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Chapter 13 ECO304K terms and notes

Chapter 13 ECO304K terms and notes - Two implications of...

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Chapter 13 ECO304K terms and notes Collusion- the act of working with other producers in an effort to limit competition and increase joint profits For P to equal MC two propositions: 1) that price provides a good approximation of the social value of a unit of output 2) that marginal cost, in the absence of externalities (costs or benefits to external parties not weighed by firms) provides a good approx. of the product’s social opportunity cost Monopoly leads to an inefficient mix of output Rent-seeking behavior- actions taken by households or firms to preserve positive profits
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Unformatted text preview: Two implications of rent-seeking behavior: 1) this behavior consumes resources and money can even consume all positive profits 2) government failure occurs when the govt. becomes the tool of the rent seeker and the allocation of resources is made even less efficient by the intervention of government public choice theory- An economic theory that the public officials who set economic policies and regulate the players act in their own self-interest, just as firms do price discrimination- changing different prices to different buyers...
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