DAVID A.
BESANKO
Northwestern University,
Kellogg School of Management
RONALD R. BRAEUTIGAM
Northwestern University,
Department of Economics
with Contributions from
Michael J. Gibbs
The University of Chicago,
Booth School of Business
WILEY
WflLEY ft SOWS, INC.
'W
PART 1 INTRODUCTION TO MICROECONOMICS
CHAPTER 1 Analyzing Economic Problems 1
CHAPTER 2 Demand and Supply Analysis 26
APPENDIX: Price Elasticity of Demand Along a Constant Elasticity Demand Curve 72
PART 2 CONSUMER THEORY
CHAPTER 3 Consumer Preferences and the Concept of Utility
CHAPTER 4 Consumer Choice 103
APPENDIX 1: The Mathematics of Consumer Choice 143
APPENDIX 2: The Time Value of Money 144
CHAPTER 5 The Theory of Demand 150
73
PART 3 PRODUCTION AND COST THEORY
CHAPTER 6 Inputs and Production Functions 200
APPENDIX: The Elasticity of Substitution for a CobbDouglas Production Function 243
CHAPTER 7 Costs and Cost Minimization 245
APPENDIX: Advanced Topics in Cost Minimization 281
CHAPTER 8 Cost Curves 285
APPENDIX: Shephard's Lemma and Duality 323
PART 4 PERFECT COMPETITION
CHAPTER 9 Perfectly Competitive Markets 327
APPENDIX: Profit Maximization Implies Cost Minimization
CHAPTER 10 Competitive Markets: Applications 386
384
PART 5 MARKET POWER
CHAPTER 11 Monopoly and Monopsony
CHAPTER 12 Capturing Surplus 485
438
PART 6 IMPERFECT COMPETITION AND STRATEGIC BEHAVIOR
CHAPTER 13 Market Structure and Competition 528
APPENDIX: The Cournot Equilibrium and the Inverse Elasticity Pricing Rule 570
CHAPTER 14 Game Theory and Strategic Behavior 571
PART 7 SPECIAL TOPICS
CHAPTER 15
CHAPTER 16
APPENDIX:
CHAPTER 17
Risk and Information 604
General Equilibrium Theory 648
Deriving the Demand and Supply Curves for General Equilibrium
Externalities and Public Goods 697
Mathematical Appendix 729
Solutions to Selected Problems
Glossary 771
Photo Credits 781
Index 783
xvi
749
692
PART 1 INTRODUCTION TO MICROECONOMICS
CHAPTER 1 Analyzing Economic Problems
Microeconomics and Climate Change
1.1 Why Study Microeconomics?
1.2 Three Key Analytical Tools
Constrained Optimization 6
Equilibrium Analysis 12
Comparative Statics 13
2.3 Other Elasticities 51
Income Elasticity of Demand 51
CrossPrice Elasticity of Demand 52
Price Elasticity of Supply 54
1.3 Positive and Normative Analysis
MarketLevel versus BrandLevel Price Elasticities
of Demand 49
18
LEARNINGBYDOING EXERCISES
1.1 Constrained Optimization: The Farmer's Fence 7
1.2 Constrained Optimization: Consumer Choice 8
1.3 Comparative Statics with Market Equilibrium in the
U.S. Market for Corn 16
1.4 Comparative Statics with Constrained
Optimization 18
CHAPTER 2 Demand and Supply Analysis
26
What Gives with the Price of Corn?
2.1 Demand, Supply, and Market Equilibrium
Demand Curves 30
Supply Curves 32
Market Equilibrium _33
Shifts in Supply and Demand 35
29
2.2 Price Elasticity of Demand 43
Elasticities along Specific Demand Curves 45
Price Elasticity of Demand and Total Revenue 47
Determinants of the Price Elasticity',of Demand 48
2.4 Elasticity in the Long Run versus
the Short Run 54
Greater Elasticity in the Long Run Than in
the Short Run 54
Greater Elasticity in the Short Run Than in the
Long Run 56
2.5 BackoftheEnvelope Calculations 57
Fitting Linear Demand Curves Using Quantity, Price,
and Elasticity Information 58
Identifying Supply and Demand Curves on the Back of an
Envelope 59
Identifying the Price Elasticity of Demand from
Shifts in Supply 61
APPENDIX Price Elasticity of Demand along a
Constant Elasticity Demand Curve 72
LEARNINGBYDOING EXERCISES
2.1 Sketching a Demand Curve 31
2.2 Sketching a Supply Curve 33
2.3 Calculating Equilibrium Price and Quantity 34
2.4 Comparative Statics on the Market
Equilibrium 37
2.5 Price Elasticity of Demand 45
2.6 Elasticities along Special Demand Curves 47
PART 2 CONSUMER THEORY
CHAPTER 3 Consumer Preferences and
the Concept of Utility 73
Why Do You Like What You Like?
3.1 Representations of Preferences 75
Assumptions about Consumer Preferences 75
Ordinal and Cardinal Ranking 76
3.2 Utility Functions 77,
Preferences with a Single Good: The Concept of
Marginal Utility 77
Preferences with Multiple Goods: Marginal Utility, Indifference
Curves, and the Marginal Rate of Substitution 81
3.3 Special Preferences 92
Perfect Substitutes 92
Perfect Complements 93
The CobbDouglas Utility Function
Quasilinear Utility Functions 95
94
LEARNiNGBYDOING EXERCISES
3.1 Marginal Utility 82
3.2 Marginal Utility That Is Not Diminishing 83
3.3 Indifference Curves with Diminishing
MRSKy 90
3.4 Indifference Curves with Increasing MRSxy 91
XVII
XVIII
CONTENTS
The Effects of a Change in Price or Income: An Algebraic
Approach 160
CHAPTER 4 Consumer Choice 103
How Much of What You Like Should You Buy?
4.1 The Budget Constraint 105
5.2 Change in the Price of a Good: Substitution
Effect and Income Effect 162
The Substitution Effect 163
The Income Effect 163
Income and Substitution Effects When Goods Are Not
Normal 165
How Does a Change in Income Affect the
Budget Line? 107
How Does a Change in Price Affect the
Budget Line? 107
4.2 Optimal Choice 110
Using the Tangency Condition t o Understand When
a Basket Is Not Optimal 114
Finding an Optimal Consumption Basket 115
Two Ways of Thinking About Optimality 116
Corner Points 118
4.3 Consumer Choice with Composite Goods
Application: Coupons and Cash Subsidies 121
Application: Joining a Club 125
Application: Borrowing and Lending 126
ApplicationfQuantity Discounts 131
4.4 Revealed Preference 132
Are Observed Choices Consistent with Utility
Maximization? 133
121
APPENDIX 1 The Mathematics of Consumer
Choice 143
APPENDIX 2 The Time Value of Money
144
LEARNINGBVJJOING EXERCISES
4.1 Good News/Bad News and the Budget Line 110
4.2 Finding an Interior Optimum 115
4.3 Finding a Corner Point Solution 119
4.4 Comer Point Solution with Perfect
Substitutes 120
4.5 Consumer Choice That Fails t o Maximize Utility 134
4.6 Other Uses of Revealed Preference 136
CHAPTER 5 The Theory of Demand
150
Why Understanding the Demand for Cigarettes Is
Important for Public Policy
5.1 Optimal Choice and Demand 152
The Effects of a Change in Price 152
The Effects of a Change in Income 155
5.3 Change in the Price of a Good: The Concept
of Consumer Surplus 173
Understanding Consumer Surplus from the
Demand Curve 173
Understanding Consumer Surplus from the Optimal
Choice Diagram: Compensating Variation
and Equivalent Variation 175
5.4 Market Demand 182
Network Externalities 184
Market Demand with Network Externalities
184
5.5 The Choice of Labor and Leisure 187
As Wages Rise, Leisure First Decreases, Then
Increases 187
The BackwardBending Supply of Labor 189
5.6 Consumer Price Indices
192
LEARNINGBYDOING EXERCISES
5.1 A Normal Good Has a Positive Income Elasticity
of Demand 159
5.2 Finding a Demand Curve (No Corner Points) 160
5.3 Finding a Demand Curve (with a Corner
Point Solution) 161
5.4 Finding Income and Substitution Effects
Algebraically 168
5.5 Income and Substitution Effects with a
Price Increase 170
5.6 Income and Substitution Effects with a Quasilinear
Utility Function 171
5.7 Consumer Surplus: Looking at the Demand Curve 174
5.8 Compensating and Equivalent Variations with No
Income Effect 178
5.9 Compensating and Equivalent Variations with
an Income Effect 180
5.10 The Demand for Leisure and the Supply of Labor 191
PART 3 PRODUCTION AND COST THEORY
CHAPTER 6 Inputs and Production
Functions 200
Can They Do It Better and Cheaper?
6.1 Introduction to Inputs and Production
Functions 202
6.2 Production Functions with a Single Input 204
Total Product Functions 205
Marginal and Average Product 206
Relationship Between Marginal and Average Product
6.3 Production Functions with More Than
One Input 210
Total Product and Marginal Product with Two Inputs
Isoquants 212
210
210
CONTENTS
Economic and Uneconomic Regions
of Production 216
Marginal Rate of Technical Substitution
6.4 Substitutability among Inputs
Comparative Statics: ShortRun Input Demand
versus LongRun Input Demand 273
More Than One Variable Input in the
Short Run 274
217
219
Describing a Firm's Input Substitution Opportunities
Graphically 220
Elasticity of Substitution 222
Special Production Functions 225
6.5 Returns t o Scale 230
Definitions 230
Returns to Scale versus Diminishing Marginal
Returns 233
6.6 Technological Progress
APPENDIX Advanced Topics in Cost
Minimization
281
233
APPENDIX The Elasticity of Substitution for a
CobbDouglas Production Function 243
LEARNINGBYDOING EXERCISES
6.1 Deriving the Equation of an Isoquant 216
6.2 Relating the Marginal Rate of Technical Substitution
to Marginal Products 219
6.3 Calculating the Elasticity of Substitution from
a Production Function 223
'
6.4 Returns to Scale for a CobbDouglas Production
Function 232
6.5 Technological Progress 235
CHAPTER 7 Costs and Cost Minimization
What's Behind the SelfService Revolution?
7.1 Cost Concepts for Decision Making
247
Opportunity Cost 247
Economic versus Accounting Costs 250
Sunk (Unavoidable) versus Nonsunk (Avoidable)
Costs 251
7.2 The CostMinimization Problem
253
Long Run versus Short Run 253
The LongRun CostMinimization Problem 254
Isocost Lines 255
Graphical Characterization of the Solution to the
LongRun CostMinimization Problem 256
Corner Point Solutions 258
7.3 Comparative Statics Analysis of the
CostMinimization Problem 260
Comparative Statics Analysis of Changes in
Input Prices 260
Comparative Statics Analysis of Changes
in Output 264
Summarizing the Comparative Statics Analysis:
The Input Demand Curves 265
The Price Elasticity of Demand
for Inputs 267
7.4 ShortRun Cost M i n i m i z a t i o n
269
Characterizing Costs in the Short Run 270
Cost Minimization in the Short Run 272
XIX
245
LEARNINGBYDOING EXERCISES
7.1 Using the Cost Concepts for a College Campus
Business 252
7.2 Finding an Interior CostMinimization
Optimum 258
7.3 Finding a Corner Point Solution with Perfect
Substitutes 259
7.4 Deriving the Input Demand Curves from a Production
Function 267
7.5 ShortRun Cost Minimization with One
Fixed Input 274
7.6 ShortRun Cost Minimization with Two Variable
Inputs 275
CHAPTER 8 Cost Curves
285
How Can HiSense Get a Handle on Costs?
8.1 LongRun Cost Curves
287
LongRun Total Cost Curve 287
How Does the LongRun Total Cost Curve Shift When
Input Prices Change? 289
LongRun Average and Marginal Cost Curves 292
8.2 ShortRun Cost Curves 302
ShortRun Total Cost Curve 302
Relationship Between the LongRun and the ShortRun
Total Cost Curves 303
ShortRun Average and Marginal Cost Curves 305
Relationships Between the LongRun and the ShortRun
Average and Marginal Cost Curves 306
When Are LongRun and ShortRun Average and Marginal
Costs Equal, and When Are They Not? 307
8.3 Special Topics in Cost
310
Economies of Scope 310
Economies of Experience: The Experience
Curve 313
;
8.4 Estimating Cost Functions 315
Constant Elasticity Cost Function 316
Translog Cost Function 316
APPENDIX Shephard's Lemma a n d Duality
323
LEARNINGBYDOING EXERCISES
8.1 Finding the LongRun Total Cost Curve from a
Production Function 288
8.2 Deriving LongRun Average and Marginal Cost
Curves from a LongRun Total Cost Curve 294
8.3 Deriving a ShortRun Total Cost Curve 303
8.4 The Relationship between ShortRun and LongRun
Average Cost Curves 308
XX
CONTENTS
PART 4 PERFECT COMPETITION
CHAPTER 9 Perfectly Competitive Markets
327
A Rose Is a Rose Is a Rose
9.1 What Is Perfect Competition?
330
9.2 Profit Maximization by a PriceTaking Firm
332
Economic Profit versus Accounting Profit 333
The ProfitMaximizing Output Choice for a
PriceTaking Firm 334
9.3 How the Market Price Is Determined:
ShortRun Equilibrium 337
LEARNINGBYDOING EXERCISES
9.1 Deriving the ShortRun Supply Curve for a
PriceTaking Firm 341
9.2 Deriving the ShortRun Supply Curve for a PriceTaking
Firm with Some Nonsunk Fixed Costs 343
9.3 ShortRun Market Equilibrium 349
9.4 Calculating a LongRun Equilibrium 356
9.5 Calculating Producer Surplus 375
CHAPTER 10 Competitive Markets:
Applications 386
The PriceTaking Firm's ShortRun Cost Structure 337
ShortRun Supply Curve for a PriceTaking Firm
When All Fixed Costs Are Sunk 339
ShortRun Supply Curve for a PriceTaking Firm When
Some Fixed Costs Are Sunk and Some
Are Nonsunk 341
ShortRun Market Supply Curve 344
ShortRun Perfectly Competitive Equilibrium 348
Comparative Statics Analysis of the ShortRun
Equilibrium 349
'
Is Support a Good Thing?
10.1 The Invisible Hand, Excise Taxes and
Subsidies 388
The Invisible Hand
Excise Taxes 390
Incidence of a Tax
Subsidies 397
389
394
10.2 Price Ceilings arid Floors
Price Ceilings 400
Price Floors 408
9.4 How the Market Price Is Determined:
LongRun Equilibrium 352
10.3 Production Quotas
LongRun Output and PlantSize Adjustments by
Established Firms 352
The Firm's LongRun Supply Curve 353
Free Entry and LongRun Perfectly Competitive
Equilibrium 354
LongRun Market Supply Curve 356
ConstantCost, IncreasingCost, and DecreasingCost
Industries 358
What Does Perfect Competition Teach Us? 363
400
413
10.4 Price Supports in the Agricultural Sector
Acreage Limitation Programs 418
Government Purchase Programs 418
417
10.5 Import Quotas and Tariffs 422
Quotas 422
Tariffs 425
9.5 Economic Rent and Producer Surplus 367
Economic Rent 367
l
Producer Surplus 370
i
Economic Profit, Producer Surplus, Economic Rent 376
APPENDIX Profit M a x i m i z a t i o n Implies Cost
Minimization
384
LEARNINGBYDOING EXERCISES
10.1 Impact of an Excise Tax 393
10.2 Impact of a Subsidy 400
10.3 Impact of a Price Ceiling 407
10.4 Impact of a Price Floor 412
10.5 Comparing the Impact of an Excise Tax, a Price Floor,
and a Production Quota 417
10.6 Effects of an Import Tariff 428
PART 5 MARKET POWER
CHAPTER 11 Monopoly and Monopsony
How Do Firms Play Monopoly?
11.1 Profit Maximization by a Monopolist
438
440
The ProfitMaximization Condition 440
A Closer Look at Marginal Revenue: Marginal Units and
Inframarginal Units 444
Average Revenue and Marginal Revenue 445
The ProfitMaximization Condition Shown
Graphically 447
A Monopolist Does Not Have a Supply Curve 449
11.2 The Importance of Price Elasticity
of Demand 450
Price Elasticity of Demand and the ProfitMaximizing
Price 450
Marginal Revenue and Price Elasticity of Demand 451
Marginal Cost and Price Elasticity of Demand: The Inverse
Elasticity Pricing Rule 453
The Monopolist Always Produces on the Elastic Region
of the Market Demand Curve 454
The IEPR Applies Not Only to Monopolists 456
Quantifying Market Power: The Lemer Index 457
CONTENTS
11.3 Comparative Statics for Monopolists
Shifts in Market Demand 458
Shifts in Marginal Cost 461
11.9 Applying the Inverse Elasticity Rule for a
Monopsonist 478
458
CHAPTER 12 Capturing Surplus
11.4 Monopoly with Multiple Plants
and Markets 463
485
Why Did Your Ticket Cost So Much Less Than Mine?
Output Choice with Two Plants 463
Output Choice with Two Markets 465
Profit Maximization by a Cartel 466
12.1 Capturing Surplus
11.5 The Welfare Economics of Monopoly
487
12.2 FirstDegree Price Discrimination: Making the
Most from Each Consumer 490
469
The Monopoly Equilibrium Differs from the Perfectly
Competitive Equilibrium 469
Monopoly Deadweight Loss 471
RentSeeking Activities 471
11.6 Why Do Monopoly Markets Exist?
Natural Monopoly 472
Barriers to Entry 473
XXI
471
11.7 Monopsony 475
The Monopsonist's ProfitMaximization Condition 475
An Inverse Elasticity Pricing Rule for Monopsony 477
Monopsony Deadweight Loss 478
LEARNINGBYDOING EXERCISES
11.1 Marginal and Average Revenue for a Linear Demand
Curve 447
11.2 Applying the Monopolist's ProfitMaximization
Condition 449
11.3 Computing the Optimal Monopoly Price for a
Constant Elasticity Demand Curve 453
11.4 Computing the Optimal Monopoly Price for a Linear
Demand Curve 454
11.5 Computing the Optimal Price Using the Monopoly
Midpoint Rule 460
11.6 Determining the Optimal Output, Price, and Division
of Production for a Multiplant Monopolist 465
11.7 Determining the Optimal Output and Price for a
Monopolist Serving Two Markets 466
11.8 Applying the Monopsonist's ProfitMaximization
Condition 476
12.3 SecondDegree Price Discrimination:
Quantity Discounts 495
Block Pricing 495
Subscription and Usage Charges 498
12.4 ThirdDegree Price Discrimination: Different
Prices for Different Market Segments 501
Two Different Segments, Two Different Prices 501
Screening 504
ThirdDegree Price Discrimination with Capacity
Constraints 506
Implementing the Scheme of Price Discrimination:
Building "Fences" s508
12.5 Tying (TieIn Sales)
Bundling 513
Mixed Bundling 515
12.6 Advertising
512
518
LEARNINGBYDOING EXERCISES
12.1 Capturing Surplus: Uniform Pricing versus
FirstDegree Price Discrimination 492
12.2 Where Is the Marginal Revenue Curve with
FirstDegree Price Discrimination? 493
12.3 Increasing Profits with a Block Tariff 497
12.4 ThirdDegree Price Discrimination in Railroad
Transport 503
12.5 ThirdDegree Price Discrimination for Airline Tickets 505
12.6 Price Discrimination Subject to Capacity Constraints 507
12.7 Markup and AdvertisingtoSales Ratio 520
PART 6 IMPERFECT COMPETITION AND STRATEGIC BEHAVIOR
CHAPTER 13 Market Structure and
Competition 528
Is Competition Always the Same? If Not, Why Not?
13.1 Describing and Measuring Market
Structure 530
13.2 Oligopoly w i t h Homogeneous Products
The Cournot Model of Oligopoly 533
The Bertrand Model of Oligopoly 541
Why Are the Cournot and Bertrand Equilibria
Different? 543
The Stackelberg Model of Oligopoly 544
533
13.3 Dominant Firm Markets 546
13.4 Oligopoly with Horizontally Differentiated
Products 549
What Is Product Differentiation? 549
Bertrand Price Competition with Horizontally
Differentiated Products 553
13.5 Monopolistic Competition 558
ShortRun and LongRun Equilibrium in Monopolisticaily
Competitive Markets 558
Price Elasticity of Demand, Margins, and Number of Firms
in the Market 560
Do Prices Fall When More Firms Enter? 560
xxii
CONTENTS
APPENDIX The Cournot Equilibrium and the Inverse
Elasticity Pricing Rule 570
LEARN1NGBYDO1NG EXERCISES
13.1 Computing a Cournot Equilibrium 536
13.2 Computing the Cournot Equilibrium for Two or
More Firms with Linear Demand 540
13.3 Computing the Equilibrium in the Dominant Firm
Model 548
13.4 Computing a Bertrand Equilibrium with Horizontally
Differentiated Products 556
CHAPTER 14 Game Theory and Strategic
Behavior
571
What's in a Game?
14.1 The Concept of Nash Equilibrium
A Simple Game 573
573
The Nash Equilibrium 574
The Prisoners' Dilemma 574
Dominant and Dominated Strategies 575
Games with More Than One Nash Equilibrium 579
Mixed Strategies 583
Summary: How to Find All the Nash Equilibria in a
SimultaneousMove Game with Two Players 584
14.2 The Repeated Prisoners' Dilemma
584
14.3 SequentialMove Games a n d Strategic
Moves 590
Analyzing SequentialMove Games 590
The Strategic Value of Limiting One's Options 593
LEARNINGBYDOING EXERCISES
14.1 Finding the Nash Equilibrium: Coke versus Pepsi 578
14.2 Finding All of the Nash Equilibria in a Game 582
14.3 An Entry Game 592
PART 7 SPECIAL TOPICS
CHAPTER 15 Risk and Information
604
What Are My Chances of Winning?
15.1 Describing Risky Outcomes
Lotteries and Probabilities 606
Expected Value 608
Variance 608
15.4 The Willingness to Pay for Insurance 621
15.5 Verifying the Nash Equilibrium in a FirstPrice
SealedBid Auction with Private Values 636
606
15.2 Evaluating Risky Outcomes 611
Utility Functions and Risk Preferences 611
RiskNeutral and RiskLoving Preferences 614
15.3 Bearing a n d Eliminating Risk 617
Risk Premium 617
When Would a RiskAverse Person Choose to Eliminate
Risk? The Demand for Insurance 620
Asymmetric Information in Insurance Markets: Moral
Hazard and Adverse Selection' 622
15.4 Analyzing Risky Decisions 627
Decision Tree Basics 627
Decision Trees with a Sequence of Decisions 629
The Value of Information 631
15.5 Auctions 633
Types of Auctions and Bidding Environments 634
Auctions When Bidders Have Private Values 635
Auctions When Bidders Have Common Values:
The Winner's Curse 639
LEARNINGBYDOING EXERCISES
15.1 Computing the Expected Utility for Two Lotteries
for a RiskAverse Decision Maker 614
15.2 Computing the Expected Utility for Two Lotteries:
RiskNeutral and RiskLoving Decision Makers 616
15.3 Computing the Risk Premium from a Utility
Function 620
CHAPTER 16 General Equilibrium Theory
648
How Do Gasoline Taxes Affect the Economy?
16.1 General Equilibrium Analysis: Two Markets
16.2 General Equilibrium Analysis: Many
Markets 654
The Origins of Supply and Demand in a Simple
Economy 654
The General Equilibrium in Our Simple Economy
Walras' Law 664
650
660
16.3 General Equilibrium Analysis: Comparative
Statics 665
16.4 The Efficiency of Competitive Markets 669
What Is Economic Efficiency? 669
Exchange Efficiency 670
Input Efficiency 676
Substitution Efficiency 678
Pulling the Analysis Together: The Fundamental Theorems
of Welfare Economics 681
16.5 Gains f r o m Free Trade 682
Free Trade Is Mutually Beneficial 682
Comparative Advantage 686
APPENDIX Deriving t h e D e m a n d a n d Supply Curves
f o r General Equilibrium in Figure 16.9 a n d LearningbyDoing Exercise 16.2 692
LEARNINGBYDOING EXERCISES
16.1 Finding the Prices at a General Equilibrium with
Two Markets 654
CONTENTS
16.2 Finding the Conditions for a General Equilibrium
with Four Markets 663
16.3 Checking the Conditions for Exchange
Efficiency 674
CHAPTER 17 Externalities and Public Goods
xxiii
Efficient Provision of a Public Good
The Free Rider Problem 722
697
720
LEARNINGBYDOING EXERCISES
17.1 The Efficient Amount of Pollution 704
17.2 Emissions Fee 707
17.3 The Coase Theorem 717
17.4 Optimal Provision of a Public Good 721
When Does the Invisible Hand Fail?
17.1 Introduction
699
17.2 Externalities 700
Negative Externalities and Economic Efficiency 702
Positive Externalities and Economic Efficiency 711
Property Rights and the Coase Theorem 716
17.3 Public Goods
719
Mathematical Appendix
v
729
Solutions t o Selected Problems

Glossary
771
Photo Credits
Index
783
781
749