In Chapter 2, we complete our discussion of standard introductory concepts, with a focus on rationality, choice, and opportunity costs. We extend these concepts to the economics of groups, with a discussion of incentives for individuals within small versus large groups. And we apply this to a discussion of shirking and the usefulness of “tough bosses.”

In Chapter 3, we open with a conventional description of demand, supply, equilibrium, and disequilibrium – with an added focus on “market processes,” nonprice competition, and a variety of real-world “equilibria” that still result in persistent shortages/surpluses (e.g., queues in stores). We also discuss Henry Ford’s use of “efficiency wages” to (efficiently) “overpay” workers, and the pros and cons of mandatory retirement for workers and firms.

In Chapter 5, we turn to applications in business and public policy, with discussions on the burden of taxes, price regulations, minimum wages, the buying/selling of fringe benefits within firms, and the role of honesty, credibility, and ethics within profit maximization.

In Chapter 7, we open with a thorough discussion of “the theory of the firm,” followed by a conventional treatment of productivity and an introduction to costs. This chapter also has a lengthy discussion of expected applications (sunk costs, agency problems, insource/outsource), and a number of unusual but important applications (dedicated investments, franchising, tenure, and employee management).

In Chapter 4, we bring more sophistication to our demand curve analysis with a lengthy description of elasticity, a discussion of lagged-demand and network goods, and a dialogue on concerns about demand theory.

In Chapter 6, we discuss market versus government “failure” – contexts in which markets struggle to provide efficient outcomes and the prospective role of government (in its own struggles) to address market limitations (e.g., pollution). Given the significant dose of public policy throughout the book, we lay out various theories within political economy, modeling why agents in political markets do what they do – and then applying these theories to business practice.

In Chapter 1, we discuss some of the standard introductory concepts in any economics course. After defining scarcity and discussing the importance of incentives, we focus on the presence/absence of property rights (in general and in the workplace) – and introduce the “Prisoner’s Dilemma” with applications to various “tragedies of the commons” and “tragedies of the anticommons” in firms and the economy.

In Chapter 9, we have a conventional treatment of the model of “perfect competition,” with an extension to competition in markets by “price takers.” We detail profit maximization in the short run and long run. We also have lengthy discussions about the vital role of entrepreneurship; the myth of “the first-mover advantage”; and the importance of finding optimal team size and team pay.