NM. Gregory Mankiw
`
`Macroeconomics
`
`JONY
`
`Mylan v. Regeneron
`IPR2021-00881
`U.S. Pat. 9,254,338
`
`Exhibit 2219
`
`Exhibit 2219
`Page 01 of 45
`
`

`

`
`
`FIRM BEHAVIOR AND THE ORGANIZATION OF INDUSTRY
`
`13 The Costs of Production
`14 Firms inCompetitiveMarkets
`
`15 Monopoly
`16 Monopolistic Competition
`17 Oligopoly
`
`THE ECONOMICS OF LABOR MARKETS
`
`18 The Markets for the Factors of Production
`
`3 eae
`20 IncomeInequality and Poverty
`
`TOPICS FOR FURTHER STUDY
`
`21 The Theory of Consumer Choice
`
`22 Frontiers of Microeconomics
`
`|
`
`The theory ofthefirm sheds light on the decisionsthatlie
`behindsupply incompetitivemarkets.
`
`Firms with market power can cause market outcomes to
`be inefficient.
`
`These chapters examine the specialfeatures of labor markets,
`in which most people earn mostoftheir income.
`
`Additionaltopics in microeconomics include household decision
`
`L making, asymmetric information, political economy, and
`
`behavioral economics.
`
`Exhibit 2219
`
`Page 02 of 45
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`
`
`Exhibit 2219
`Page 02 of 45
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`

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`This page intentionally left blank
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`  ÿÿ
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`ÿ

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`
`Exhibit 2219
`
`Page 03 of 45
`
`Exhibit 2219
`Page 03 of 45
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`

`

`Mucroeconomics
`
`FIFTH EDITION
`
`
`
`N. GREGORY MANKIW
`
`HARVARD UNIVERSITY
`
`¢»SOUTH-WESTERN
`|
`CENGAGE Learning-
`
`Australia + Brazil + Japan + Korea + Mexico + Singapore + Spain + United Kingdom + United States
`
`Exhibit 2219
`
`Page 04 of 45
`
`Exhibit 2219
`Page 04 of 45
`
`

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`Exhibit 2219
`Page 05 of 45
`
`

`

`To Catherine, Nicholas, and Peter,
`my other contributions to the next generation
`
` ÿ 
`ÿ

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`ÿ
`ÿ ÿ
` 
`ÿ ÿÿ
`ÿ
`
`
`
`Exhibit 2219
`
`Page 06 of 45
`
`Exhibit 2219
`Page 06 of 45
`
`

`

`
`
`About the Author
`
`N. Gregory Mankiw is professor of economics at Harvard University. As a stu-
`dent, he studied economics at Princeton University and MIT. Asa teacher, he has
`taught macroeconomics, microeconomics, statistics, and principles of econom-
`ics. He even spent one summerlongagoas a sailing instructor on Long Beach
`Island.
`
` Professor Mankiwis a prolific writer and a regular participant in
`
`academic and policy debates. His work has been published in schol-
`arly journals, such as the American Economic Review, Journalof Politi-
`cal Economy, and Quarterly Journal of Economics, and in more popular
`forums, such as The New York Times and The Wall Street Journal. He
`is also author of the best-selling intermediate-level textbook Macro-
`economics (Worth Publishers). In addition to his teaching, research,
`and writing, Professor Mankiw has been a research associate of the
`National Bureau of Economic Research, an adviser to the Federal
`Reserve Bank of Boston and the Congressional Budget Office, and
`a memberof the ETS test development committee for the Advanced
`Placement exam in economics. From 2003 to 2005, he served as chair-
`man ofthe President’s Council of Economic Advisers.
`Professor Mankiw lives in Wellesley, Massachusetts, with his wife, Deborah,
`three children, Catherine, Nicholas, and Peter, and their borderterrier, Tobin.
`
`vi
`
`Exhibit 2219
`
`Page 07 of 45
`
`Exhibit 2219
`Page 07 of 45
`
`

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`CuaPteR 22
`
`483
`
`
`CuapteR 10_—sExternalities 203
`
`CuHaptTerR 11
`Public Goods and Common Resources
`225
`
`CuaPteR 12—‘The Design of the Tax System 241
`
`Exhibit 2219
`
`Page 08 of 45
`
`vii
`
`fgg
`
`FIRM BEHAVIOR AND THE
`PART V_
`ORGANIZATION OF INDUSTRY 265
`
`PART VI_ THE ECONOMICS OF LABOR
`MARKETS 389
`
`3
`Ten Principles of Economics
`CHAPTER 1
`CHAPTER 2
`Thinking Like an Economist
`21
`CuHaPteR 13~~The Costs of Production 267
`CHAPTER 3
`Interdependence and the Gains from
`
`CuHaPTeR 14—‘Firms in Competitive Markets 289
`Trade
`49
`CuHaPteR 15=Monopoly 311
`CuHaPTeR 16 Monopolistic Competition 345
`PART Il HOW MARKETS WORK 63
`CuHaPteR 17=Oligopoly 365
`CHAPTER 4
`The Market Forces of Supply
`and Demand 65
`Elasticity and Its Application 89
`CHAPTER 5
`CHAPTER 6
`Supply, Demand, and Government
`CuHaPteR 18—‘The Marketsfor the Factors of
`Policies
`113
`Production 391
`CuHapteR 19~—-Earnings and Discrimination 413
`PART Ill MARKETS AND WELFARE 135
`CuapteR 20=Income Inequality and Poverty 433
`CHAPTER 7
`Consumers, Producers, and the Efficiency
`PART Vil TOPICS FOR FURTHER
`of Markets
`137
`STUDY 455
`Application: The Costs of Taxation 159
`CuapTer 8
`Application: International Trade
`177
`CHAPTER 9
`CuHaPteR 21~—‘The Theory of Consumer
`Choice
`457
`‘Frontiers of Microeconomics
`
`PARTI
`
`INTRODUCTION 1
`
`PART IV THE ECONOMICS OF THE PUBLIC
`SECTOR 201
`
`Exhibit 2219
`Page 08 of 45
`
`

`

`This page intentionally left blank
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`  ÿÿ
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` 

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`Exhibit 2219
`
`Page 09 of 45
`
`Exhibit 2219
`Page 09 of 45
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`
`“Economics is a study of mankind in the ordinary business of life.” So wrote
`Alfred Marshall, the great 19th-century economist, in his textbook, Principles of
`Economics. Although we have learned much about the economy since Marshall’s
`time, this definition of economics is as true today as it was in 1890, whenthe first
`edition of his text was published.
`Whyshould you, as a studentat the beginning of the 21st century, embark on
`the study of economics? There are three reasons.
`The first reason to study economics is that it will help you understand the
`world in which you live. There are many questions about the economy that might
`spark your curiosity. Why are apartments so hard to find in New York City? Why
`do airlines charge less for a round-trip ticket if the traveler stays over a Saturday
`night? Whyis Johnny Depp paid so muchto star in movies? Whyare living stan-
`dards so meager in many African countries? Why do some countries have high
`rates of inflation while others have stable prices? Why are jobs easy to find in
`someyears andhard to find in others? These are just a few of the questions that a
`course in economics will help you answer.
`The second reason to study economicsis that it will make you a moreastute par-
`ticipant in the economy. As you go aboutyour life, you make many economic deci-
`sions. While you are a student, you decide how manyyearsto stay in school. Once
`you take a job, you decide how much of your income to spend, how much to save,
`and how to invest your savings. Someday you may find yourself running a small
`business or a large corporation, and you will decide whatprices to charge for your
`products. The insights developed in the coming chapters will give you a new per-
`spective on how best to makethese decisions. Studying economics will notby itself
`make yourich, butit will give you sometools that may help in that endeavor.
`The third reason to study economicsis that it will give you a better understand-
`ing of both the potential and the limits of economic policy. Economic questions
`are always on the mindsof policymakers in mayors’ offices, governors’ mansions,
`and the White House. Whatare the burdensassociated with alternative forms of
`taxation? Whatare the effects of free trade with other countries? Whatis the best
`way to protect the environment? How does a government budget deficit affect
`the economy? As a voter, you help choosethe policies that guide the allocation of
`society’s resources. An understanding of economics will help you carry out that
`responsibility. And who knows: Perhaps someday you will end up as one of those
`policymakers yourself.
`Thus, the principles of economics can be applied in many oflife’s situations.
`Whetherthe future finds you reading the newspaper, running a business, or sit-
`ting in the Oval Office, you will be glad that you studied economics.
`
`Exhibit 2219
`
`Page 10 of 45
`
` ÿ
`ÿ

ÿ



`
`N. Gregory Mankiw
`September 2008
`
`
`
`Exhibit 2219
`Page 10 of 45
`
`

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`results — when you Experience Mankiw Fifth Edition’s engaging learning tools.
`With the product support website and EconCentral, you'll quickly reinforce chapter
`concepts and sharpen yourskills with interactive, hands-on applicationsonline.
`If a printed Study Guide better suits your needs and study habits, the Mankiw
`5e Study Guide is unsurpassedin its careful attention to accuracy, concise
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`2)» SOUTH-WESTERN
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`Te pemeeenate
`Principtes of Macraevanomies
`Airiet Principtes of Macroeconomics
`Essentiass of Economics
`
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`
`www.cengage.com/economics/mankiw
`The Mankiw product support website is an easy
`online stop. Here, you'll find access to free
`Quizzing, Student Note Prompt handouts for the
`Premium PowerPoint® yourinstructor may use,
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`fouwth tanon
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`Prirciptes of MICTOeCONOMICS
`Principles of Macroeconomics
`Bnet Principies of Macroeconomics
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`Helping you achieve your personal best, the
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`the Fifth Edition, covering chapter material
`comprehensively — and accurately. Very hands-
`on, each chapter thoroughly covers the material in the corresponding chapter
`of Mankiw. Every key word and conceptis addressed within the Study Guide
`chapter — meaning you'll feel confident that if you can do the study guide, you
`will understand all of the material in that chapter of Mankiw.
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`ACKNOWLEDGMENTS
`
`9:;<=>?@ABC@<DE
`
`XV
`
`78
`
`previous edition, while putting together an excellent team to revise the supple-
`ments. Colleen Farmer, senior content project manager, and Katherine Wilson,
`senior project manager, had the patience and dedication necessary to turn my
`manuscript into this book. Michelle Kunkler, senior art director, gave this book
`its clean, friendly look. Michael Steirnagle, the illustrator, helped make the book
`more visually appealing and the economicsin it less abstract. Carolyn Crabtree,
`copyeditor, refined my prose, and Terry Casey, indexer, prepared a careful and
`thorough index. Brian Joyner, executive marketing manager, worked long hours
`getting the word outto potential users of this book. Therest of the Cengage team,
`including Jean Buttrom, Sandra Milewski and Deepak Kumar, was also consis-
`tently professional, enthusiastic, and dedicated.
`I am grateful also to Josh Bookin, a former Advanced Placement economics
`teacher and recently an extraordinary section leader for Ec 10, the introductory
`course at Harvard. Josh helped merefine the manuscript and check the page
`proofsfor this edition.
`Asalways, I must thank my “in-house” editor Deborah Mankiw.Asthefirst
`reader of almost everything I write, she continued to offer just the right mix of
`criticism and encouragement.
`Finally, I would like to mention my three children Catherine, Nicholas, and
`Peter. Their contribution to this book was putting up with a father spending too
`many hoursin his study. The four of us have much in common—notleast of which
`is our love of ice cream (which becomes apparent in Chapter 4). Maybe sometime
`soon one of them will pick up my passion for economics as well.
`
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`September 2008
`
`Exhibit 2219
`
`Page 16 of 45
`
`Exhibit 2219
`Page 16 of 45
`
`

`

`
`
`Table of Contents
`
`Preface: To the Student
`
`ix
`
`
`
`PART|
`INTRODUCTION 1
`
`12
`Howthe Economy as a Whole Works
`Principle 8: A Country’s Standard of Living Depends
`onIts Ability to Produce Goods and Services
`12
`Principle 9: Prices Rise When the GovernmentPrints Too
`Much Money 13
`14
`IN THE NEWS WhyYou Should Study Economics
`Principle 10: Society Faces a Short-Run Trade-off between
`Inflation and Unemployment
`14
`
`Conclusion 15
`FY! How to Read This Book
`
`16
`
`Summary 17
`17
`Key Concepts
`Questions for Review 18
`Problems and Applications
`
`18
`
`CHAPTER1
`TEN PRINCIPLES OF ECONOMICS 3
`
`CHAPTER 2
`THINKING LIKE AN ECONOMIST 21
`
`How People Make Decisions 4
`4
`Principle 1: People Face Trade-offs
`Principle 2: The Cost of Something Is What You Give
`Up to Get It 5
`Principle 3: Rational People Think at the Margin 6
`Principle 4: People Respond to Incentives
`7
`
`8
`How People Interact
`Principle 5: Trade Can Make Everyone Better Off
`Principle 6: Markets Are Usually a Good Wayto
`Organize Economic Activity 8
`IN THE NEWSIncentive Pay 9
`Principle 7: Governments Can Sometimes Improve
`Market Outcomes
`10
`
`8
`
`FY! Adam Smith and the Invisible Hand
`
`11
`
`The Economist as Scientist
`
`22
`
`The Scientific Method: Observation, Theory, and
`More Observation 22
`
`The Role of Assumptions
`Economic Models 23
`
`23
`
`Our First Model: The Circular-Flow Diagram 24
`Our Second Model: The Production Possibilities
`Frontier
`25
`Microeconomics and Macroeconomics
`FY! WhoStudies Economics? 29
`
`28
`
`The Economist as Policy Adviser 30
`Positive versus Normative Analysis
`Economists in Washington 31
`IN THE NEWS Football Economics
`
`30
`
`32
`
`WhyEconomists’ Advice Is Not Always Followed 32
`
`xvi
`
`Exhibit 2219
`
`Page 17 of 45
`
`Exhibit 2219
`Page 17 of 45
`
`

`

`
`
`PARTIl
`HOW MARKETS WORK 63
`
`CHAPTER 4
`THE MARKET FORCES OF SUPPLY
`AND DEMAND 65
`
`Markets and Competition 66
`WhatIs a Market?
`66
`
`WhatIs Competition?
`
`66
`
`Demand 67
`
`The Demand Curve: The Relationship between Price
`and Quantity Demanded 67
`Market Demandversus Individual Demand 68
`Shifts in the Demand Curve
`69
`
`CASE STUDY Two Waysto Reduce the Quantity of
`Smoking Demanded 71
`
`Supply 73
`The Supply Curve: The Relationship between Price
`and Quantity Supplied 73
`Market Supply versus Individual Supply 73
`Shifts in the Supply Curve
`74
`
`Supply and Demand Together
`Equilibrium 77
`Three Steps to Analyzing Changes in Equilibrium 79
`
`77
`
`Conclusion: How Prices Allocate Resources
`
`83
`
`83
`IN THE NEWSThe Helium Market
`IN THE NEWSPrice Increases after Natural
`Disasters 84
`
`Summary 85
`86
`Key Concepts
`Questions for Review 86
`Problems and Applications
`
`87
`
`TABLE OF CONTENTS_xvii
`
`34
`WhyEconomists Disagree
`Differences in Scientific Judgments
`Differences in Values
`34
`
`34
`
`Perception versus Reality 35
`
`Let’s Get Going 36
`IN THE NEWS Environmental Economics
`
`37
`
`Summary 38
`38
`Key Concepts
`Questions for Review 38
`Problems and Applications
`
`38
`
`APPENDIX Graphing: A Brief Review 40
`Graphsof a Single Variable 40
`Graphsof TwoVariables: The Coordinate System 41
`Curves in the Coordinate System 42
`Slope
`44
`Cause and Effect
`
`46
`
`CHAPTER3
`INTERDEPENDENCE AND THE GAINS FROM
`TRADE 49
`
`A Parable for the Modern Economy 50
`Production Possibilities
`50
`
`Specialization and Trade
`
`52
`
`Comparative Advantage: The Driving Force of
`Specialization 54
`54
`Absolute Advantage
`Opportunity Cost and Comparative Advantage 54
`Comparative Advantage and Trade
`55
`The Price of the Trade
`56
`
`57
`Applications of Comparative Advantage
`FY! The Legacy of Adam Smith and David Ricardo
`Should Tiger Woods Mow His Own Lawn?
`58
`Should the United States Trade with Other
`Countries?
`58
`
`57
`
`IN THE NEWS The Changing FaceofInternational
`Trade
`59
`
`Conclusion 60
`Summary 60
`60
`Key Concepts
`Questions for Review 61
`Proble