MEDSTUDY.COM
INSTRUCTOR’S SOLUTIONS
MANUAL
for
M
ED
Microeconomics
Eighteenth Canadian Edition
ST
Christopher T. S. Ragan
U
McGill University
D
Y
Contents
Part One What Is Economics?
Chapter 1 Economic Issues and Concepts ...................................................... 2
Chapter 2 Economic Theories, Data, and Graphs ......................................... 13
Part Two An Introduction to Demand and Supply
Chapter 3 Demand, Supply, and Price .......................................................... 25
Chapter 4 Elasticity ....................................................................................... 38
Chapter 5 Price Controls and Market Efficiency .......................................... 52
Copyright © 2026 Pearson Canada Inc.
,Part Three Consumers and Producers
Chapter 6 Consumer Behaviour .................................................................... 62
Chapter 7 Producers in the Short Run........................................................... 79
Chapter 8 Producers in the Long Run ........................................................... 92
Part Four Market Structure and Efficiency
Chapter 9 Competitive Markets .................................................................. 101
Chapter 10 Monopoly, Cartels, and Price Discrimination ............................ 114
Chapter 11 Imperfect Competition and Strategic Behaviour ........................ 128
Chapter 12 Economic Efficiency and Public Policy ..................................... 140
Part Five Factor Markets
Chapter 13 How Factor Markets Work......................................................... 150
Chapter 14 Labour Markets and Income Inequality ..................................... 162
Chapter 15 Interest Rates and the Capital Market ........................................ 174
M
Part Six Government in the Market Economy
Chapter 16 Market Failures and Government Intervention .......................... 182
Chapter 17 The Economics of Environmental Protection ............................ 195
ED
Chapter 18 Taxation and Public Expenditure ............................................... 207
Part Seven Canada in the Global Economy
Chapter 19 The Gains from International Trade ........................................... 217
Chapter 20 Trade Policy ............................................................................... 227
ST
U
D
Y
,MEDSTUDY.COM
List of Boxes
Applying Economic Concepts
1-1 The High Opportunity Cost of Your University Degree 8
1-2 Economics Needs the Other Social Sciences 23
2-1 Where Economists Work 32
2-2 Can Economists Design Controlled Experiments to Test Their Theories? 36
3-1 Demand and Supply Shocks Created by the COVID-19 Pandemic 66
3-2 Why Apples but Not iPhones? 74
4-1 Who Really ―Pays‖ for Payroll Taxes? 95
5-1 Minimum Wages and Unemployment 107
5-2 The Debate over ―Price Gouging‖: Efficiency Versus Public Virtue 120
6-1 Rationality and Framing in Consumer Behaviour 134
M
7-1 Is It Socially Responsible to Maximize Profits? 162
7-2 Three Examples of Diminishing Returns 171
7-3 The Digital World: When Diminishing Returns Disappear Altogether 177
ED
8-1 Is Canada Falling Behind? 196
8-2 Computers, the Internet, and the Productivity Paradox 198
9-1 Why Small Firms Are Price Takers 212
9-2 The Parable of the Seaside Inn 222
10-1 Network Effects as Entry Barriers 245
ST
13-1 Is Greater Immigration a Solution for ―Labour Shortages‖? 340
14-1 A Century of Legislated Discrimination of Indigenous Peoples 354
15-1 Inflation and Interest Rates 395
15-2 Canada’s Housing Affordability Crisis 400
U
16-1 The World’s Endangered Fish 416
16-2 Used Cars and the Market for ―Lemons‖ 422
18-1 Using a UBI to Eliminate Poverty 486
D
19-1 Two Examples of Absolute and Comparative Advantage 506
19-2 Comparative Advantage and Global Supply Chains 514
Y
20-1 Tensions Between Supply Management and Freer Trade 538
Lessons from History
4-1 Economic Development and Income Elasticities 97
8-1 Jacob Viner and the Clever Draftsman 193
9-1 What Do Whaling Ships and Oil Wells Have in Common? 230
10-1 Disruptive Technologies and Creative Destruction 247
12-1 Are Amazon and Facebook the Standard Oil of the Twenty-First Century? 310
13-1 David Ricardo and ―Economic Rent‖ 337
20-1 Tariff Wars and the Stark Lessons from the Great Depression 532
20-2 Canadian Wine: A Free-Trade Success Story 545
3
, Extensions in Theory
3-1 The Distinction Between Stocks and Flows 55
11-1 The Prisoners’ Dilemma 278
16-1 Arthur Okun’s ―Leaky Bucket‖ 424
18-1 Who Really Pays the Corporate Income Tax? 470
19-1 The Gains from Trade More Generally 504
Part One
M
What Is Economics?
ED
This opening Part of the book is an introduction to
ST
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
U
ends with a discussion of the various types of
economic systems. Chapter 2 examines how economists
build their models and test their theories. It also
D
addresses central methodological issues, the most
important being the idea that the progress of
economics as a discipline (like all scientific
Y
disciplines) depends on relating our theories to
what we observe in the world around us. Finally, the
chapter has an extensive section on graphing.
***
Chapter 1 opens with a brief tour of some key
economic issues in Canada and other countries—from
rising house prices and the dangers of climate
change to accelerating technological change and
growing income inequality. The purpose is to whet
the reader‘s appetite for the kinds of issues
economists are thinking about today. This offers a
INSTRUCTOR’S SOLUTIONS
MANUAL
for
M
ED
Microeconomics
Eighteenth Canadian Edition
ST
Christopher T. S. Ragan
U
McGill University
D
Y
Contents
Part One What Is Economics?
Chapter 1 Economic Issues and Concepts ...................................................... 2
Chapter 2 Economic Theories, Data, and Graphs ......................................... 13
Part Two An Introduction to Demand and Supply
Chapter 3 Demand, Supply, and Price .......................................................... 25
Chapter 4 Elasticity ....................................................................................... 38
Chapter 5 Price Controls and Market Efficiency .......................................... 52
Copyright © 2026 Pearson Canada Inc.
,Part Three Consumers and Producers
Chapter 6 Consumer Behaviour .................................................................... 62
Chapter 7 Producers in the Short Run........................................................... 79
Chapter 8 Producers in the Long Run ........................................................... 92
Part Four Market Structure and Efficiency
Chapter 9 Competitive Markets .................................................................. 101
Chapter 10 Monopoly, Cartels, and Price Discrimination ............................ 114
Chapter 11 Imperfect Competition and Strategic Behaviour ........................ 128
Chapter 12 Economic Efficiency and Public Policy ..................................... 140
Part Five Factor Markets
Chapter 13 How Factor Markets Work......................................................... 150
Chapter 14 Labour Markets and Income Inequality ..................................... 162
Chapter 15 Interest Rates and the Capital Market ........................................ 174
M
Part Six Government in the Market Economy
Chapter 16 Market Failures and Government Intervention .......................... 182
Chapter 17 The Economics of Environmental Protection ............................ 195
ED
Chapter 18 Taxation and Public Expenditure ............................................... 207
Part Seven Canada in the Global Economy
Chapter 19 The Gains from International Trade ........................................... 217
Chapter 20 Trade Policy ............................................................................... 227
ST
U
D
Y
,MEDSTUDY.COM
List of Boxes
Applying Economic Concepts
1-1 The High Opportunity Cost of Your University Degree 8
1-2 Economics Needs the Other Social Sciences 23
2-1 Where Economists Work 32
2-2 Can Economists Design Controlled Experiments to Test Their Theories? 36
3-1 Demand and Supply Shocks Created by the COVID-19 Pandemic 66
3-2 Why Apples but Not iPhones? 74
4-1 Who Really ―Pays‖ for Payroll Taxes? 95
5-1 Minimum Wages and Unemployment 107
5-2 The Debate over ―Price Gouging‖: Efficiency Versus Public Virtue 120
6-1 Rationality and Framing in Consumer Behaviour 134
M
7-1 Is It Socially Responsible to Maximize Profits? 162
7-2 Three Examples of Diminishing Returns 171
7-3 The Digital World: When Diminishing Returns Disappear Altogether 177
ED
8-1 Is Canada Falling Behind? 196
8-2 Computers, the Internet, and the Productivity Paradox 198
9-1 Why Small Firms Are Price Takers 212
9-2 The Parable of the Seaside Inn 222
10-1 Network Effects as Entry Barriers 245
ST
13-1 Is Greater Immigration a Solution for ―Labour Shortages‖? 340
14-1 A Century of Legislated Discrimination of Indigenous Peoples 354
15-1 Inflation and Interest Rates 395
15-2 Canada’s Housing Affordability Crisis 400
U
16-1 The World’s Endangered Fish 416
16-2 Used Cars and the Market for ―Lemons‖ 422
18-1 Using a UBI to Eliminate Poverty 486
D
19-1 Two Examples of Absolute and Comparative Advantage 506
19-2 Comparative Advantage and Global Supply Chains 514
Y
20-1 Tensions Between Supply Management and Freer Trade 538
Lessons from History
4-1 Economic Development and Income Elasticities 97
8-1 Jacob Viner and the Clever Draftsman 193
9-1 What Do Whaling Ships and Oil Wells Have in Common? 230
10-1 Disruptive Technologies and Creative Destruction 247
12-1 Are Amazon and Facebook the Standard Oil of the Twenty-First Century? 310
13-1 David Ricardo and ―Economic Rent‖ 337
20-1 Tariff Wars and the Stark Lessons from the Great Depression 532
20-2 Canadian Wine: A Free-Trade Success Story 545
3
, Extensions in Theory
3-1 The Distinction Between Stocks and Flows 55
11-1 The Prisoners’ Dilemma 278
16-1 Arthur Okun’s ―Leaky Bucket‖ 424
18-1 Who Really Pays the Corporate Income Tax? 470
19-1 The Gains from Trade More Generally 504
Part One
M
What Is Economics?
ED
This opening Part of the book is an introduction to
ST
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
U
ends with a discussion of the various types of
economic systems. Chapter 2 examines how economists
build their models and test their theories. It also
D
addresses central methodological issues, the most
important being the idea that the progress of
economics as a discipline (like all scientific
Y
disciplines) depends on relating our theories to
what we observe in the world around us. Finally, the
chapter has an extensive section on graphing.
***
Chapter 1 opens with a brief tour of some key
economic issues in Canada and other countries—from
rising house prices and the dangers of climate
change to accelerating technological change and
growing income inequality. The purpose is to whet
the reader‘s appetite for the kinds of issues
economists are thinking about today. This offers a
