University Press of Florida

Principles of Microeconomics

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Title:
Principles of Microeconomics
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Book
Language:
English
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OpenStax College
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OpenStax College
Rice University
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Houston, TX
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University Press of Florida
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University Press of Florida
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This item is licensed with the Creative Commons Attribution License. This license lets others distribute, remix, tweak, and build upon this work, even commercially, as long as they credit the author for the original creation.
Resource Identifier:
isbn-10 - 1938168240
isbn-13 - 978-1-938168-24-6
System ID:
AA00026957:00001


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Principles of Microeconomics

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OpenStax College Rice University 6100 Main Street MS380 Houston, Texas 77005 To learn more about OpenStax College, visit http://openstaxcollege.org Individual print copies and bulk orders can be purchased through our website. 2014 Rice University. Textbook content produced by OpenStax College is licensed under a Creative Commons Attribution 4.0 License. Under this license, any user of this textbook or the textbook contents herein must provide proper attribution as fol lows: If you redistribute this textbook in a digital format (including but not limited to EPUB, PDF, and HTML), then you must ret ain on every page the following attribution: Download for free at http://cnx.org/content/col11627/latest . If you redistribute this textbook in a print format, then you must include on every physical page the following attribution: Download for free at http://cnx.org/content/col11627/latest . If you redist ribute part of this textbook, then you must retain in every digital format page view (including but not limited to EPUB, PDF, and HTML) and on every physical printed page the following attribution: Download for free at http://cnx.org/content/col11627/latest . If you use this textbook as a bibliographic reference, then you should cite it as follow s: OpenStax College, Principles of Microe conomics OpenStax College. 19 March 2014 < http://cnx.org/content/col11627/latest >. The OpenStax College name, OpenStax College logo, OpenStax College book covers, Connexions name, and Connexions logo are not subject to the license and may not be reproduced without the prior and express written consent of Rice University. For questions regarding this license, please contact partners@openstaxcollege.org. Trademarks The OpenStax College name, OpenStax College logo, OpenStax College book covers, Connexions name, and Connexions logo are registered trademarks of Rice University. All rights reserved. Any of the trademarks, service marks, collective marks, desi gn rights, or similar rights that are mentioned, used, or cited in OpenStax College, Connexions, or Connexions sites are the property of t heir respective owners. ISBN 10 1938168240 ISBN 13 9781 938168246 Revision ME 1 001RS

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OpenStax College OpenStax College is a non profit organization committed to improving student access to quality learning materials. Our free textbooks are developed and peer reviewed by educators to ensure they are readable, accurate, and meet the scope and sequence requir ements of modern college courses Through our partnerships with companies and foundations committed to reducing costs for students, OpenStax College is working to improve access to higher education for all. Connexions The technology platform supporting Op enStax College is Connexions ( http://cnx.org ), one of the worlds first and largest open education projects. Connexions provides students with free online and low cost print editions of the OpenStax College library and provides instructors with tools to customize the content so that they can have the perfect book for their course. Rice University OpenStax College and Connexions are initiative s of Rice University. As a leading research university with a distinctive commitment to undergraduate education, Rice University aspires to path breaking research, unsurpassed teaching, and contributions to the betterment of our world. It seeks to fulfill this mission by cultivating a diverse community of learning and discovery that produces leaders across the spectrum of human endeavor. Foundation Support OpenStax College is grateful for the tremendous support of our sponsors. Without their strong engagement, the goal of free access to highquality textbooks would remain just a dream Laura and John Arnold Foundation (LJAF) actively seeks opportunities to invest in organizations and thought leaders that have a sincere interest in implementing fundamental changes that not only yield immediate gains, but also repair broken systems for future generations. LJAF currently focuses its strategic investments on education, criminal justice, research integrity, and public accountability The William and Flora Hewlett Foundation has been making grants since 1967 to help solve social and environmental problems at home and around the world. The Foundation concentrates its resources on activities in education, the environment, global development and population, performing arts, and philanthropy, and makes grants to support disadvantaged communities in the San Francisco Bay Area. Guided by the belief that every life h as equal value, the Bill & Melinda Gates Foundation works to help all people lead healthy, productive lives. In developing countries, it focuses on improving peoples health with vaccines and other life saving tools and giving them the chance to lift thems elves out of hunger and extreme poverty. In the United States, it seeks to significantly improve education so that all young people have the opportunity to reach their full potential. Based in Seattle, Washington, the foundation is led by CEO Jeff Raikes a nd Co chair William H. Gates Sr., under the direction of Bill and Melinda Gates and Warren Buffett. The Maxfield Foundation supports projects with potential for high impact in science, education, sustainability, and other areas of social importance. Our mission at the Twenty Million Minds Foundation is to grow access and success by eliminating unnecessary hurdles to affordability. We support the creation, sharing, and proliferation of more effective, more affordable educational content by leveraging disruptive technologies, open educational resources, and new models for collaborat ion between forprofit, nonprofit, and public entities. !"#$%&'()*$+,!"#"$%&"$#%-*-.)%/$0-1*2&!)-* Calvin K. Kazanjian was the founder and president of Peter Paul Inc., the maker of the Mounds and Almond Joy candy bars, located in Naugatuck, Connecticut. He firmly believed that if more people understood basic economics the world would be a better place in which to live. Accordingly, he established the Foundation in the true spirit of unselfish service. The Calvin K. Kazanjian Economics Foundation Inc. is a non political education organization that was incorporated as a nonprofit organization under the Statue Laws of the State of Connecticut on April 4, 1947.

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4EBCFOJ@>KRPBQEBMLFKQPLKQEBABJ>KA@ROSB$QL@>I@RI>QBQLQ>IOBSBKRBf>KAQEBKf?>PBALKQLQ>IOBSBKRBf@>I@RI>QBFQP J>ODFK>IOBSBKRB@ROSB4EBMOLCFQrJ>UFJFWFKDNR>KQFQVTFIIL@@ROTEBOB-2-#]LO>QQEBI>PQMLPPF?IBMLFKQ?BCLOB J>ODFK>I@LPQPPQ>OQBU@BBAFKDJ>ODFK>IOBSBKRB/K #B@NK> f-2-#L@@ROP>Q>KLRQMRQLC Step 2: The Monopolist Decides What Price to Charge 4EBJLKLMLIFPQTFII@E>ODBTE>QQEBJ>OHBQFPTFIIFKDQLM>V!ALQQBAIFKBAO>TKPQO>FDEQRMCOLJQEBMOLCFQrJ>UFJFWFKD NR>KQFQVQLQEBABJ>KA@ROSBPELTPQEBMOLCFQrJ>UFJFWFKDMOF@B4EFPMOF@BFP>?LSBQEB>SBO>DB@LPQ@ROSBfTEF@EPELTP QE>QQEBCFOJFPB>OKFKDMOLCFQP Step 3: Calculate Total Revenue, Total Cost, and Profit 4LQ>IOBSBKRBFPQEBLSBO>IIPE>ABA?LUfTEBOBQEBTFAQELCQEB?LUFPQEBNR>KQFQV?BFKDPLIA>KAQEBEBFDEQFPQEBMOF@B )K #B@NK> fQEB?LQQLJM>OQLCQEBPE>ABA?LUfTEF@EFPPE>ABAJLOBIFDEQIVfPELTPQLQ>I@LPQPQE>QFPfNR>KQFQVLKQEB ELOFWLKQ>I>UFPJRIQFMIFBA?V>SBO>DB@LPQLKQEBSBOQF@>I>UFP4EBI>ODBO?LULCQLQ>IOBSBKRBPJFKRPQEBPJ>IIBO?LULC QLQ>I@LPQPTFIIBNR>IMOLCFQPfTEF@EFPPELTK?VQEBA>OHIVPE>ABA?LU)K>MBOCB@QIV@LJMBQFQFSBJ>OHBQfQEBCLO@BPLC BKQOVTLRIABOLABQEFPMOLCFQFKQEBILKDORK"RQ>JLKLMLIFPQFPMOLQB@QBA?V?>OOFBOPQLBKQOV)KC>@QfLKBQBIIQ>IBPFDKLC> MLPPF?IBJLKLMLIVFPTEBK>CFOJB>OKPMOLCFQPVB>O>CQBOVB>OfTEFIBALFKDJLOBLOIBPPQEBP>JBQEFKDfTFQELRQBSBOPBBFKD QELPBMOLCFQPBOLABA?VFK@OB>PBA@LJMBQFQFLK #B@NK>%HP:-KH?BM*:QBFBSBG@*HGHIHER!>L-KB<> )KQBMrQEBJLKLMLIV@ELLPBPQEBMOLCFQ J>UFJFWFKDIBSBILCLRQMRQ r?V@ELLPFKDQEBNR>KQFQVTEBOB-2-#)KQBMrQEBJLKLMLIVAB@FABPELTJR@E QL@E>ODBCLOLRQMRQIBSBI ?VAO>TFKD>IFKBPQO>FDEQRMCOLJ QLMLFKQLKFQPMBO@BFSBAABJ>KA@ROSBERPr QEBJLKLMLIVTFII@E>ODB>MOF@Bt0 n)KQBMrQEBJLKLMLIVFABKQFCFBPFQPMOLCFQLQ>IOBSBKRBTFII?B JRIQFMIFBA ?V LQ>I@LPQTFII?B JRIQFMIFBA?VQEB>SBO>DB@LPQLCMOLAR@FKD rTEF@EFPPELTK?VMLFKQLKQEB>SBO>DB @LPQ@ROSBQL?B OLCFQPTFII?BQEBQLQ>IOBSBKRBOB@Q>KDIBJFKRPQEBQLQ>I@LPQOB@Q>KDIBrPELTK?VQEBPE>ABA WLKBFKQEBCFDROB 4ARBL:FHGHIHEBLMYLF:K@BG:EK>O>GN>:EP:RLE>LLMA:GMA> IKB<> 4EBJ>ODFK>IOBSBKRB@ROSBCLO>JLKLMLIFPQ>IT>VPIFBP?BKB>QEQEBJ>OHBQABJ>KA@ROSB4L RKABOPQ>KATEVrQEFKH>?LRQFK@OB>PFKDQEBNR>KQFQV>ILKDQEBABJ>KA@ROSB?VLKBRKFQrPLQE>QVLR Q>HBLKBPQBMALTKQEBABJ>KA@ROSBQL>PIFDEQIVEFDEBONR>KQFQV?RQ>PIFDEQIVILTBOMOF@B!ABJ>KA @ROSBFPKLQPBNRBKQF>I)QFPKLQQE>QCFOPQTBPBII1 >Q>EFDEBOMOF@Br>KAQEBKTBPBII1 >Q>ILTBO MOF@B2>QEBOr>ABJ>KA@ROSBFP@LKAFQFLK>I)CTB@E>ODBQEBEFDEBOMOF@BrTBTLRIAPBII1 )CrFKPQB>Ar TB@E>ODB>ILTBOMOF@BtLK>IIQEBRKFQPQE>QTBPBIInrTBTLRIAPBII 3LTEBKTBQEFKH>?LRQFK@OB>PFKDQEBNR>KQFQVPLIA?VLKBRKFQrJ>ODFK>IOBSBKRBFP>CCB@QBAFKQTL T>VP&FOPQrTBPBIILKB>AAFQFLK>IRKFQ>QQEBKBTJ>OHBQMOF@B3B@LKAr>IIQEBMOBSFLRPRKFQPrTEF@E @LRIAE>SB?BBKPLIA>QQEBEFDEBOMOF@BrKLTPBIICLOIBPP"B@>RPBLCQEBILTBOMOF@BLK>IIRKFQPPLIAr QEBJ>ODFK>IOBSBKRBLCPBIIFKD>RKFQFPIBPPQE>KQEBMOF@BLCQE>QRKFQ^>KAQEBJ>ODFK>IOBSBKRB@ROSB #(!04%2X-/./0/,9 4EFP@LKQBKQFP>S>FI>?IBCLOCOBB>QEQQM@KULOD@LKQBKQ@LI

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