354 INDEXMonopolistic competition: (Cont.)defined 238, 245, 246pdemand curves 238–239, 247pexcess capacity 248–249plong-run equilibrium 239, 248–249pprice and output 238–239, 247–248pproduct differentiation 195p, 246pshort-run equilibrium 238, 247pMonopolistic exploitation 287, 301pMonopoly:bilateral 289, 306–308pcompared with other models 230–231pcontrol 216–218, 219, 231–233pdefined 212, 220–221pdemand curve 212, 220–221pefficiency 229–231plong-run equilibrium 215–216, 229–231pmultiplant 226–228pprice discrimination 218, 233–236pprice and output 212, 221–222pshort-run equilibrium 213–215, 219, 224–226pMonopsonistic exploitation 289, 305pMonopsony 288–289, 302, 305pMoral hazard 337, 339, 345pMultiplant firm 226–227pNash equilibrium 273, 275, 277–278pNatural monopoly 222p, 231pNecessities 42, 54pNeutral technical progress 153, 154, 177pNew approach to consumer demand theory 106, 108,115–116pNoncompeting groups 309pNonprice competition 248pNon-zero-sum game 272, 275Normal good 15, 22p, 42, 59, 89–91pNormal profit 207p, 220p, 259pNormative economics 2–3, 12–13pNuméraire 325pOligopoly:Bertrand model 240, 244, 250–251pcentralized cartel model 242, 244, 255–256pChamberlin model 241, 244, 253pcollusion 242–244, 253–259pcompared with other models 259–260pCournot model 240, 244, 250–252pdefined 239, 245, 246–247pEdgeworth model 240–241, 245, 250–252pefficiency 244, 259–260pgame theory 254pkinked demand curve model 241–242, 245, 254pmarked-sharing cartel model 243, 245, 256pnonprice competition 248pprice leadership by dominant firm model 257–259pprice leadership by low-cost firm model 256–257pOligopoly: (Cont.)price and output 239, 247–250pSweezy model 241, 254pOligopsony 303pOpportunity cost doctrine 155pOptimal combination of factors 283, 286, 289,291–293p, 298–300p, 303–305pOptimal rate of output 163p, 213–216, 255–258pOptimal scale of plant 162–163p, 215–216, 226–227pOrdinal utility 66, 99pOutput (see production theory)Output effect 140pOutput elasticity 152, 154Paasche index 105, 108, 113–114pPareto optimum 316–317, 320, 327–330pPartial equilibrium analysis 2, 3, 12p, 322pPayoff 272, 275, 277–278pPayoff matrix 272, 275, 277–278pPeak-load pricing 263, 265, 268–269pPer-unit tax 38p, 232pPerfect competition:compared with other models 230, 231p, 249p,259–260p, 384pconstant cost industries 190, 192, 205–206pdecreasing cost industries 192, 205–208pdefined 184, 192, 194–195pdemand curve 184, 195–196pefficiency 194p, 230–231p, 248–249p, 259p, 334pincreasing cost industries 191–192, 205–208plong-run 189, 204–205pprice and employment of factors 283–284, 291–302pprice and output 184–211short-run 185–189, 192, 200–204psupply curve 189, 201–203pvery short-run 185, 196–197pPlayers 272, 275, 276pPoint elasticity of demand 40–42, 45, 47–51pPositive economics 2–3, 12–18pPrice:absolute 328pand employment of inputs 283–310equilibrium 11p, 19, 31–36prelative 328–329pPrice ceiling 36pPrice-consumption curve 69, 71, 89–91pPrice discrimination:first degree 218, 233–234psecond degree 218, 234–235pthird degree 218, 235–236pPrice elasticity of demand 39–40, 45, 47–53pPrice floor 36pPrice index number 104, 108, 113–114pPrice leadership:by dominant firm 243–244, 258pby low-cost firm 256–257p
INDEX 355Price rigidity 241, 254–255pPrice theory 1, 8pPrice wars 254pPrisoners’ dilemma 273–274, 275, 278–279pPrincipal-agent problem 338, 339, 345pPrivate marginal benefit 334pPrivate marginal cost 334pProduct curves:average 118–120, 127–132pmarginal 118–120, 127–132ptotal 118–120, 127–132pProduct differentiation 238, 246–247pProduct group 247pProduction possibility curve 314, 324pProduction techniques 6–7p, 10, 30p, 221p, 248–249pProduction theory 118–145Profit:economic 192, 204pnormal 192, 204pProfit maximization:marginal revenue—marginal cost approach 186–187,200–202p, 214–215, 226p, 238–239, 247–248pin monopolistic competition 238–239, 246–248pin monopoly 214–215, 225–226pin monopsony 288–289, 302–306pas objective of the firm 198p, 260pin oligopoly 240–244, 250–259pin perfect competition 185–189, 198–200ptotal revenue-total cost approach 185–186,198–200p, 213–214, 223–224pPublic good 317–320, 333–334pPublic utilities 221pPure monopoly 212, 219, 220pQuasi-rent 286, 289, 298pRationing 1, 7p, 197–198pReal income 70, 91–94pRegression analysis 116–117pRelative price 329pRent 286, 290, 297pRepeated games 274–275, 280pRepresentative firm 184, 185, 247pReturns to scale:constant 125–126, 143–144pdecreasing 125–126, 143–144pincreasing 125–126, 143–144pRevealed preference 103, 108, 111–113pRevenue:marginal 186–187p, 192, 200–201p, 212, 214–215,221–223p, 238, 241–244p, 255–257ptotal 185, 192, 198p, 212Ridge lines 122, 135–136pSales promotion 249p, 259p(See also Advertising)Scale of plant 149–150, 162–163p, 215–216,229–230pScarcity 1, 6pSearch costs 336, 339, 340pSearch goods 336, 339, 340pSecond best, theory of 333pShort run 118, 126Shut-down point 188, 192, 200–201pSlutsky substitution effect 102, 108, 110pSocial marginal benefit 334pSocial marginal cost 334pSocial welfare function 317, 320, 331pSpeculation 198pStable equilibrium 19, 20, 32–34pStages of production:first 120, 130–132prelevant 120, 130–132psecond 120, 130–132pthird 120, 130–132pStrategic behavior 274, 281–282pStrategies 274, 275, 281–282pSubsidy 37pSubstitution:in consumption 15, 25p, 43, 54–55p, 79peffect 70, 91–96peffect according to Hicks and Slutsky 102, 108, 110pin production 125, 139–142pSupply:ceteris paribus 16, 28pchanges in 17, 29–30p, 36pelasticity of 44, 45, 56–59pfirm 189, 201–203pfor an input 285, 287, 296–297pmarket 2, 9–10p, 18, 81pschedule of 9, 17, 28–31pSupply curves:backward bending 296pfor a constant cost industry 190, 224–226pfor a decreasing cost industry 192, 205–208pinput market 285, 287, 296–297p, 501–502pfor an increasing cost industry 191, 205–208pproduct market 16–18, 192–196psingle producer 17, 25p, 189, 200–204punder imperfect competition 228punder perfect competition 189, 200–204pSweezy model 241, 245, 255pTastes 14, 22pTax:lump-sum 216, 232pper-unit 37p, 60p, 217–218, 232–233pTechnical progress 153, 176–177pTechnologically fixed factor proportions 143pTechnology 7–8p, 17, 28–30pTheory 1, 3, 5–6pTime as economic good
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PREFACEvimicroeconomic theory and r
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CHAPTER 4Consumer DemandTheory4.1 T
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