Econ11Fall2007NotesForLecture_21Nov21

Econ11Fall2007NotesForLecture_21Nov21 - Use of a good or...

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
Lecture XXI Notes For November 21, 2007 I. Sources of Market Failure and Inefficiency II. Four Different Forms of Market Organization III. Maximizing Monopoly Profit on a Total Diagram I. Sources of Market Failure and Inefficiency A. Monopoly, Monopolistic Competition & Oligopoly 1. Firms that set P > MC, produce "too little" B. Monopsony (one buyer), 1. Monopsony in labor markets sets W < P Q MP L C. Imperfect information on quality - medicine D. Public Goods – non-exclusion and non-rivalry 1.Problem of "non-exclusion" - it is not easy to identify users of a good and then charge them for using 2. Problem of "non-rivalry" - your consumption does not prevent my consumption ?? Are police a public good? - exclusion? rivalry? ?? Is fire protection a public good? exclusion rivalry? ?? Are libraries a public good? exclusion, rivalry ?? Are parks a public good? exclusion, rivalry? 3. Externalities - a special type of non-rivalry.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 2
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Use of a good or service by one person has effects on others a. Negative externality: noise from your dance party. b. Positive externality: you publish cancer research c. Produce too much (little) of goods with negative (positive) externalities II. Four Different Forms of Market Organization Type of Industry # Firms Entry Cost Product Type Perfect Comp Many Low Homogenous Monopoly One Very High Different Oligopoly Few High Homogenous Monopolistic Comp Many Low Different III. Maximize Monopoly Profit on a Total Diagram A. Total cost curves have the usual shape B. Total revenue is concave (P falls as Q rises) C. In the long run, choose output to maximize profit where TR is parallel to TC L , i.e. slopes of curves are equal 1. Maximize profit where MR = MC! Golden Rule $ TC L TR TR* P * TR = max TC* MR = 0 MR=MC $/Q Q* P max Output...
View Full Document

Page1 / 2

Econ11Fall2007NotesForLecture_21Nov21 - Use of a good or...

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online