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Ebook Microeconomics - A modern approach (3rd edition): Part 2

(BQ) Part 2 book "Microeconomics - A modern approach" has contents: Markets and market structures; welfare, exchange, and general equilibrium; breakdowns and market failure, input markets and the origins of class struggle. | SECTION 5 Markets and Market Structures In most textbooks, the study of markets is the be all and end all of economics. The study of the consumer and the firm is just looked upon as one of the ingredients needed to study the supply and demand side of markets, the only institution in need of study. While this book takes a slightly broader view of institutions, the study of markets is still central to what we do. We start our analysis of markets in Chapter 14 by making an artificial assumption that perfectly competitive market institutions are already in place so we can study how firms behave in this very important institutional setting. Here, we will investigate how firms in perfectly competitive markets make their price and quantity decisions and how the market price and quantity are determined in the short run. We will also examine the welfare properties of perfectly competitive markets in the long run in Chapter 15, and we will find that these markets benefit society by maximizing the sum of consumer surplus and producer surplus. Finally, in Chapter 16 we study other various types of market institutions that could be used to allocate goods, namely auctions. What is left out of this picture is how this institution emerged. In other words, when the world was created, such markets did not exist. Rather, they emerged as time went on and our primitive economy grew. So in Chapters 17 and 20, we investigate how perfectly competitive markets could have evolved from an earlier stage in which all production was concentrated in the hands of one producer—a monopolist. These chapters are like flashbacks in a movie where you are given a glimpse of what is happening in the plot at this moment (perfectly competitive markets) but then are transported back in time to see how we got to where we are today. As a guide to what we do in this section, as stated above, we start out in Chapter 14 by talking about the properties of perfectly competitive markets. After this, we go back .