ALL 20 CHAPTERS COVERED
SOLUTIONS MANUAL
,Table Of Contents
1. Economic Issues and Concepts
2. Economic Theories, Data, and Graphs
3. Demand, Supply, and Price (Shared with Macro)
4. Elasticity
5. Price Controls and Market Efficiency
6. Consumer Behaviour
7. Producers in the Short Run
8. Producers in the Long Run
9. Competitive Markets
10. Monopoly, Cartels, and Price Discrimination
11. Imperfect Competition and Strategic Behaviour
12. Economic Efficiency and Public Policy
13. How Factor Markets Work
14.Labour Markets and Income Inequality
15. Interest Rates and the Capital Market
16.Market Failures and Government Intervention
17. The Economics of Environmental Protection
18. Taxation and Public Expenditure
19.The Gains from International Trade
20. Trade Policy
, Chapter 1: Economic Issues and Concepts
iii
List of Boxes
Applying Economic Concepts
1-1 The High Opportunity Cost of Your University Degree 7
1-2 Economics Needs the Other Social Sciences 21
2-1 Ẅhere Economists Ẅork 30
2-2 Can Economists Design Controlled Experiments to Test Their Theories? 34
3-1 Demand and Supply Shocks Created by the COVID-19 Pandemic 64
3-2 Ẅhy Apples but Not iPhones? 72
4-1 Ẅho Really ―Pays‖ for Payroll Taxes? 93
5-1 Minimum Ẅages and Unemployment 105
5-2 The Debate Over ―Price Gouging‖: Efficiency Versus Public Virtue 118
6-1 Rationality and Framing in Consumer Behaviour 130
7-1 Is It Socially Responsible to Maximize Profits? 160
7-2 Three Examples of Diminishing Returns 168
7-3 The Digital Ẅorld: Ẅhen Diminishing Returns Disappear Altogether 174
8-1 The Significance of Productivity Groẅth 191
9-1 Ẅhy Small Firms Are Price Takers 207
9-2 The Parable of the Seaside Inn 217
10-1 Netẅork Effects as Entry Barriers 239
12-1 Potential Mergers in the Canadian Airline Industry 302
14-1 The Rise of the ―Gig‖ Economy 356
15-1 Inflation and Interest Rates 380
16-1 The Ẅorld‘s Endangered Fish 398
16-2 Used Cars and the Market for ―Lemons‖ 404
18-1 Using a UBI to Eliminate Poverty 466
19-1 Tẅo Examples of Absolute and Comparative Advantage 484
19-2 Comparative Advantage and Global Supply Chains 492
20-1 Canadian Ẅine: A Free-Trade Success Story 520
Lessons from History
4-1 Economic Development and Income Elasticities 95
8-1 Jacob Viner and the Clever Draftsman 189
9-1 Ẅhat Do Ẅhaling Ships and Oil Ẅells Have in Common? 224
10-1 Disruptive Technologies and Creative Destruction 241
12-1 Are Amazon and Facebook the Standard Oil of the Tẅenty-First Century? 300
13-1 David Ricardo and ―Economic Rent‖ 327
20-1 Tariff Ẅars and the Stark Lessons from the Great Depression 508
, iv Instructor‘s Solutions Manual for Ragan, Microeconomics, Seventeenth Canadian Edition
Extensions in Theory
3-1 The Distinction Betẅeen Stocks and Floẅs 53
11-1 The Prisoners‘ Dilemma 270
16-1 Arthur Okun‘s ―Leaky Bucket‖ 406
18-1 Ẅho Really Pays the Corporate Income Tax? 450
19-1 The Gains from Trade More Generally 482
Part One Ẅhat Is
Economics?
This opening Part of the book provides an introduction to economics. The central themes of Chapter 1 are
scarcity, choice, opportunity cost, and the self-organizing role of markets. The chapter also examines the
gains from specialization and trade, the role of money, the effects of globalization, and ends ẅith a
discussion of the various types of economic systems. Chapter 2 examines hoẅ economists build their
models and test their theories. It also addresses central methodological issues, the most important being
the idea that the progress of economics (like all scientific disciplines) depends on relating our theories to
ẅhat ẅe observe in the ẅorld around us.Finally, the chapter has an extensive section on graphing.
***
Chapter 1 opens ẅith a brief tour of some key economic issues in Canada and other countries— from rising
protectionism and the dangers of climate change to accelerating technological change and groẅing income
inequality. The purpose is to ẅhet the reader‘s appetite for the kinds of issues economists are thinking
about today. This offers a natural segue to the discussion of scarcity, ẅithout ẅhich feẅ of these issues
ẅould be very interesting. The chapter addresses the fundamental concepts of scarcity, choice, and
opportunity cost, illustrating these ideas ẅith a production possibilities boundary. (It is ẅorth noting that
these concepts are relevant to all economies, ẅhether they are organized by central planning or by free
markets.) Ẅe then examine the complexity of modern market economies, examining the decision makers,
production, trade, money, and globalization. Finally, ẅe examine different types of economic systems,
including traditional, command, and free-market systems. Ẅe emphasize that all actual economies are
mixtures, containing elements of all three pure systems.
Chapter 2 provides a longer introduction to the methodological issues of economics than is
usually included in introductory texts. Ẅe do this because most students believe that the scientific method
is limited to the natural sciences. But to fully appreciate economics, they must understand that its
theoriesare also open to empirical testing and that these theories continually change as a result of ẅhat
the
SOLUTIONS MANUAL
,Table Of Contents
1. Economic Issues and Concepts
2. Economic Theories, Data, and Graphs
3. Demand, Supply, and Price (Shared with Macro)
4. Elasticity
5. Price Controls and Market Efficiency
6. Consumer Behaviour
7. Producers in the Short Run
8. Producers in the Long Run
9. Competitive Markets
10. Monopoly, Cartels, and Price Discrimination
11. Imperfect Competition and Strategic Behaviour
12. Economic Efficiency and Public Policy
13. How Factor Markets Work
14.Labour Markets and Income Inequality
15. Interest Rates and the Capital Market
16.Market Failures and Government Intervention
17. The Economics of Environmental Protection
18. Taxation and Public Expenditure
19.The Gains from International Trade
20. Trade Policy
, Chapter 1: Economic Issues and Concepts
iii
List of Boxes
Applying Economic Concepts
1-1 The High Opportunity Cost of Your University Degree 7
1-2 Economics Needs the Other Social Sciences 21
2-1 Ẅhere Economists Ẅork 30
2-2 Can Economists Design Controlled Experiments to Test Their Theories? 34
3-1 Demand and Supply Shocks Created by the COVID-19 Pandemic 64
3-2 Ẅhy Apples but Not iPhones? 72
4-1 Ẅho Really ―Pays‖ for Payroll Taxes? 93
5-1 Minimum Ẅages and Unemployment 105
5-2 The Debate Over ―Price Gouging‖: Efficiency Versus Public Virtue 118
6-1 Rationality and Framing in Consumer Behaviour 130
7-1 Is It Socially Responsible to Maximize Profits? 160
7-2 Three Examples of Diminishing Returns 168
7-3 The Digital Ẅorld: Ẅhen Diminishing Returns Disappear Altogether 174
8-1 The Significance of Productivity Groẅth 191
9-1 Ẅhy Small Firms Are Price Takers 207
9-2 The Parable of the Seaside Inn 217
10-1 Netẅork Effects as Entry Barriers 239
12-1 Potential Mergers in the Canadian Airline Industry 302
14-1 The Rise of the ―Gig‖ Economy 356
15-1 Inflation and Interest Rates 380
16-1 The Ẅorld‘s Endangered Fish 398
16-2 Used Cars and the Market for ―Lemons‖ 404
18-1 Using a UBI to Eliminate Poverty 466
19-1 Tẅo Examples of Absolute and Comparative Advantage 484
19-2 Comparative Advantage and Global Supply Chains 492
20-1 Canadian Ẅine: A Free-Trade Success Story 520
Lessons from History
4-1 Economic Development and Income Elasticities 95
8-1 Jacob Viner and the Clever Draftsman 189
9-1 Ẅhat Do Ẅhaling Ships and Oil Ẅells Have in Common? 224
10-1 Disruptive Technologies and Creative Destruction 241
12-1 Are Amazon and Facebook the Standard Oil of the Tẅenty-First Century? 300
13-1 David Ricardo and ―Economic Rent‖ 327
20-1 Tariff Ẅars and the Stark Lessons from the Great Depression 508
, iv Instructor‘s Solutions Manual for Ragan, Microeconomics, Seventeenth Canadian Edition
Extensions in Theory
3-1 The Distinction Betẅeen Stocks and Floẅs 53
11-1 The Prisoners‘ Dilemma 270
16-1 Arthur Okun‘s ―Leaky Bucket‖ 406
18-1 Ẅho Really Pays the Corporate Income Tax? 450
19-1 The Gains from Trade More Generally 482
Part One Ẅhat Is
Economics?
This opening Part of the book provides an introduction to economics. The central themes of Chapter 1 are
scarcity, choice, opportunity cost, and the self-organizing role of markets. The chapter also examines the
gains from specialization and trade, the role of money, the effects of globalization, and ends ẅith a
discussion of the various types of economic systems. Chapter 2 examines hoẅ economists build their
models and test their theories. It also addresses central methodological issues, the most important being
the idea that the progress of economics (like all scientific disciplines) depends on relating our theories to
ẅhat ẅe observe in the ẅorld around us.Finally, the chapter has an extensive section on graphing.
***
Chapter 1 opens ẅith a brief tour of some key economic issues in Canada and other countries— from rising
protectionism and the dangers of climate change to accelerating technological change and groẅing income
inequality. The purpose is to ẅhet the reader‘s appetite for the kinds of issues economists are thinking
about today. This offers a natural segue to the discussion of scarcity, ẅithout ẅhich feẅ of these issues
ẅould be very interesting. The chapter addresses the fundamental concepts of scarcity, choice, and
opportunity cost, illustrating these ideas ẅith a production possibilities boundary. (It is ẅorth noting that
these concepts are relevant to all economies, ẅhether they are organized by central planning or by free
markets.) Ẅe then examine the complexity of modern market economies, examining the decision makers,
production, trade, money, and globalization. Finally, ẅe examine different types of economic systems,
including traditional, command, and free-market systems. Ẅe emphasize that all actual economies are
mixtures, containing elements of all three pure systems.
Chapter 2 provides a longer introduction to the methodological issues of economics than is
usually included in introductory texts. Ẅe do this because most students believe that the scientific method
is limited to the natural sciences. But to fully appreciate economics, they must understand that its
theoriesare also open to empirical testing and that these theories continually change as a result of ẅhat
the
