Index. Cambridge University Press A Short Course in Intermediate Microeconomics with Calculus Roberto Serrano and Allan M.

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1 adverse selection, 361, 363 Akerloff, G., 360 allocation competitive equilibrium allocation, 275 feasible allocation, 266, 267, 275 nonfeasible allocation, 268 Arrow, K., 272 asymmetric information, 359, 361, 363 average cost, average cost function, 128 average product, 132, 133, 164 average total cost, 167, 168 average variable cost, 167, 168 backward induction, 255 bankruptcy, 142 battle of the sexes, 243, 247 expanded battle of the sexes, 243, 251, 252 Bertrand, J., 222, 233 Bertrand competition, 233 Bertrand duopoly model, 222 Bertrand equilibrium, 235, 248 Bowley, A., 264 budget constraint, 25 intertemporal budget constraint, 29 standard budget constraint, 25 budget line, 26 budget set, 26 bundle, 7 cap and trade, 306, 317, 318, 320 capital market, 76 carrot and stick, 364 cartel, 229 certainty equivalent, 354, 355 change in consumer s surplus, 110 Clarke, E., 340 classical school, 1 Coase, R., 314 Coase theorem, 315 Coasian property rights, 306, 313 Cobb, C., 37, 61, 159 Cobb-Douglas production function, 159, 171 Cobb-Douglas utility function, 37 collusion, 228, 230, 231 command policy, 335 comparative statics, 43 compensating variation/equivalent variation paradox, 95, 104, 106 competitive equilibrium, 225, 227, 263, 272, 275, 292, 298 competitive firm, 177 competitive market, 125, 137, 177, 178, 215, 272, 275, 289 competitive market equilibrium, 177, complements, 50, 51 completeness, 7, 9, 350 concavity, 123 conditional factor demand, 126, 152 conditional input demand, 126, 135, 152 consumer s surplus, 103, 106, 109, 185 consumers surplus, 103, , 185, 189, 204, 205, 265 consumption bundle, 7 consumption/leisure model, 65, 69, 285 continuity, 350 contract curve, 271 convexity, 7, 12, 145 core, 272, 276 corner solution, 33 cost, 125 cost minimization, , 165 coupon rationing, 28 Cournot, A., 222 Cournot competition,

2 378 Cournot equilibrium, , 227, 248 Crusoe, Robinson, 263 deadweight loss, 177, 189, 190, 192, 194, 204, 205, 214, 226 Debreu, G., 272 Defoe, D., 263 demand curve, 43, 47, 201 compensated demand curve, 44, 56, 115 inverse demand curve, 44, 201 demand function, 43 demand-revealing mechanism, differentiated goods, 236, 237 diminishing returns, 123 discount factor, 31 distributional fairness, 267 dominant strategy, 244 dominant strategy equilibrium, 242, 244, 248 Douglas, P., 37, 61, 159 Dresher, M., 243 duopoly, 222 economic problem, 1 economy exchange economy, 263 Edgeworth, F., 1, 264 Edgeworth box diagram, 264, 269 efficiency, 266, 284, 311, 318, 325, 338 elasticity, 57 price elasticity of demand, 58, 202 endowment initial endowment, 264 Engel, E., 45 Engel curve, 43, 45 equity, 267 excess demand, 184, 291 excess supply, 184, 291 expected utility property, 352 expected value, 348, 349 experimental evidence on games, 246 externality, 305, 306, 325 feasible, 8 fixed cost, 165 Flood, M., 243 free entry, 178 free exit, 178 free rider, 326, 333, 334 gamble, 348 game, 242, 348 battle of the sexes, 243, 247 centipede game, 260 chess, 253 duopoly sequential competition, 256 expanded battle of the sexes, 243, 251 matching pennies, 254 mutual-assured destruction, 257 one-shot game, 246 prisoners dilemma, 242, 243, 245 repeated game, 246 sequential move game, 253 simultaneous move game, 253 tic-tac-toe, 253 tit for tat, 243, 247 game theory, 222, 242 game tree, 254 general equilibrium, 267 general equilibrium analysis, 3 general equilibrium model, 284 Giffen, R., 47 Giffen good, 47 Groves, T., 340 health insurance market, 361 Hicks, J., 52 homogeneity, 233 homogeneous goods, 178, implied warranty, 372 incentive compatibility constraint, 370 incentive compatible, 340 income effect, 44, income expansion path, 46 independence, 351 indifference, 8 indifference curve, 7, 10, 18 indifference relation, 8 individual demand function, 43 industry supply curve, 188 horizontal industry supply curve, 183 long-run industry supply curve, 181 short-run industry supply curve, 179 upward-sloping long-run industry supply curve, 182 inefficiency, 266 inferior good, 43, 46 inflation rate, 77 input demand curve, 135 insurance auto insurance, 364 flood insurance, 364 health insurance, 361 homeowner s insurance, 364 interest rate, 78 nominal interest rate, 78 real interest rate, 79 internalizing the externality, 310 intertemporal budget constraint, 29, intertemporal budget line, 78 inverse demand, 49 inverse production function, 126, 136 invisible hand, 245 isocost line, 150 isofactor curve, 140

3 379 isoquant, 143 isorevenue line, 140 Jevons, W., 1 Kaldor, N., 55 Keynes, J., 142 labor, 64, 285 labor market, 76 labor supply curve, 68 labor supply function, 68 Lagrange, J., 40 Lagrange function, 36, 40 Lagrange function method, 36, 40 law of demand, 47 legal contract, 372 leisure, 64, 65, 285 Leontief, W., 62 liability rules, 372 Lindahl, E., 336 Lindahl equilibrium, long run, 142, 143, 178 long-run cost curve, 152 long-run cost function, 152 long-run market theory, 179 lottery, 348 compound lottery, 349, 351 Luce, R., 247 Malthus, T., 123 marginal benefit, 328 marginal cost, , , 201, 208, 211, 213 marginal cost function, 128 marginal external cost, 309 marginal product, 132, 133, 144, 164 marginal rate of substitution, 7, 13, 14, 18, 20, 288 marginal revenue, 201, 208, 213 marginal unit, 108 marginal utility, 8, 18, 20, 353 market cap and trade market, 306, 317, 318, 320 market for pollution rights, 306, 316 market constraints, 122, 124 market demand, 59 market demand curve, 44 market equilibrium, 184, 263, 330 market failure, 190, 305, 312, 325, 361, 363, 365, 371 market for lemons, 360 market supply curve, 188 horizontal market supply curve, 183 long-run market supply curve, 181 short-run market supply curve, 179 upward-sloping long-run market supply curve, 182 markup, 203 Marshall, A., 1, 47 Marx, K., 1 McKenzie, L., 272 microeconomics, 2 Mill, J., 1 money good, 105 monitoring, 372 monopolist, 178, 199 monopolistic competition, 199, 212 monopoly, 200, 215, 225, 227 legal monopoly, 200 natural monopoly, 199 monopoly firm, 199 monopoly market, 199 monopoly profit maximization, 201 monopsony, 200 monotonicity, 7, 10, 122, 145 moral hazard, 359, 363, 365 Morgenstern, O., 242, 347, 350 mutual assured destruction, 257 Nash, J., 248, 251 Nash equilibrium, 243, 248, 334 mixed-strategy Nash equilibrium, 251 pure strategy Nash equilibrium, 251 neoclassical school, 1 nonlabor income, 70 normal good, 43, 45 numeraire, 278, 289 numeraire good, 30, 105 ObamaCare, 374 oligopoly, 221 opportunity cost of leisure, 66 optimal choice, 32, 35 overtime pay, 73 Pareto, V., 1, 266 Pareto domination, 266, 287, 298 Pareto efficiency, 86, 263, 266, 287, 298 Pareto efficient, 266 Pareto move, 266, 272 Pareto optimal, 335 Pareto optimality, 86, 263, 266, 269, 272, 275, 284, 287, 298, 318, 325, 338, 340, 341 partial derivative, 18 partial equilibrium, 266 partial equilibrium analysis, 3 Patient Protection and Affordable Care Act of 2010, 374 perfect competition, 177 perfect complements, 33 perfect information, 178, 346 perfect substitutes, 23, 33 Pigou, A., 312 pollution rights, 306, 316 Polonius, 77

4 380 preference relation, 8 strict preference relation, 8 weak preference relation, 9 preferences, 7 well-behaved preferences, 12 present value of consumption stream, 31 of income stream, 31, 78 price constraints, 124 price discrimination, 199, 206 common price discrimination, 207 first-degree price discrimination, 207, 209 perfect price discrimination, 207, 209 second-degree price discrimination, 207 third-degree price discrimination, 206, 207 price-taking behavior, 178 principal agent problem, 360, 366, 371 prisoners dilemma, 242, 243, 245 private good, 325, 328 probability, 348 producer s surplus, 177, 187, 204, 205 producers surplus, 177, 188, 189, 265 production, 121 production function, 122, 141 production model multiple-input/single-output production model, 121, 141 single-input/single-output production model, 121 production technique, 143 profit, 122, 125 profit maximization, 129, 131, 134, 151, 155, 169, 170, 210, 213 first-order condition for profit maximization, 130 joint profit maximization, 310 second-order condition for profit maximization, 130 public good, 325 public good model, 327 quasi-public good, 327 quasilinear preferences, 103, 105, 109, 328 quasilinearity, 103, 106, 108, 115, 328 Raiffa, H., 247 randomness, 346, 348 rationality, 2, 249 real wage, 67 real-world convexity/concavity, 123 repeated games, 242 reservation price, 360 returns to scale, 147 constant returns to scale, 147, 149, 152 decreasing returns to scale, 147, 154 increasing returns to scale, 147, 153 revealed preference, 86, 99 strong axiom of revealed preference, 100 weak axiom of revealed preference, 100 revenue, 125 Ricardo, D., 1, 123 risk averse, 353 risk loving, 354 risk neutral, 355 Russell, B., 65 Samuelson, P., 99, 333 Samuelson optimality condition, 325, 332, 333, 335, 338 savings, 30 income effect on savings, 82 substitution effect on savings, 80 screening contract, 372 second-price auction, 341 set less preferred set, 11 more preferred set, 11 Shakespeare, W., 77 short run, 163, 164, 178 short-run cost function, 166 short-run demand function, 165 short-run market theory, 179 short-run production function, 164 short-run total cost, 166 signaling device, 371 Slutsky, E., 52 Smith, A., 1, 86, 123, 189, 245, 275 social surplus, 185, 189 social surplus maximization, 189 Spence, M., 360 Stackelberg, H., 222, 232 Stackelberg competition, 232 Stackelberg duopoly model, 222 Stackelberg follower, 222, 232 Stackelberg leader, 222, 232 Stiglitz, J., 360 strategic behavior, 221, 222, 242 strategy, 244 mixed strategy, 251 pure strategy, 250 subsidy Pigouvian subsidy, 306, 312 substitutes, 50, 51 substitution effect, 44, Hicks substitution effect, 91 Kaldor substitution effect, 91 Slutsky substitution effect, 102 supply function, 138 supply of labor, 64 supply of savings, 64, 76, 80 tatonnement process, 275 tax ad valorem tax, 87 carbon emissions tax, 90

5 381 demand-revealing tax, 326, 340 federal income tax, 74 flat tax, 64, 74, 76 gasoline tax, 87 income tax, 74 just tax, 336 lump-sum tax, 86 89, 278 payroll tax, 74 per-head tax, 88 per-unit tax, 86, 87, 89, , 194 percentage tax, 87 Pigouvian tax, 306, 312 poll tax, 87 progressive tax, 64, 74, 76, 336 regressive tax, 74 sales tax, 87 Social Security tax, 74 specific tax, 87 taxation according to ability to pay, 336 taxation according to benefit, 336 taxation according to marginal benefit, 336 value-added tax, 87 Wicksell/Lindahl tax, 326, 336 tax rebate per-unit tax rebate, 89 technical rate of substitution, 146 technological constraints, 122, 142 technological efficiency, 143, 285, 287 technological inefficiency, 285 theory of the firm long-run theory of the firm, 142 short-run theory of the firm, 142, 163 threat, 257 tit for tat, 243, 247 total cost, 127, 165 total cost function, 127 transfer lump-sum transfer, 278 transitivity, 7, 9, 350 Tucker, A., 243 U-shaped average cost curve, 123 uncertainty, unemployment benefits, 72 unequal probabilities, 351 utility cardinal utility, 17, 348, 353 expected utility, 352 ordinal utility, 17, 103, 348 utility function, 7, 16 Cobb-Douglas utility function, 115 quasilinear utility function, 110 utility maximization, 35 value of average product, 133 value of marginal product, 133 variable cost, 165 variation compensating variation, 92 94, 103, 110 equivalent variation, 92 94, 103, 110 Veblen, T., 48 Veblen good, 48 Vickrey, W., 341 Vickrey auction, 341 voluntary contribution mechanism, 333 von Neumann, J., 242, 347, 350 von Neumann Morgenstern expected utility, 347, 350 von Neumann Morgenstern expected utility theorem, 351 von Neumann Morgenstern utility, 359 von Neumann Morgenstern utility function, 347 wage rate, 65 Walras, L., 1, 272, 280 Walras Law, 280 Walrasian equilibrium, 272, 275, 292, 298 Walrasian process, 275 welfare change for many people, 112 welfare change for one person, 91 welfare economics, 86 first fundamental theorem of welfare economics, 263, 276, 277, 299 second fundamental theorem of welfare economics, 263, 277, 279, 299 Wicksell, K., 336 willingness to pay, 95, 108 naive willingness to pay, 96, 108 zero savings point, 77

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