MankiwMI_IM_t_0324319088p 12/29/05p 11:19pPMp Pagep1
Instructor's Manual with Solutions Manual
p p p p
PrinciplesofMicroeconomics p p
FOURTH EDITION
p
N. Gregory Mankiw
p p
Harvard University
p
Prepared by p
Linda Ghent
p
Eastern Illinois University
p p
, Instructor’spManual
PrinciplespofpMicroeconomics,p4thpEdition
N.pGregorypMankiwpPrepar
edpbypLindapS.pGhent
VP/EditorialpDirector: Sr.pProductionpProjectpManager: AssistantpEditor:
JackpW.pCalhoun EmilypS.pGross ErinpBerger
Editor-in-Chief: ManagerpofpTechnology,pEditorial:
Ancillaryp Coordinator:
AlexpvonpRosenberg VickypTrue
ErinpM.pDonohoe
Publisher: TechnologypProjectp Editor:
StevepMomper DanapCowden ArtpDirector:
MichellepKunkler
Sr.pAcquisitionspEditor:
MikepWorls WebpCoordinator: Productionp Artist:
KarenpSchaffer PattipHudepohl
Developmentalp Editor:
JanepTufts InternalpandpCoverpDesigner:
Sr.pManufacturingp Coordinator: StrattonpDesign
Contributingp Editors: SandeepMilewski
SarahpK.pDorgerpJennif CoverpIllustration:
erpE.pBaker Productionp House: TatepGallery,pLondon/ArtpResource,pNY
OffCenterpConceptpHouse
Sr.pMarketingpManager: InternalpIllustrator:
BrianpJoyner Printer:p Darb WilliampLow/CobaltpIllustrationpServices
ypPrintingpAtla
Assoc.pMarketingpCommunications nta,pGA
pManager:
SarahpGreber
COPYRIGHTp©p2007 ALLpRIGHTSpRESERVED.pNoppartpof Forppermissionptopusepmaterialpfrompthis
ThomsonpSouth- thispworkpcoveredpbypthepcopyrightphe ptextporpproduct,psubmitpaprequestponlin
Western,pappartpofpThepThomsonpCorp reonpmaypbepreproducedporpusedpinpa epatphttp://www.thomsonrights.com.
oration.pThomson,pthepStarplogo,pandpS nypformporpbypanypmeans—
outh- graphic,pelectronic,porpmechanical,pinc Forpmorepinformationpaboutpourpproduct
Westernpareptrademarkspusedphereinpu ludingpphotocopying,precording,ptapin s,pcontactpuspat:
nderplicense. g,pWebpdistribution,pinformationpstora
gepandpretrievalpsystems,porpinpanypot ThomsonpLearningpAcademicpResourcepC
PrintedpinpthepUnitedpStatespofpAmerica herpmanner— enter
1p 2p 3p 4p 5p 09p 08p 07p 06 exceptpaspmaypbeppermittedpbyptheplic 1-800-423-0563
enseptermspherein.
ISBNp0-324-31908-8 ThomsonpHigherpEducation
5191pNatorppBoulevard
Mason,pOHp45040pUS
A
,Preface
Thepinstructor’spmaterialpthatpaccompaniespthepfivepversionspofpMankiw’spPrinciplespofp Ec
onomics,pFourthpEditionptextbookspaddresspthepneedspofpbothpnovicepandpexperiencedp inst
ructors.pTopmeetpthepneedspofptheseptwopgroups,pthispInstructor’spManualpwithp SolutionspM
anualpcomprisesp bothp chapterp outlinesp andpteachingp tipsp asp wellp asp solutionsptop allp ofp th
ep questionsp andp problemsp foundp inp thep textbook.
LindapGhentpofpEasternpIllinoispUniversityppreparedpthepmainpportionpofpeachpchapterp
includingpapsynopsispofpwhatpispnewpinpthispeditionpcomparedptopthepthirdpedition.pHerp
workpforpeachpchapterpalsopincludespaplistpofplearningpobjectivespandpkeyppoints.pThesepi
temsparepfollowedpbypdetailedpchapterpoutlinespthatpfocusponpthepcontentpfoundpinpthept
extbook.pHelpfulptipspandpiconspoccasionallypinterruptpthesepoutlines.pThepbombpiconp(
Warnings)pindicatespareaspwherepstudentspmayphavepparticularpdifficultypwithpthepmate
rial.pTheplightpbulbpiconp(BrightpIdeas)pofferspideaspforppresentingpthepmaterialpinpapnewp
orpmorepthoughtfulpway.pAlsopincludedpinpeachpchapterpofpthepInstructor’spManualparepc
lassroompactivities,pdevelopedp inppartpbypCharlespStullpofpKalamazoopCollege.pEachpactiv
itypprovidespimportantpdetailsptopassistpinpplanningpaspwellpaspclearpinstructionspforpleadi
ngpthepactivity.pRecommendedp“PointspforpDiscussion”pconnectpthepactivityptopthepreleva
ntpeconomicpconceptspdiscussedpinpthepchapter.
Usingpthesepresources,panpinstructorpcanpquicklypreviewpthepchapterplearningpobjectives
pandpchapterpsummariesptopmakepsureptheirplecture pnotespcoverpeverythingpinptheptextpc
hapter.pInpaddition,pthepchapterpoutlinesparepdesignedpaspapbasepforpcreatingplecturepnot
espforpnovicepinstructors.pTheypmaypalsopbepusedpaspapcompletepsetpofpnotespforpmorepex
periencedpinstructors.p Therefore,pthispsupplementpispalsopavailablepelectronicallypfrompt
hepproductpsupportpWebpsitep(http://mankiw.swlearning.com).
Forpqueriespandpgrading,pthepInstructor’spManualpcontainspsolutionsptopexercisespfrom
ptheptextbook.pDeanpCroushore p(UniversitypofpRichmond)ppreparedpmanypofpthepsolution
spforpthep“QuickpQuizzes,”p“pQuestionspforpReview,”pandp“ProblemspandpApplications”pfo
undpinptheptextbook.
, Comparative Table of Contents
p p p
Brief
Core Micro Macro Essentials Macro
Partp1:pIntroduction Partp1 Partp1 Partp1 Partp1
1 Tenp Principlesp ofp Economics 1 1 1 1
2 ThinkingpLikepanpEconomist 2 2 2 2
3 Interdependencep andp thep Gainsp fromp Trade 3 3 3 3
Partp2:pHowpMarketspWork Partp2 Partp2 Partp2 Partp2
4 ThepMarketpForcespofpSupplypandpDemand 4 4 4 4
5 Elasticityp andp Itsp Application 5 5 5
6p p Supply,p Demand,pandp Governmentp Policies 6 6 6
Partp3:pMarketspandpWelfare Partp3 Partp3 Partp3
7 Consumers,pProducers,pandpthepEfficiencypofpMarkets 7 7 7
8 Application:pThepCostspofpTaxation 8 8 8
9 Application:p Internationalp Trade 9 9 9
Partp4:pThepEconomicspofpthepPublicpSector Partp4 Partp4
10p Externalities 10 10
11p Publicp Goodsp andp Commonp Resources 11 11
12p ThepDesignpofpthepTaxpSystem 12
Partp5:pFirmpBehaviorpandpthepOrganizationpofpIndustry Partp5 Partp5
13p ThepCostspofpProduction 13 12
14p FirmspinpCompetitivepMarkets 14 13
15p Monopoly 15 14
16p Oligopoly 16
17p MonopolisticpCompetition 17
Partp6:pThepEconomicspofpLaborpMarket Partp6
18p ThepMarketspforpthepFactorspofpProduction 18
19p Earningsp andp Discrimination 19
20p IncomepInequalitypandpPoverty 20
Partp7:pTopicspforpFurtherpStudy Partp7
21p ThepTheorypofpConsumerpChoice 21
22p FrontierspofpMicroeconomics 22
Partp8:pThepDatapofpMacroeconomics Partp4 Partp6 Partp3
23p MeasuringpapNation’spIncome 10 15 5
24p MeasuringpthepCostpofpLiving 11 16 6
Partp9:pThepRealpEconomypinpthepLongpRun Partp5 Partp7 Partp4
25p ProductionpandpGrowth 12 17 7
26p Saving,pInvestment,pandpthepFinancialpSystem 13 18 8
27pThepBasicpToolspofpFinance 14 19 9
28pUnemployment 15 20 10
Partp10:pMoneypandpPricespinpthepLongpRun Partp6 Partp8 Partp5
29p ThepMonetarypSystem 16 21 11
30p MoneypGrowthpandpInflation 17 22 12
Partp11:pThepMacroeconomicspofpOpenpEconomics Partp7 Partp6
31p Open-Economyp Macroeconomics:p Basicp Concepts 18 13
32p ApMacroeconomicpTheorypofpthepOpenpEconomy 19 14
Partp12:pShort-RunpEconomicpFluctuations Partp8 Partp9 Partp7
33p AggregatepDemandpandpAggregatepSupply 20 23 15
34pThepInfluencepofpMonetarypandpFiscalpPolicyponpAggregatepDemand 21 24 16
35p ThepShort-RunpTrade-offpbetweenpInflationpandpUnemployment 22 17
Partp13:pFinalpThoughts Partp9 Partp8
36p FivepDebatespoverpMacroeconomicpPolicy 23 18
Instructor's Manual with Solutions Manual
p p p p
PrinciplesofMicroeconomics p p
FOURTH EDITION
p
N. Gregory Mankiw
p p
Harvard University
p
Prepared by p
Linda Ghent
p
Eastern Illinois University
p p
, Instructor’spManual
PrinciplespofpMicroeconomics,p4thpEdition
N.pGregorypMankiwpPrepar
edpbypLindapS.pGhent
VP/EditorialpDirector: Sr.pProductionpProjectpManager: AssistantpEditor:
JackpW.pCalhoun EmilypS.pGross ErinpBerger
Editor-in-Chief: ManagerpofpTechnology,pEditorial:
Ancillaryp Coordinator:
AlexpvonpRosenberg VickypTrue
ErinpM.pDonohoe
Publisher: TechnologypProjectp Editor:
StevepMomper DanapCowden ArtpDirector:
MichellepKunkler
Sr.pAcquisitionspEditor:
MikepWorls WebpCoordinator: Productionp Artist:
KarenpSchaffer PattipHudepohl
Developmentalp Editor:
JanepTufts InternalpandpCoverpDesigner:
Sr.pManufacturingp Coordinator: StrattonpDesign
Contributingp Editors: SandeepMilewski
SarahpK.pDorgerpJennif CoverpIllustration:
erpE.pBaker Productionp House: TatepGallery,pLondon/ArtpResource,pNY
OffCenterpConceptpHouse
Sr.pMarketingpManager: InternalpIllustrator:
BrianpJoyner Printer:p Darb WilliampLow/CobaltpIllustrationpServices
ypPrintingpAtla
Assoc.pMarketingpCommunications nta,pGA
pManager:
SarahpGreber
COPYRIGHTp©p2007 ALLpRIGHTSpRESERVED.pNoppartpof Forppermissionptopusepmaterialpfrompthis
ThomsonpSouth- thispworkpcoveredpbypthepcopyrightphe ptextporpproduct,psubmitpaprequestponlin
Western,pappartpofpThepThomsonpCorp reonpmaypbepreproducedporpusedpinpa epatphttp://www.thomsonrights.com.
oration.pThomson,pthepStarplogo,pandpS nypformporpbypanypmeans—
outh- graphic,pelectronic,porpmechanical,pinc Forpmorepinformationpaboutpourpproduct
Westernpareptrademarkspusedphereinpu ludingpphotocopying,precording,ptapin s,pcontactpuspat:
nderplicense. g,pWebpdistribution,pinformationpstora
gepandpretrievalpsystems,porpinpanypot ThomsonpLearningpAcademicpResourcepC
PrintedpinpthepUnitedpStatespofpAmerica herpmanner— enter
1p 2p 3p 4p 5p 09p 08p 07p 06 exceptpaspmaypbeppermittedpbyptheplic 1-800-423-0563
enseptermspherein.
ISBNp0-324-31908-8 ThomsonpHigherpEducation
5191pNatorppBoulevard
Mason,pOHp45040pUS
A
,Preface
Thepinstructor’spmaterialpthatpaccompaniespthepfivepversionspofpMankiw’spPrinciplespofp Ec
onomics,pFourthpEditionptextbookspaddresspthepneedspofpbothpnovicepandpexperiencedp inst
ructors.pTopmeetpthepneedspofptheseptwopgroups,pthispInstructor’spManualpwithp SolutionspM
anualpcomprisesp bothp chapterp outlinesp andpteachingp tipsp asp wellp asp solutionsptop allp ofp th
ep questionsp andp problemsp foundp inp thep textbook.
LindapGhentpofpEasternpIllinoispUniversityppreparedpthepmainpportionpofpeachpchapterp
includingpapsynopsispofpwhatpispnewpinpthispeditionpcomparedptopthepthirdpedition.pHerp
workpforpeachpchapterpalsopincludespaplistpofplearningpobjectivespandpkeyppoints.pThesepi
temsparepfollowedpbypdetailedpchapterpoutlinespthatpfocusponpthepcontentpfoundpinpthept
extbook.pHelpfulptipspandpiconspoccasionallypinterruptpthesepoutlines.pThepbombpiconp(
Warnings)pindicatespareaspwherepstudentspmayphavepparticularpdifficultypwithpthepmate
rial.pTheplightpbulbpiconp(BrightpIdeas)pofferspideaspforppresentingpthepmaterialpinpapnewp
orpmorepthoughtfulpway.pAlsopincludedpinpeachpchapterpofpthepInstructor’spManualparepc
lassroompactivities,pdevelopedp inppartpbypCharlespStullpofpKalamazoopCollege.pEachpactiv
itypprovidespimportantpdetailsptopassistpinpplanningpaspwellpaspclearpinstructionspforpleadi
ngpthepactivity.pRecommendedp“PointspforpDiscussion”pconnectpthepactivityptopthepreleva
ntpeconomicpconceptspdiscussedpinpthepchapter.
Usingpthesepresources,panpinstructorpcanpquicklypreviewpthepchapterplearningpobjectives
pandpchapterpsummariesptopmakepsureptheirplecture pnotespcoverpeverythingpinptheptextpc
hapter.pInpaddition,pthepchapterpoutlinesparepdesignedpaspapbasepforpcreatingplecturepnot
espforpnovicepinstructors.pTheypmaypalsopbepusedpaspapcompletepsetpofpnotespforpmorepex
periencedpinstructors.p Therefore,pthispsupplementpispalsopavailablepelectronicallypfrompt
hepproductpsupportpWebpsitep(http://mankiw.swlearning.com).
Forpqueriespandpgrading,pthepInstructor’spManualpcontainspsolutionsptopexercisespfrom
ptheptextbook.pDeanpCroushore p(UniversitypofpRichmond)ppreparedpmanypofpthepsolution
spforpthep“QuickpQuizzes,”p“pQuestionspforpReview,”pandp“ProblemspandpApplications”pfo
undpinptheptextbook.
, Comparative Table of Contents
p p p
Brief
Core Micro Macro Essentials Macro
Partp1:pIntroduction Partp1 Partp1 Partp1 Partp1
1 Tenp Principlesp ofp Economics 1 1 1 1
2 ThinkingpLikepanpEconomist 2 2 2 2
3 Interdependencep andp thep Gainsp fromp Trade 3 3 3 3
Partp2:pHowpMarketspWork Partp2 Partp2 Partp2 Partp2
4 ThepMarketpForcespofpSupplypandpDemand 4 4 4 4
5 Elasticityp andp Itsp Application 5 5 5
6p p Supply,p Demand,pandp Governmentp Policies 6 6 6
Partp3:pMarketspandpWelfare Partp3 Partp3 Partp3
7 Consumers,pProducers,pandpthepEfficiencypofpMarkets 7 7 7
8 Application:pThepCostspofpTaxation 8 8 8
9 Application:p Internationalp Trade 9 9 9
Partp4:pThepEconomicspofpthepPublicpSector Partp4 Partp4
10p Externalities 10 10
11p Publicp Goodsp andp Commonp Resources 11 11
12p ThepDesignpofpthepTaxpSystem 12
Partp5:pFirmpBehaviorpandpthepOrganizationpofpIndustry Partp5 Partp5
13p ThepCostspofpProduction 13 12
14p FirmspinpCompetitivepMarkets 14 13
15p Monopoly 15 14
16p Oligopoly 16
17p MonopolisticpCompetition 17
Partp6:pThepEconomicspofpLaborpMarket Partp6
18p ThepMarketspforpthepFactorspofpProduction 18
19p Earningsp andp Discrimination 19
20p IncomepInequalitypandpPoverty 20
Partp7:pTopicspforpFurtherpStudy Partp7
21p ThepTheorypofpConsumerpChoice 21
22p FrontierspofpMicroeconomics 22
Partp8:pThepDatapofpMacroeconomics Partp4 Partp6 Partp3
23p MeasuringpapNation’spIncome 10 15 5
24p MeasuringpthepCostpofpLiving 11 16 6
Partp9:pThepRealpEconomypinpthepLongpRun Partp5 Partp7 Partp4
25p ProductionpandpGrowth 12 17 7
26p Saving,pInvestment,pandpthepFinancialpSystem 13 18 8
27pThepBasicpToolspofpFinance 14 19 9
28pUnemployment 15 20 10
Partp10:pMoneypandpPricespinpthepLongpRun Partp6 Partp8 Partp5
29p ThepMonetarypSystem 16 21 11
30p MoneypGrowthpandpInflation 17 22 12
Partp11:pThepMacroeconomicspofpOpenpEconomics Partp7 Partp6
31p Open-Economyp Macroeconomics:p Basicp Concepts 18 13
32p ApMacroeconomicpTheorypofpthepOpenpEconomy 19 14
Partp12:pShort-RunpEconomicpFluctuations Partp8 Partp9 Partp7
33p AggregatepDemandpandpAggregatepSupply 20 23 15
34pThepInfluencepofpMonetarypandpFiscalpPolicyponpAggregatepDemand 21 24 16
35p ThepShort-RunpTrade-offpbetweenpInflationpandpUnemployment 22 17
Partp13:pFinalpThoughts Partp9 Partp8
36p FivepDebatespoverpMacroeconomicpPolicy 23 18
