Test1 notes

Test1 notes - The competitive market allocation is by...

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The competitive market allocation is by "willingness to pay". Discriminatory monopolist landlord -knows everyones willingness to pay ordinary monopolist not pareto efficient. .becomes discriminating to maximize profit Monopolistic landlord -sets rental price p , rents D( p ) apartments revenue= p D( p ) In long-run, everything is going to become Pareto efficient Pareto efficient -there is no way to make at least 1 person better off w/out making some1 worse off Pareto inefficient outcome -unrealized mutual gains-to-trade remain Pareto improvement -find a way to make some people better off w/out making anybody else worse off Any market that achieves all possible gains-to-trade must be Pareto efficient Competitive equilibrium -1)all close APT renters value them at the market price p e or more 2) all others value close APTs at < p e 3) so no mutually beneficial trades remain outcome is Pareto efficient Discriminatory monopoly -APTs assigned same as comp. equi…so also pareto efficient Ordinary monopoly
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