AP_Krugman_Textbook

xx CONTENTS

Contents

Equilibrium in the Imperfectly Competitive Labor

Market 703

Module 4 AP Review

Module 72The Cost-Minimizing Input

Combination 706

Alternative Input Combinations 706

Substitutes and Complements in Factor Markets 706

Determining the Optimal Input Mix 707

Cost Minimization 707

The Cost-Minimization Rule 708

Module 42 AP Review

Module 73Theories of Income Distribution 711

The Marginal Productivity Theory of Income Distribution 711

Marginal Productivity and Wage Inequality 711

Market Power 713

Efficiency Wages 714

Discrimination 714

Wage Disparities in Practice 715

FYI:The Economics of Apartheid 715

Is the Marginal Productivity Theory of Income Distribution

Really True? 716

So Does Marginal Productivity Theory Work? 717

Module 64 AP Review

Section 13 Review 718

Section 14

Market Failure and the Role of Government 723

Module 74Introduction to Externalities 724

The Economics of Pollution 724

Costs and Benefits of Pollution 724

Pollution: An External Cost 726

FYI:Talking and Driving 727

The Inefficiency of Excess Pollution 727

Private Solutions to Externalities 728

FYI:Thank You for Not Smoking 729

Module 65 AP Review

Module 75Externalities and Public Policy 731

Policies Toward Pollution 731

Environmental Standards 731

Emissions Taxes 732

Tradable Emissions Permits 734

FYI:Cap and Trade 736

Production, Consumption, and Externalities 736

Private versus Social Benefits 736

Private versus Social Costs 739

Network Externalities 740

Module 66 AP Review

Module 76Public Goods 743

Private Goods—And Others 743

Characteristics of Goods 743

Why Markets Can Supply Only Private Goods

Efficiently 744

Public Goods 745

Providing Public Goods 746

How Much of a Public Good Should Be Provided? 747

FYI:Voting as a Public Good 749

Common Resources 749

The Problem of Overuse 749

The Efficient Use and Maintenance of a Common

Resource 750

Artificially Scarce Goods 751

Module 67 AP Review

Module 77Public Policy to Promote Competition 754

Promoting Competition 754

Antitrust Policy 754

The Sherman Antitrust Act of 1860 755

The Clayton Antitrust Act of 1914 755

The Federal Trade Commission Act of 1914 756

Dealing with Natural Monopoly 756

FYI:Cable Dilemmas 758

Module 77 AP Review 758

Module 78Income Inequality and Income

Distribution 761

The Problem of Poverty 761

Trends in Poverty 761

Who Are the Poor? 762

What Causes Poverty? 763

Consequences of Poverty 763

FYI:The Impeccable Economic Logic of Early Childhood

Intervention Programs 764

Economic Inequality 764

Economic Insecurity 766

FYI:Long-Term Trends in Income Inequality in the United

States 767