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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...
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