Microeconomics (5th Edition)

Book Preface

After many years of experience teaching microeconomics at the undergraduate and MBAlevels, we have concluded that the most effective way to teach it is to present the content with a variety of engaging applications, coupled with an ample number of practice problems and exercises. The applications ground the theory in the real world, and the exercises and problems sets enable students to master the tools of economic analysis and make them their own. The applications and the problems are combined with verbal intuition and graphs, so that they are reinforced and amplified. This approach enables students to see clearly the interplay of key concepts, to thoroughly grasp these concepts through abundant practice, and to see how they apply in actual markets and business firms.

Our reviewers and adopters of the first edition told us that this approach worked for them and their students. In the second edition, we built on this approach, adding even more applications and problems and revisiting every explanation, every graph, and every Learning-By-Doing exercise to make sure the text was as clear as possible. In the third edition, we continued in the spirit of the second edition, adding more current applications and problems. In fact, we added at least five problems to each chapter (nearly 90 new problems in all). In the fourth edition, we added still more new problems, and we introduced over 30 new applications. In addition, we added a new Appendix to Chapter 4 that introduces the basic concepts of time value of money, such as present and future value. Finally, every chapter now begins with a set of concrete, actionable learning goals based on Bloom’s Taxonomy of Educational Objectives. In the fifth edition, we updated applications and chapter openers, and added new applications throughout the book, many with a focus on current events. Each major section of every chapter now has at least one application.We also added new material to Chapter 15 on pay for performance and to Chapter 17 on contrasting emissions fees, emissions standards, and tradable permits.

• The Solution Is in the Problems. Our emphasis on practice exercises and numerous, varied problems sets this book apart from others. Based on our experience, students need drills in order to internalize microeconomic theory. They need to work through many problems that are tangible, problems that have specific equations and numbers in them. Anyone who has mastered a skill or a sport, whether it be piano, ballet, or golf, understands that a fundamental part of the learning process involves repetitive drills that seemingly bear no relation to how one would actually execute the skill under “real” conditions. We feel that drill problems in microeconomics serve the same purpose. A student may never have to do a numerical comparative statics analysis after completing the microeconomics course. However, having seen concretely, through the use of numbers and equations, how a shift in demand or supply affects the equilibrium, a student will have a deeper appreciation for comparative statics analysis and will be better prepared to interpret events in real markets.

Learning-By-Doing exercises, embedded in the text of each chapter, guide the student through specific numerical problems. We use three to ten Learning By-Doing
exercises in each chapter and have designed them to illustrate the core ideas of the chapter. They are integrated with the graphical and verbal exposition, so that students can clearly see, through the use of numbers and tangible algebraic relationships, what the graphs and words are striving to teach. These exercises set the student up to do similar practice problems as well as more difficult analytical problems at the end of each chapter.

As noted above, we have added to the already complete end-of-chapter problem sets to give students and instructors more opportunity to assess student understanding. Chapters have between 20 and 35 end-of-chapter exercises. There is at least one exercise for each of the topics covered in the chapter, and the topics covered by the exercises generally follow the order of topics in the chapter. At the end of the book, there are fully worked-out solutions to selected exercises.