Microeconomics (Mcgraw-hill Series: Economics) 21st Edition

Book Preface

Fundamental Objectives
We have three main goals for Economics:
∙ Help the beginning student master the principles essential for understanding the economizing problem, specific economic issues, and policy alternatives.
∙ Help the student understand and apply the economic perspective and reason accurately and objectively about economic matters.
∙ Promote a lasting student interest in economics and the economy.

What’s New and Improved?

One of the benefits of writing a successful text is the opportunity to revise—to delete the outdated and install the new, to  rewrite misleading or ambiguous statements, to introduce  more relevant illustrations, to improve the organizational  structure, and to enhance the learning aids.

We trust that you will agree that we have used this opportunity wisely and fully. Some of the more significant changes include the following.

Separate Presentations of  Monopolistic Competition  and Oligopoly

In response to instructor feedback, we have split the material  on monopolistic competition and oligopoly that had together
comprised a single chapter in previous editions into two separate chapters. The separated chapters have been made modular  so that skipping either or covering both will be equally viable  options for instructors. This should be particularly helpful to instructors who want to spend more time on oligopoly.

Onboarding of Web Chapters  and COI Material

Economics is everywhere, so the 21st edition continues our  commitment to providing instructors with accessible and intuitive coverage of a wide variety of economic subject areas.
To that end, we are happy to report that we have been able to  pull material that appeared only online in previous editions  into the printed book. That includes what were previously  two full-length Web Chapters as well as a large fraction of the  material that had been posted online as Content Options for Instructors (COIs).

“Technology, R&D, and Efficiency,” which had previously been a Web Chapter, is now Chapter 15, while “The  Economics of Developing Countries,” also previously a Web Chapter, is now Chapter 42. Those chapters as well as the  material on “Previous Exchange Rate Systems” that had been  posted online as Content Options for Instructors 2 (COI2) are now integrated directly into the printed book, the latter becoming an appendix to Chapter 27 (The Balance of Payments,  Exchange Rates, and Trade Deficits). The only online material that was not brought into the book was COI1, “The  United States in the Global Economy.” That content largely  duplicated material that appeared in other chapters and was not much used, so it will no longer be supported either online or in print.

Modernized Presentation of Fixed Exchange Rates and Currency Interventions For this new edition, we have reorganized and rewritten large  parts of Chapter 27 (The Balance of Payments, Exchange  Rates, and Trade Deficits). The key revision has to do with our  presentation of fixed exchange rates. We now show with  greater clarity that under a fixed exchange rate regime, changes  in the balance of payments generate automatic changes in both  foreign exchange reserves and the domestic money supply that  then have to be dealt with by a nation’s central bank. Our new  presentation uses China as an example of these forces and how  they often lead to “sterilization” actions on the part of the central banks that are engaged in currency pegs. Our new presentation also clarifies the relationship between trade deficits and foreign exchange reserves under a currency peg.

We have inserted additional examples into our presentation of flexible exchange rates and have introduced a new  Last Word on optimal currency areas to give students insight  into some of the European Monetary Union’s current problems and how they relate to the fact that a monetary union is  equivalent to simultaneous multilateral currency pegs. For instructors who wish to give a larger historical perspective,  we have created a brief appendix that covers the gold standard era as well as the Bretton Woods period. This material  was previously available in Content Options for Instructors 1  (COI2)

New “Consider This” and  “Last Word” Pieces Our “Consider This” boxes are used to provide analogies,  examples, or stories that help drive home central economic  ideas in a student-oriented, real-world manner. For instance, a  “Consider This” box titled “McHits and  McMisses” illustrates  consumer sovereignty  through a listing of  successful and unsuccessful products. How businesses exploit  price discrimination is  driven home in a  “Consider This” box  that explains why ballparks charge different  admission prices for  adults and children but  only one set of prices  at their concession  stands. These brief vignettes, each accompanied by a photo, illustrate key  points in a lively, colorful, and easy-to-remember way. We  have added 10 new “Consider This” boxes in this edition. Our “Last Word” pieces are lengthier applications or  case studies that are placed near the end of each chapter. For  example, the “Last Word” section for Chapter 1 (Limits,  Alternatives, and Choices) examines pitfalls to sound  economic reasoning, while the “Last Word” section for  Chapter 4 (Market Failures: Public Goods and Externalities)  examines cap-and-trade versus carbon taxes as policy responses to excessive carbon dioxide emissions. There are 7  new “Last Word” sections in this edition. If you are unfamiliar with Economics, we encourage you  to thumb through the chapters to take a quick look at these  highly visible features. Enhanced Coverage of Game Theory and Strategic Behavior The online economy and the tech sector present students with  many high-profile examples of oligopolistic firms and industries. A grasp of strategic behavior is consequently more im portant than ever for principles students. To that end, the 21st  edition features extended coverage of game theory and strategic behavior. The new material covers topics related to sequential games, including backward induction, the game tree  (extensive form) representation of strategic games, and subgame perfect Nash equilibrium.

In previous editions, a substantial portion of our game  theory coverage appeared in an appendix to a chapter that  covered both monopolistic competition and oligopoly. With  the material on monopolistic competition now located in a  separate chapter, we have been able to eliminate the appendix  and fully integrate the game theory material that had appeared  there with the treatment of oligopoly that had appeared in the  main body of text. The result is our new Chapter 14, which is  titled, “Oligopoly and Strategic Behavior.”

This integrated presentation facilitates student comprehension of both game theory and oligopoly because strategic  interactions are always presented in an accessible, intuitive  context. Students already understand that Google’s actions  affect those of rivals like Facebook, and vice versa. So integrating oligopoly with game theory illuminates both sets of  material.