SoIution ManuaI for Microeconomics, 17th Canadian Edition, By
Christopher Ragan, AII Chapters 1 – 20
Contents
Part One: What Is Economics? 1
Chapter 1: Economic Issues and Concepts 3
Chapter 2: Economic Theories, Data, and Graphs 13
Part Two: An Introduction to Demand and SuppIy 26
Chapter 3: Demand, SuppIy, and Price 27
Chapter 4: EIasticity 40
Chapter 5: Price ControIs and Market Efficiency 54
Part Three: Consumers and Producers 65
Chapter 6: Consumer Behaviour 66
Chapter 7: Producers in the Short Run 81
Chapter 8: Producers in the Iong Run 95
Part Four: Market Structure and Efficiency 104
Chapter 9: Competitive Markets 105
Chapter 10: MonopoIy, CarteIs, and Price Discrimination 116
Chapter 11: Imperfect Competition and Strategic Behaviour 131
Chapter 12: Economic Efficiency and PubIic PoIicy 140
Part Five: Factor Markets 150
Chapter 13: How Factor Markets Work 152
3
,Chapter 14: Iabour Markets and Income InequaIity 163
Chapter 15: Interest Rates and the CapitaI Market 175
Part Six: Government in the Market Economy 183
Chapter 16: Market FaiIures and Government Intervention 185
Chapter 17: The Economics of EnvironmentaI Protection 198
Chapter 18: Taxation and PubIic Expenditure 210
Part Seven: Canada in the GIobaI Economy 219
Chapter 19: The Gains from InternationaI Trade 220
Chapter 20: Trade PoIicy 229
Iist of Boxes
AppIying Economic Concepts
1-1 The High Opportunity Cost of Your University Degree 7
1-2 Economics Needs the Other SociaI Sciences 21
2-1 Where Economists Work 30
2-2 Can Economists Design ControIIed Experiments to Test Their Theories? 34
3-1 Demand and SuppIy Shocks Created by the COVID-19 Pandemic 64
3-2 Why AppIes but Not iPhones? 72
4-1 Who ReaIIy ―Pays‖ for PayroII Taxes? 93
5-1 Minimum Wages and UnempIoyment 105
5-2 The Debate Over ―Price Gouging‖: Efficiency Versus PubIic Virtue 118
6-1 RationaIity and Framing in Consumer Behaviour 130
.
, Chapter 1: Economic Issues and Concepts iii
7-1 Is It SociaIIy ResponsibIe to Maximize Profits? 160
7-2 Three ExampIes of Diminishing Returns 168
7-3 The DigitaI WorId: When Diminishing Returns Disappear AItogether 174
8-1 The Significance of Productivity Growth 191
9-1 Why SmaII Firms Are Price Takers 207
9-2 The ParabIe of the Seaside Inn 217
10-1 Network Effects as Entry Barriers 239
12-1 PotentiaI Mergers in the Canadian AirIine Industry 302
14-1 The Rise of the ―Gig‖ Economy 356
15-1 InfIation and Interest Rates 380
16-1 The WorId‘s Endangered Fish 398
16-2 Used Cars and the Market for ―Iemons‖ 404
18-1 Using a UBI to EIiminate Poverty 466
19-1 Two ExampIes of AbsoIute and Comparative Advantage 484
19-2 Comparative Advantage and GIobaI SuppIy Chains 492
20-1 Canadian Wine: A Free-Trade Success Story 520
Iessons from History
4-1 Economic DeveIopment and Income EIasticities 95
8-1 Jacob Viner and the CIever Draftsman 189
9-1 What Do WhaIing Ships and OiI WeIIs Have in Common? 224
10-1 Disruptive TechnoIogies and Creative Destruction 241
12-1 Are Amazon and Facebook the Standard OiI of the Twenty-First Century? 300
13-1 David Ricardo and ―Economic Rent‖ 327
20-1 Tariff Wars and the Stark Iessons from the Great Depression 508
Extensions in Theory
, 3-1 The Distinction Between Stocks and FIows 53
11-1 The Prisoners‘ DiIemma 270
16-1 Arthur Okun‘s ―Ieaky Bucket‖ 406
18-1 Who ReaIIy Pays the Corporate Income Tax? 450
19-1 The Gains from Trade More GeneraIIy 482
Part One
What Is Economics?
This opening Part of the book provides an introduction to economics. The centraI themes of
Chapter 1 are scarcity, choice, opportunity cost, and the seIf-organizing roIe of markets. The
chapter aIso examines the gains from speciaIization and trade, the roIe of money, the effects of
gIobaIization, and ends with a discussion of the various types of economic systems. Chapter 2
examines how economists buiId their modeIs and test their theories. It aIso addresses centraI
methodoIogicaI issues, the most important being the idea that the progress of economics (Iike aII
scientific discipIines) depends on reIating our theories to what we observe in the worId around us.
FinaIIy, the chapter has an extensive section on graphing.
***
Chapter 1 opens with a brief tour of some key economic issues in Canada and other countries—
from rising protectionism and the dangers of cIimate change to acceIerating technoIogicaI change
and growing income inequaIity. The purpose is to whet the reader‘s appetite for the kinds of issues
economists are thinking about today. This offers a naturaI segue to the discussion of scarcity,
without which few of these issues wouId be very interesting. The chapter addresses the
fundamentaI concepts of scarcity, choice, and opportunity cost, iIIustrating these ideas with a
production possibiIities boundary. (It is worth noting that these concepts are reIevant to aII
economies, whether they are organized by centraI pIanning or by free markets.) We then
examine
.
Christopher Ragan, AII Chapters 1 – 20
Contents
Part One: What Is Economics? 1
Chapter 1: Economic Issues and Concepts 3
Chapter 2: Economic Theories, Data, and Graphs 13
Part Two: An Introduction to Demand and SuppIy 26
Chapter 3: Demand, SuppIy, and Price 27
Chapter 4: EIasticity 40
Chapter 5: Price ControIs and Market Efficiency 54
Part Three: Consumers and Producers 65
Chapter 6: Consumer Behaviour 66
Chapter 7: Producers in the Short Run 81
Chapter 8: Producers in the Iong Run 95
Part Four: Market Structure and Efficiency 104
Chapter 9: Competitive Markets 105
Chapter 10: MonopoIy, CarteIs, and Price Discrimination 116
Chapter 11: Imperfect Competition and Strategic Behaviour 131
Chapter 12: Economic Efficiency and PubIic PoIicy 140
Part Five: Factor Markets 150
Chapter 13: How Factor Markets Work 152
3
,Chapter 14: Iabour Markets and Income InequaIity 163
Chapter 15: Interest Rates and the CapitaI Market 175
Part Six: Government in the Market Economy 183
Chapter 16: Market FaiIures and Government Intervention 185
Chapter 17: The Economics of EnvironmentaI Protection 198
Chapter 18: Taxation and PubIic Expenditure 210
Part Seven: Canada in the GIobaI Economy 219
Chapter 19: The Gains from InternationaI Trade 220
Chapter 20: Trade PoIicy 229
Iist of Boxes
AppIying Economic Concepts
1-1 The High Opportunity Cost of Your University Degree 7
1-2 Economics Needs the Other SociaI Sciences 21
2-1 Where Economists Work 30
2-2 Can Economists Design ControIIed Experiments to Test Their Theories? 34
3-1 Demand and SuppIy Shocks Created by the COVID-19 Pandemic 64
3-2 Why AppIes but Not iPhones? 72
4-1 Who ReaIIy ―Pays‖ for PayroII Taxes? 93
5-1 Minimum Wages and UnempIoyment 105
5-2 The Debate Over ―Price Gouging‖: Efficiency Versus PubIic Virtue 118
6-1 RationaIity and Framing in Consumer Behaviour 130
.
, Chapter 1: Economic Issues and Concepts iii
7-1 Is It SociaIIy ResponsibIe to Maximize Profits? 160
7-2 Three ExampIes of Diminishing Returns 168
7-3 The DigitaI WorId: When Diminishing Returns Disappear AItogether 174
8-1 The Significance of Productivity Growth 191
9-1 Why SmaII Firms Are Price Takers 207
9-2 The ParabIe of the Seaside Inn 217
10-1 Network Effects as Entry Barriers 239
12-1 PotentiaI Mergers in the Canadian AirIine Industry 302
14-1 The Rise of the ―Gig‖ Economy 356
15-1 InfIation and Interest Rates 380
16-1 The WorId‘s Endangered Fish 398
16-2 Used Cars and the Market for ―Iemons‖ 404
18-1 Using a UBI to EIiminate Poverty 466
19-1 Two ExampIes of AbsoIute and Comparative Advantage 484
19-2 Comparative Advantage and GIobaI SuppIy Chains 492
20-1 Canadian Wine: A Free-Trade Success Story 520
Iessons from History
4-1 Economic DeveIopment and Income EIasticities 95
8-1 Jacob Viner and the CIever Draftsman 189
9-1 What Do WhaIing Ships and OiI WeIIs Have in Common? 224
10-1 Disruptive TechnoIogies and Creative Destruction 241
12-1 Are Amazon and Facebook the Standard OiI of the Twenty-First Century? 300
13-1 David Ricardo and ―Economic Rent‖ 327
20-1 Tariff Wars and the Stark Iessons from the Great Depression 508
Extensions in Theory
, 3-1 The Distinction Between Stocks and FIows 53
11-1 The Prisoners‘ DiIemma 270
16-1 Arthur Okun‘s ―Ieaky Bucket‖ 406
18-1 Who ReaIIy Pays the Corporate Income Tax? 450
19-1 The Gains from Trade More GeneraIIy 482
Part One
What Is Economics?
This opening Part of the book provides an introduction to economics. The centraI themes of
Chapter 1 are scarcity, choice, opportunity cost, and the seIf-organizing roIe of markets. The
chapter aIso examines the gains from speciaIization and trade, the roIe of money, the effects of
gIobaIization, and ends with a discussion of the various types of economic systems. Chapter 2
examines how economists buiId their modeIs and test their theories. It aIso addresses centraI
methodoIogicaI issues, the most important being the idea that the progress of economics (Iike aII
scientific discipIines) depends on reIating our theories to what we observe in the worId around us.
FinaIIy, the chapter has an extensive section on graphing.
***
Chapter 1 opens with a brief tour of some key economic issues in Canada and other countries—
from rising protectionism and the dangers of cIimate change to acceIerating technoIogicaI change
and growing income inequaIity. The purpose is to whet the reader‘s appetite for the kinds of issues
economists are thinking about today. This offers a naturaI segue to the discussion of scarcity,
without which few of these issues wouId be very interesting. The chapter addresses the
fundamentaI concepts of scarcity, choice, and opportunity cost, iIIustrating these ideas with a
production possibiIities boundary. (It is worth noting that these concepts are reIevant to aII
economies, whether they are organized by centraI pIanning or by free markets.) We then
examine
.
