Solution Manual For Microeconomics, 17th Canadian Edition, By Christopher Ragan

INSTRUCTOR’S SOLUTIONS A




MANUAL
for


Microeconomics
Seventeenth Canadian Edition
A A




Christopher T.S. Ragan
A A

,Contents
PartAOne:A WhatAIsAEconomics? 1
ChapterA1:AEconomicAIssuesAandAConcepts 3
ChapterA2:AEconomicATheories,AData,AandAGraphs 13

PartATwo:A AnAIntroductionAtoADemandAandASupply 26
ChapterA3:ADemand,ASupply,AandAPrice 27
ChapterA4:AElasticity 40
ChapterA5:APriceAControlsAandAMarketAEfficiency 54

PartAThree:A ConsumersAandAProducers 65
ChapterA6:AConsumerABehaviour 66
ChapterA7:AProducersAinAtheAShortARun 81
ChapterA8:AProducersAinAtheALongARun 95

PartAFour:A MarketAStructureAandAEfficiency 104
ChapterA9:ACompetitiveAMarkets 105
ChapterA10:AMonopoly,ACartels,AandAPriceADiscrimination 116
ChapterA11:AImperfectACompetitionAandAStrategicABehaviour 131
ChapterA12:AEconomicAEfficiencyAandAPublicAPolicy 140

PartAFive:A FactorAMarkets 150
ChapterA13:AHowAFactorAMarketsAWork 152
ChapterA14:ALabourAMarketsAandAIncomeAInequality 163
ChapterA15:AInterestARatesAandAtheACapitalAMarket 175

PartASix:A GovernmentAinAtheAMarketAEconomy 183
ChapterA16:AMarketAFailuresAandAGovernmentAIntervention 185
ChapterA17:ATheAEconomicsAofAEnvironmentalAProtection 198
ChapterA18:ATaxationAandAPublicAExpenditure 210

PartASeven:A CanadaAinAtheAGlobalAEconomy 219
ChapterA19:ATheAGainsAfromAInternationalATrade 220
ChapterA20:ATradeAPolicy 229

, ChapterA1:AEconomicAIssuesAandAConcepts iii



List of Boxes
A A




ApplyingAEconomicAConcepts
1-1ATheAHighAOpportunityACostAofAYourAUniversityADegree 7
1-2AEconomicsANeedsAtheAOtherASocialASciences 21
2-1AWhereAEconomistsAWork 30
2-2ACanAEconomistsADesignAControlledAExperimentsAtoATestATheirATheories? 34
3-1ADemandAandASupplyAShocksACreatedAbyAtheACOVID-19APandemic 64
3-2AWhyAApplesAbutANotAiPhones? 72
4-1AWhoAReallyA―Pays‖AforAPayrollATaxes? 93
5-1AMinimumAWagesAandAUnemployment 105
5-2ATheADebateAOverA―PriceAGouging‖:AEfficiencyAVersusAPublicAVirtue 118
6-1ARationalityAandAFramingAinAConsumerABehaviour 130
7-1AIsAItASociallyAResponsibleAtoAMaximizeAProfits? 160
7-2AThreeAExamplesAofADiminishingAReturns 168
7-3ATheADigitalAWorld:AWhenADiminishingAReturnsADisappearAAltogether 174
8-1ATheASignificanceAofAProductivityAGrowth 191
9-1AWhyASmallAFirmsAAreAPriceATakers 207
9-2ATheAParableAofAtheASeasideAInn 217
10-1ANetworkAEffectsAasAEntryABarriers 239
12-1APotentialAMergersAinAtheACanadianAAirlineAIndustry 302
14-1ATheARiseAofAtheA―Gig‖AEconomy 356
15-1AInflationAandAInterestARates 380
16-1ATheAWorld‘sAEndangeredAFish 398
16-2AUsedACarsAandAtheAMarketAforA―Lemons‖ 404
18-1AUsingAaAUBIAtoAEliminateAPoverty 466
19-1ATwoAExamplesAofAAbsoluteAandAComparativeAAdvantage 484
19-2AComparativeAAdvantageAandAGlobalASupplyAChains 492
20-1ACanadianAWine:AAAFree-TradeASuccessAStory 520

LessonsAfromAHistory
4-1AEconomicADevelopmentAandAIncomeAElasticities 95
8-1AJacobAVinerAandAtheACleverADraftsman 189
9-1AWhatADoAWhalingAShipsAandAOilAWellsAHaveAinACommon? 224
10-1ADisruptiveATechnologiesAandACreativeADestruction 241
12-1AAreAAmazonAandAFacebookAtheAStandardAOilAofAtheATwenty-FirstACentury? 300
13-1ADavidARicardoAandA―EconomicARent‖ 327
20-1ATariffAWarsAandAtheAStarkALessonsAfromAtheAGreatADepression 508

, iv Instructor‘sASolutionsAManualA forA Ragan,AMicroeconomics,A SeventeenthA CanadianAEditio
n

ExtensionsAinATheory
3-1ATheADistinctionABetweenAStocksAandAFlows 53
11-1ATheAPrisoners‘ADilemma 270
16-1AArthurAOkun‘sA―LeakyABucket‖ 406
18-1AWhoAReallyAPaysAtheACorporateAIncomeATax? 450
19-1ATheAGainsAfromATradeAMoreAGenerally 482




Part One What
A A A




Is Economics?
A




ThisAopeningAPartAofAtheAbookAprovidesAanAintroductionAtoAeconomics.ATheAcentralAthemesAofACh
apterA1AareAscarcity,Achoice,AopportunityAcost,AandAtheAself-
organizingAroleAofAmarkets.ATheAchapterAalsoAexaminesAtheAgainsAfromAspecializationAandAtrade,At
heAroleAofAmoney,AtheAeffectsAofAglobalization,AandAendsAwithAaAdiscussionAofAtheAvariousAtypesAo
fAeconomicAsystems.AChapterA2AexaminesAhowAeconomistsAbuildAtheirAmodelsAandAtestAtheirAtheo
ries.AItAalsoAaddressesAcentralAmethodologicalAissues,AtheAmostAimportantAbeingAtheAideaAthatAth
eAprogressAofAeconomicsA(likeAallAscientificAdisciplines)AdependsAonArelatingAourAtheoriesAtoAwhatA
weAobserveAinAtheAworldAaroundAus.AFinally,AtheAchapterAhasAanAextensiveAsectionAonAgraphing.
***
ChapterA1AopensAwithAaAbriefAtourAofAsomeAkeyAeconomicAissuesAinACanadaAandAotherAcountries
—
AfromArisingAprotectionismAandAtheAdangersAofAclimateAchangeAtoAacceleratingAtechnologicalAchan

geAandAgrowingAincomeAinequality.ATheApurposeAisAtoAwhetAtheAreader‘sAappetiteAforAtheAkindsAofAi
ssuesAeconomistsAareAthinkingAaboutAtoday.AThisAoffersAaAnaturalAsegueAtoAtheAdiscussionAofAscar
city,AwithoutAwhichAfewAofAtheseAissuesAwouldAbeAveryAinteresting.ATheAchapterAaddressesAtheAfu
ndamentalAconceptsAofAscarcity,Achoice,AandAopportunityAcost,AillustratingAtheseAideasAwithAaApro
ductionApossibilitiesAboundary.A(ItAisAworthAnotingAthatAtheseAconceptsAareArelevantAtoAallAecono
mies,AwhetherAtheyAareAorganizedAbyAcentralAplanningAorAbyAfreeAmarkets.)AWeAthenAexamineAthe
AcomplexityAofAmodernAmarketAeconomies,AexaminingAtheAdecisionAmakers,Aproduction,Atrade,A

money,AandAglobalization.AFinally,AweAexamineAdifferentAtypesAofAeconomicAsystems,AincludingAtr
aditional,Acommand,AandAfree-
marketAsystems.AWeAemphasizeAthatAallAactualAeconomiesAareAmixtures,AcontainingAelementsAofA
allAthreeApureAsystems.
ChapterA2AprovidesAaAlongerAintroductionAtoAtheAmethodologicalAissuesAofAeconomicsAthanAisAus
uallyAincludedAinAintroductoryAtexts.AWeAdoAthisAbecauseAmostAstudentsAbelieveAthatAtheAscientificAmetho
dAisAlimitedAtoAtheAnaturalAsciences.AButAtoAfullyAappreciateAeconomics,AtheyAmustAunderstandAthatAitsAth
eoriesAareAalsoAopenAtoAempiricalAtestingAandAthatAtheseAtheoriesAcontinuallyAchangeAasAaAresultAofAwhat