogbegusedgasgagcompletegsetgofgnotesgforgmoregexperi
encedginstructors.g Therefore,gthisgsupplementgisgalsogavailablegelectronicallygfromgthegpr
oductgsupportgWebgsiteg(http://mankiw.swlearning.com).
Forgqueriesgandggrading,gthegInstructor’sgManualgcontainsgsolutionsgtogexercisesgfromg
thegtextbook.gDeangCroushoreg(UniversitygofgRichmond)gpreparedgmanygofgthegsolutionsg
forgtheg“QuickgQuizzes,”g“gQuestionsgforgReview,”gandg“ProblemsgandgApplications”gfoun
dgingthegtextbook.
, Comparative Table of Contents
g g g
Brief
Core Micro Macro Essentials Macro
Partg1:gIntroduction Partg1 Partg1 Partg1 Partg1
1 Teng Principlesg ofg Economics 1 1 1 1
2 ThinkinggLikegangEconomist 2 2 2 2
3 Interdependenceg andg theg Gainsg fromg Trade 3 3 3 3
Partg2:gHowgMarketsgWork Partg2 Partg2 Partg2 Partg2
4 ThegMarketgForcesgofgSupplygandgDemand 4 4 4 4
5 Elasticityg andg Itsg Application 5 5 5
6g g Supply,g Demand,g andg Governmentg Policies 6 6 6
Partg3:gMarketsgandgWelfare Partg3 Partg3 Partg3
7 Consumers,gProducers,gandgthegEfficiencygofgMarkets 7 7 7
8 Application:gThegCostsgofgTaxation 8 8 8
9 Application:g Internationalg Trade 9 9 9
Partg4:gThegEconomicsgofgthegPublicgSector Partg4 Partg4
10g Externalities 10 10
11g Publicg Goodsg andg Commong Resources 11 11
12g ThegDesigngofgthegTaxgSystem 12
Partg5:gFirmgBehaviorgandgthegOrganizationgofgIndustry Partg5 Partg5
13g ThegCostsgofgProduction 13 12
14g FirmsgingCompetitivegMarkets 14 13
15g Monopoly 15 14
16g Oligopoly 16
17g MonopolisticgCompetition 17
Partg6:gThegEconomicsgofgLaborgMarket Partg6
18g ThegMarketsgforgthegFactorsgofgProduction 18
19g Earningsg andg Discrimination 19
20g IncomegInequalitygandgPoverty 20
Partg7:gTopicsgforgFurthergStudy Partg7
21g ThegTheorygofgConsumergChoice 21
22g FrontiersgofgMicroeconomics 22
Partg8:gThegDatagofgMacroeconomics Partg4 Partg6 Partg3
23g MeasuringgagNation’sgIncome 10 15 5
24g MeasuringgthegCostgofgLiving 11 16 6
Partg9:gThegRealgEconomygingthegLonggRun Partg5 Partg7 Partg4
25g ProductiongandgGrowth 12 17 7
26g Saving,gInvestment,gandgthegFinancialgSystem 13 18 8
27gThegBasicgToolsgofgFinance 14 19 9
28gUnemployment 15 20 10
Partg10:gMoneygandgPricesgingthegLonggRun Partg6 Partg8 Partg5
29g ThegMonetarygSystem 16 21 11
30g MoneygGrowthgandgInflation 17 22 12
Partg11:gThegMacroeconomicsgofgOpengEconomics Partg7 Partg6
31g Open-Economyg Macroeconomics:g Basicg Concepts 18 13
32g AgMacroeconomicgTheorygofgthegOpengEconomy 19 14
Partg12:gShort-RungEconomicgFluctuations Partg8 Partg9 Partg7
33g AggregategDemandgandgAggregategSupply 20 23 15
34gThegInfluencegofgMonetarygandgFiscalgPolicygongAggregategDemand 21 24 16
35g ThegShort-RungTrade-offgbetweengInflationgandgUnemployment 22 17
Partg13:gFinalgThoughts Partg9 Partg8
36g FivegDebatesgovergMacroeconomicgPolicy 23 18
