P r e f a c e
Introduction
At no time in history has teaching the principles of economics been either more challenging or more important.
Your decision to adopt the thirteenth edition of my textbook brings to your task a set of teaching and learning tools
that are unmatched in their clarity, relevance, and currency. It is my hope that with the help of these tools, you will
enable your students to become as excited about economics as you are.
This Solutions Manual has the complete answers to all the questions and problems from the textbook in one
handy source. You can either use these solutions to help you grade problems you have assigned or photocopy them
and hand them out directly to the students.
In addition to the answers, this Solutions Manual also has the questions copied directly from the textbook. If you
are working through the questions and answers in class you will no longer need to turn from the textbook for the
questions to another book for the answers because this one book has both.
At the end of each chapter in this book there are extra problems (and answers) which are similar to some of the
End of Chapter problems from the textbook. You can use these problems by either handing them out to your class for
credit or for practice. Either way your students are sure to benefit.
Acknowledgments
Mark Rush of the University of Florida put together the initial draft of the book. His work was checked by
Jeannie Gilmore of the University of Western Ontario. Mark reports that based on the errors and extensive comments
Jeannie made, he is worried that he might not pass this class.
Even with the quality of all the help, there remains room for improvement in the text and (says Mark) in this
manual. Any corrections, suggestions, or comments that you have will be greatly appreciated. Send your comments on
this manual to Mark () and your comments on the text to me ().
Whether you’re teaching the principles course for the first time or are an experienced teacher at this level, I hope
you will find this manual helpful. I wish you success and enjoyment in your course!
Michael Parkin
University of Western Ontario
© 2018 Pearson Education, Inc.
VERIFIEDBRAINBOOSTER
,VERIFIEDBRAINBOOSTER
, Table of Contents
Preface iii
Part 1 Introduction
Chapter 1 What is Economics? 1
Appendix Graphs in Economics 9
Chapter 2 The Economic Problem 21
Part 2 How Markets Work
Chapter 3 Demand and Supply 39
Chapter 4 Elasticity 53
Chapter 5 Efficiency and Equity 65
Chapter 6 Government Actions in Markets 79
Chapter 7 Global Markets in Action 93
Part 3 Households’ Choices
Chapter 8 Utility and Demand 107
Chapter 9 Possibilities, Preferences, and Choices 121
Part 4 Firms and Markets
Chapter 10 Organizing Production 137
Chapter 11 Output and Costs 151
Chapter 12 Perfect Competition 165
Chapter 13 Monopoly 179
Chapter 14 Monopolistic Competition 197
Chapter 15 Oligopoly 209
Part 5 Market Failure and Government
Chapter 16 Public Choices, Public Goods, and Healthcare 223
Chapter 17 Externalities 237
Part 6 Factor Markets, Inequality, and Uncertainty
Chapter 18 Markets for Factors of Production 249
Chapter 19 Economic Inequality 261
Chapter 20 Uncertainty and Information 275
Part 7 Monitoring Macroeconomic Performance
Chapter 21 Measuring GDP and Economic Growth 285
Chapter 22 Monitoring Jobs and Inflation 299
© 2018 Pearson Education, Inc.
VERIFIEDBRAINBOOSTER
, Part 8 Macroeconomic Trends
Chapter 23 Economic Growth 313
Chapter 24 Finance, Saving, and Investment 325
Chapter 25 Money, the Price Level, and Inflation 337
Chapter 26 The Exchange Rate and the Balance of Payments 351
Part 9 Macroeconomic Fluctuations
Chapter 27 Aggregate Supply and Aggregate Demand 365
Chapter 28 Expenditure Multipliers 381
Chapter 29 The Business Cycle, Inflation, and Deflation 397
Part 10 Macroeconomic Policy
Chapter 30 Fiscal Policy 413
Chapter 31 Monetary Policy 427
© 2018 Pearson Education, Inc.
VERIFIEDBRAINBOOSTER
Introduction
At no time in history has teaching the principles of economics been either more challenging or more important.
Your decision to adopt the thirteenth edition of my textbook brings to your task a set of teaching and learning tools
that are unmatched in their clarity, relevance, and currency. It is my hope that with the help of these tools, you will
enable your students to become as excited about economics as you are.
This Solutions Manual has the complete answers to all the questions and problems from the textbook in one
handy source. You can either use these solutions to help you grade problems you have assigned or photocopy them
and hand them out directly to the students.
In addition to the answers, this Solutions Manual also has the questions copied directly from the textbook. If you
are working through the questions and answers in class you will no longer need to turn from the textbook for the
questions to another book for the answers because this one book has both.
At the end of each chapter in this book there are extra problems (and answers) which are similar to some of the
End of Chapter problems from the textbook. You can use these problems by either handing them out to your class for
credit or for practice. Either way your students are sure to benefit.
Acknowledgments
Mark Rush of the University of Florida put together the initial draft of the book. His work was checked by
Jeannie Gilmore of the University of Western Ontario. Mark reports that based on the errors and extensive comments
Jeannie made, he is worried that he might not pass this class.
Even with the quality of all the help, there remains room for improvement in the text and (says Mark) in this
manual. Any corrections, suggestions, or comments that you have will be greatly appreciated. Send your comments on
this manual to Mark () and your comments on the text to me ().
Whether you’re teaching the principles course for the first time or are an experienced teacher at this level, I hope
you will find this manual helpful. I wish you success and enjoyment in your course!
Michael Parkin
University of Western Ontario
© 2018 Pearson Education, Inc.
VERIFIEDBRAINBOOSTER
,VERIFIEDBRAINBOOSTER
, Table of Contents
Preface iii
Part 1 Introduction
Chapter 1 What is Economics? 1
Appendix Graphs in Economics 9
Chapter 2 The Economic Problem 21
Part 2 How Markets Work
Chapter 3 Demand and Supply 39
Chapter 4 Elasticity 53
Chapter 5 Efficiency and Equity 65
Chapter 6 Government Actions in Markets 79
Chapter 7 Global Markets in Action 93
Part 3 Households’ Choices
Chapter 8 Utility and Demand 107
Chapter 9 Possibilities, Preferences, and Choices 121
Part 4 Firms and Markets
Chapter 10 Organizing Production 137
Chapter 11 Output and Costs 151
Chapter 12 Perfect Competition 165
Chapter 13 Monopoly 179
Chapter 14 Monopolistic Competition 197
Chapter 15 Oligopoly 209
Part 5 Market Failure and Government
Chapter 16 Public Choices, Public Goods, and Healthcare 223
Chapter 17 Externalities 237
Part 6 Factor Markets, Inequality, and Uncertainty
Chapter 18 Markets for Factors of Production 249
Chapter 19 Economic Inequality 261
Chapter 20 Uncertainty and Information 275
Part 7 Monitoring Macroeconomic Performance
Chapter 21 Measuring GDP and Economic Growth 285
Chapter 22 Monitoring Jobs and Inflation 299
© 2018 Pearson Education, Inc.
VERIFIEDBRAINBOOSTER
, Part 8 Macroeconomic Trends
Chapter 23 Economic Growth 313
Chapter 24 Finance, Saving, and Investment 325
Chapter 25 Money, the Price Level, and Inflation 337
Chapter 26 The Exchange Rate and the Balance of Payments 351
Part 9 Macroeconomic Fluctuations
Chapter 27 Aggregate Supply and Aggregate Demand 365
Chapter 28 Expenditure Multipliers 381
Chapter 29 The Business Cycle, Inflation, and Deflation 397
Part 10 Macroeconomic Policy
Chapter 30 Fiscal Policy 413
Chapter 31 Monetary Policy 427
© 2018 Pearson Education, Inc.
VERIFIEDBRAINBOOSTER
