Essentials of Economics

Krugman, Paul; Wells, Robin

4th ed.

New York: Worth Publishers, Macmillan Learning, 2017

p. 93

In situations like these, consumers become their own worst enemy, engaging in what is called panic buying: rushing to purchase more of a good because its price has gone up, which precipitates only a further price rise and more panic buying.

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p. 270

When there are only two players, as in a duopoly, the interdependence between the players can be represented with a payoff matrix like that shown in Figure 9-1. Each row corresponds to an action by one player (in this case, ADM); each column corresponds to an action by the other (in this case, Ajinomoto).

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p. 205

One especially successful tactic, called "pay-to-delay," is an agreement between the original drug maker and a potential generic competitor to delay the introduction of the generic drug for a specific period of time in return for compensation. As a result, the original drug maker continues to charge high prices and reap high profits.

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p. 253

When a monopolist is able to capture the entire surplus in this way, we say that it achieves perfect price discrimination.

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p. 316

Programs that are designed to aid the poor are known as poverty programs.

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p. 318

The poverty rate is the percentage of the population living below the poverty threshold.

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p. 324

The official U.S. poverty threshold is adjusted yearly to reflect changes in the cost of living but not in the average standard of living.

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p. 299

Why have New Jersey citizens voted to raise their own taxes to subsidize the preservation of farmland? Because they believe that preserved farmland in an already heavily developed state provides external benefits, such as natural beauty, access to fresh food, and the conservation of wild bird populations.

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p. 137-138

What accounts for the extreme variation in the cost of ambulance services? How are these services able to charge thousands of dollars, regardless of whether an ambulance is actually needed? Or to charge for an ambulance equipped with heart resuscitation capabilities when the patient has only a broken leg? The answer to these questions is price unresponsiveness: in the heat of the moment, many consumersxguiollargxparticularly those with true emergenciesxguiollargxare unresponsive to the price of an ambulance. Ambulance operators judge correctly that a significant number of patients won’t ask "How much is this ride to the emergency room going to cost?" before getting onboard. In other words, a large increase in the price of an ambulance ride leaves the quantity demanded by a significant number of consumers relatively unchanged.

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p. 207

This example, in fact, illustrates another general rule derived from marginal analysisxguiollargxthe price-taking firm’s optimal output rule, which says that a price-taking firm’s profit is maximized by producing the quantity of output at which the market price is equal to the marginal cost of the last unit produced.

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p. 270

Prisoners’ dilemma is a game based on two premises: (1) Each player has an incentive to choose an action that benefits itself at the other player’s expense, and (2) When both players act in this way, both are worse off than if they had acted cooperatively.

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p. 329

Market economies have an answer to this problem: health insurance. Under private health insurance, each member of a large pool of individuals agrees to pay a fixed amount annually (called a premium) into a common fund that is managed by a private company, which then pays most of the medical expenses of the pool’s members. Although members must pay fees even in years in which they don’t have large medical expenses, they benefit from the reduction in risk: if they do turn out to have high medical costs, the pool will take care of those expenses.

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p. 331

The United States is the only one of the four countries that relies on private health insurance to cover most people; as a result, it’s the only one in which private spending on health care is (slightly) larger than public spending on health care,

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