Microeconomics 6th Edition By, Ronald
Braeutigam Chapter 1-17
SOLUTION MANUAL
CopyrighT © 2014 John Wiley & Sons, ChapTer 1 - 1
Inc.
, TABLE OF CONTENTS
Chapter 1 Analyzing Economic Problems 1
Chapter 3 Consumer Preferences and the Concept of Utility 75
Chapter 4 Consumer Choice 109
Chapter 5 The Theory of Demand 163
Chapter 6 Inputs and Production Functions 216
Chapter 7 Costs and Cost Minimization 263
Chapter 8 Cost Curves 310
Chapter 9 Perfectly Competitive Markets 354
Chapter 10 Competitive Markets: Applications 415
Chapter 11 Monopoly and Monopsony 468
Chapter 12 Capturing Surplus 515
Chapter 13 Market Structure and Competition 558
Chapter 14 Game Theory and Strategic Behavior 601
Chapter 15 Risk and Information 637
Chapter 16 General Equilibrium Theory 686
Chapter 17 Externalities and Public Goods 736
CopyrighT © 2014 John Wiley & Sons, ChapTer 1 - 2
Inc.
,ChapTer 1
Analyzing Economic Problems
SoluTions To Review QuesTions
1. WhaT is The difference beTween microeconomics and macroeconomics?
Microeconomics sTudies The economic behavior of individual economic decision makers, such
as a consumer, a worker, a firm, or a manager. Macroeconomics sTudies how an enTire
naTional economy performs, examining such Topics as The aggregaTe levels of income and
employmenT, The levels of inTeresT raTes and prices, The raTe of inflaTion, and The naTure
of business cycles.
2. Why is economics ofTen described as The science of consTrained choice?
While our wanTs for goods and services are unlimiTed, The resources necessary To produce
Those goods and services, such as labor, managerial TalenT, capiTal, and raw maTerials, are
“scarce” because Their supply is limiTed. This scarciTy implies ThaT we are consTrained in
The choices we can make abouT which goods and services To produce. Thus, economics is
ofTen described as The science of consTrained choice.
3. How does The Tool of consTrained opTimizaTion help decision makers make
choices? WhaT roles do The objecTive funcTion and consTrainTs play in a model of
consTrained opTimizaTion?
ConsTrained opTimizaTion allows The decision maker To selecT The besT (opTimal)
alTernaTive while accounTing for any possible limiTaTions or resTricTions on The choices.
The objecTive funcTion represenTs The relaTionship To be maximized or minimized. For
example, a firm’s profiT mighT be The objecTive funcTion and all choices will be evaluaTed in
The profiT funcTion To deTermine which yields The highesT profiT. The consTrainTs place
limiTaTions on The choice The decision maker can selecT and defines The seT of alTernaTives
from which The besT will be chosen.
4. Suppose The markeT for wheaT is compeTiTive, wiTh an upward-sloping supply
curve, a downward-sloping demand curve, and an equilibrium price of $4.00 per bushel.
Why would a higher price (e.g., $5.00 per bushel) noT be an equilibrium price? Why
would a lower price (e.g., $2.50 per bushel) noT be an equilibrium price?
If The price in The markeT was above The equilibrium price, consumers would be willing To
purchase fewer uniTs Than suppliers would be willing To sell, creaTing an excess supply. As
suppliers realize They are noT selling The uniTs They have made available, sellers will bid
CopyrighT © 2014 John Wiley & Sons, ChapTer 1 - 3
Inc.
, down The
CopyrighT © 2014 John Wiley & Sons, ChapTer 1 - 4
Inc.
Braeutigam Chapter 1-17
SOLUTION MANUAL
CopyrighT © 2014 John Wiley & Sons, ChapTer 1 - 1
Inc.
, TABLE OF CONTENTS
Chapter 1 Analyzing Economic Problems 1
Chapter 3 Consumer Preferences and the Concept of Utility 75
Chapter 4 Consumer Choice 109
Chapter 5 The Theory of Demand 163
Chapter 6 Inputs and Production Functions 216
Chapter 7 Costs and Cost Minimization 263
Chapter 8 Cost Curves 310
Chapter 9 Perfectly Competitive Markets 354
Chapter 10 Competitive Markets: Applications 415
Chapter 11 Monopoly and Monopsony 468
Chapter 12 Capturing Surplus 515
Chapter 13 Market Structure and Competition 558
Chapter 14 Game Theory and Strategic Behavior 601
Chapter 15 Risk and Information 637
Chapter 16 General Equilibrium Theory 686
Chapter 17 Externalities and Public Goods 736
CopyrighT © 2014 John Wiley & Sons, ChapTer 1 - 2
Inc.
,ChapTer 1
Analyzing Economic Problems
SoluTions To Review QuesTions
1. WhaT is The difference beTween microeconomics and macroeconomics?
Microeconomics sTudies The economic behavior of individual economic decision makers, such
as a consumer, a worker, a firm, or a manager. Macroeconomics sTudies how an enTire
naTional economy performs, examining such Topics as The aggregaTe levels of income and
employmenT, The levels of inTeresT raTes and prices, The raTe of inflaTion, and The naTure
of business cycles.
2. Why is economics ofTen described as The science of consTrained choice?
While our wanTs for goods and services are unlimiTed, The resources necessary To produce
Those goods and services, such as labor, managerial TalenT, capiTal, and raw maTerials, are
“scarce” because Their supply is limiTed. This scarciTy implies ThaT we are consTrained in
The choices we can make abouT which goods and services To produce. Thus, economics is
ofTen described as The science of consTrained choice.
3. How does The Tool of consTrained opTimizaTion help decision makers make
choices? WhaT roles do The objecTive funcTion and consTrainTs play in a model of
consTrained opTimizaTion?
ConsTrained opTimizaTion allows The decision maker To selecT The besT (opTimal)
alTernaTive while accounTing for any possible limiTaTions or resTricTions on The choices.
The objecTive funcTion represenTs The relaTionship To be maximized or minimized. For
example, a firm’s profiT mighT be The objecTive funcTion and all choices will be evaluaTed in
The profiT funcTion To deTermine which yields The highesT profiT. The consTrainTs place
limiTaTions on The choice The decision maker can selecT and defines The seT of alTernaTives
from which The besT will be chosen.
4. Suppose The markeT for wheaT is compeTiTive, wiTh an upward-sloping supply
curve, a downward-sloping demand curve, and an equilibrium price of $4.00 per bushel.
Why would a higher price (e.g., $5.00 per bushel) noT be an equilibrium price? Why
would a lower price (e.g., $2.50 per bushel) noT be an equilibrium price?
If The price in The markeT was above The equilibrium price, consumers would be willing To
purchase fewer uniTs Than suppliers would be willing To sell, creaTing an excess supply. As
suppliers realize They are noT selling The uniTs They have made available, sellers will bid
CopyrighT © 2014 John Wiley & Sons, ChapTer 1 - 3
Inc.
, down The
CopyrighT © 2014 John Wiley & Sons, ChapTer 1 - 4
Inc.
