his book is a new type of intermediate macroeconomics textbook- Until now, the choice was between books that use calculus to present formal theory dryly and with few, if any, applications to the real world and books that include applications but present theory using only graphs and algebra. This book uses calcu- lus, algebra, and graphs to present microeconomic theory using actual examples, and applies the theory to analyze real-world problems. My purpose is to show students that economic theory has practical, problem-solving uses and is not an empty academic exercise.

This book shows how individuals, policy makers, and firms use microeconomic tools to analyze and resolve problems. For example, students learn that:

individuals can draw on microeconomic theories when deciding about issues such as whether to invest and whether to sign a contract that pegs prices to the govern- ments measure of inflation;

policymakers (and voters) can employ microeconomics to predict, before they are enacted, the impact of taxes, regulations, and other measures; ? lawyers and judges use microeconomics in antitrust, discrimination, and contract cases;

firms apply microeconomic principles to produce at least cost and maximize profit, select strategies, decide whether to buy from a market or to produce inter- nally, and write contracts to provide optimal incentives for employees.

My experience in teaching microeconomics for the departments of economics at MIT, the University of Pennsylvania, and the University of California, Berkeley; the Department of Agricultural and Resource Economics at Berkeley; and the Wharton Business School has convinced me that students prefer this emphasis on real-world issues.