Solution Manual for Microeconomics 16th Canadian Edition by Christopher T.S. Ragan

INSTRUCTOR’SSOLUTIONS B




MANUAL B




for


Microeconomics
Seventeenth Canadian Edition b b




Christopher T.S. Ragan b b




McGill University b




ISBN 978-0-13-766398-9
b




Copyright b© b2023 bPearson bCanada bInc., bToronto, bOntario. bAll brights breserved. bThis bwork bis bprotected bby bCanadian bcopyright
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bcopyright bholder bgrants bpermission bto binstructors bwho bhave badopted bMicroeconomics, bby bChristopher bT. bS. bRagan, bto bpost bthis

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bthe btextbook band bprovided bthe breproduced bmaterial bbears bthis bcopyright bnotice.




Copyright © 2023 Pearson Canada Inc.
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,ii Instructor‘s Solutions Manual for Ragan, Microeconomics, Seventeenth Canadian Edition
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Contents
Part One: What Is Economics?
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Chapter 1: Economic Issues and Concepts
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Chapter 2: Economic Theories, Data, and Graphs
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Part Two: An Introduction to Demand and Supply
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Chapter 3: Demand, Supply, and Price
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Chapter 4: Elasticity
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Chapter 5: Price Controls and Market Efficiency
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Part Three: Consumers and Producers
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Chapter 6: Consumer Behaviour
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Chapter 7: Producers in the Short Run
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Chapter 8: Producers in the Long Run
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Part Four: Market Structure and Efficiency
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Chapter 9: Competitive Markets
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Chapter 10: Monopoly, Cartels, and Price Discrimination
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Chapter 11: Imperfect Competition and Strategic Behaviour
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Chapter 12: Economic Efficiency and Public Policy
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Part Five: Factor Markets
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Chapter 13: How Factor Markets Work
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Chapter 14: Labour Markets and Income Inequality
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Chapter 15: Interest Rates and the Capital Market
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Part Six: Government in the Market Economy
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Chapter 16: Market Failures and Government Intervention
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Chapter 17: The Economics of Environmental Protection
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Chapter 18: Taxation and Public Expenditure
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Part Seven: Canada in the Global Economy
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Chapter 19: The Gains from International Trade
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Chapter 20: Trade Policy
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Copyright © 2023 Pearson Canada Inc. b b b b b

, Chapter 1: Economic Issues and Concepts
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List of Boxes b b




Applying Economic Concepts b b


1-1 The High Opportunity Cost of Your University Degree
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1-2 Economics Needs the Other Social Sciences
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2-1 Where Economists Work
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2-2 Can Economists Design Controlled Experiments to Test Their Theories?
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3-1 Demand and Supply Shocks Created by the COVID-19 Pandemic
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3-2 Why Apples but Not iPhones?
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4-1 Who Really ―Pays‖ for Payroll Taxes?
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5-1 Minimum Wages and Unemployment
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5-2 The Debate Over ―Price Gouging‖: Efficiency Versus Public Virtue
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6-1 Rationality and Framing in Consumer Behaviour
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7-1 Is It Socially Responsible to Maximize Profits?
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7-2 Three Examples of Diminishing Returns
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7-3 The Digital World: When Diminishing Returns Disappear Altogether
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8-1 The Significance of Productivity Growth
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9-1 Why Small Firms Are Price Takers
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9-2 The Parable of the Seaside Inn
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10-1 Network Effects as Entry Barriers
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12-1 Potential Mergers in the Canadian Airline Industry
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14-1 The Rise of the ―Gig‖ Economy
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15-1 Inflation and Interest Rates
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16-1 The World‘s Endangered Fish
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16-2 Used Cars and the Market for ―Lemons‖
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18-1 Using a UBI to Eliminate Poverty
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19-1 Two Examples of Absolute and Comparative Advantage
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19-2 Comparative Advantage and Global Supply Chains
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20-1 Canadian Wine: A Free-Trade Success Story
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Lessons from History b b


4-1 Economic Development and Income Elasticities
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8-1 Jacob Viner and the Clever Draftsman
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9-1 What Do Whaling Ships and Oil Wells Have in Common?
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10-1 Disruptive Technologies and Creative Destruction
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12-1 Are Amazon and Facebook the Standard Oil of the Twenty-First Century?
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13-1 David Ricardo and ―Economic Rent‖
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20-1 Tariff Wars and the Stark Lessons from the Great Depression
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Copyright © 2023 Pearson Canada Inc. b b b b b

, iv Instructor‘s Solutions Manual for Ragan, Microeconomics, Seventeenth Canadian Edition
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Extensions in Theory b b


3-1 The Distinction Between Stocks and Flows
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11-1 The Prisoners‘ Dilemma
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16-1 Arthur Okun‘s ―Leaky Bucket‖
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18-1 Who Really Pays the Corporate Income Tax?
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19-1 The Gains from Trade More Generally
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Part One b




What Is Economics?
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This opening Part of the book provides an introduction to economics. The central themes of
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Chapter 1 are scarcity, choice, opportunity cost, and the self-organizing role of markets. The
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chapter also examines the gains from specialization and trade, the role of money, the effects of
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globalization, and ends with a discussion of the various types of economic systems. Chapter 2
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examines how economists build their models and test their theories. It also addresses central
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methodological issues, the most important being the idea that the progress of economics (like all
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scientific disciplines) depends on relating our theories to what we observe in the world around us.
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Finally, the chapter has an extensive section on graphing.
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***
Chapter 1 opens with a brief tour of some key economic issues in Canada and other countries—
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from rising protectionism and the dangers of climate change to accelerating technological change
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and growing income inequality. The purpose is to whet the reader‘s appetite for the kinds of issues
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economists are thinking about today. This offers a natural segue to the discussion of scarcity,
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without which few of these issues would be very interesting. The chapter addresses the
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fundamental concepts of scarcity, choice, and opportunity cost, illustrating these ideas with a
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production possibilities boundary. (It is worth noting that these concepts are relevant to all
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economies, whether they are organized by central planning or by free markets.) We then examine
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the complexity of modern market economies, examining the decision makers, production, trade,
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money, and globalization. Finally, we examine different types of economic systems, including
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traditional, command, and free-market systems. We emphasize that all actual economies are
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mixtures, containing elements of all three pure systems.
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Chapter 2 provides a longer introduction to the methodological issues of economics than is
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usually included in introductory texts. We do this because most students believe that the scientific
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method is limited to the natural sciences. But to fully appreciate economics, they must understand that
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its theories are also open to empirical testing and that these theories continually change as a result of
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what the
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Copyright © 2023 Pearson Canada Inc. b b b b b